3 I.1 Research Background CHAPTER I INTRODUCTION Financial literacy is an essential thing that is often to be corresponded with the terms of individual’s well-being and welfare (Damayanti et al., 2018; Lusardi & Mitchell, 2007). Damayanti et al. (2018) explained that people who has a great level knowledge of finance or being a financially literate person then will also have a greater skill for managing their own finance optimally and gain an optimum benefits from their own asset which can lead to an increasing individual standard of living. Because of that, financial literacy is essential to be fostered collectively in the society so that it can eventually promote overall economic development of a country (Hidayatinnisa et al., 2021). The National Strategy of Indonesia’s Financial Literacy as cited in Hidayatinnisa et al. (2021) stated that the strategy for increasing the national level of financial literacy should also be aligned with the strategy for enhancing the national level of financial inclusion. This strategy alignment is needed since the improvement of the national financial literacy will also increase the confidence of a person to use many kinds of financial products and services that is available on the society. This situation then needs to be supported with the availability of the provided financial products and services that can be easily approached by the public. Because of that, the National Strategy of Indonesia’s Financial Literacy is also created in order to enhance the overall level of financial inclusion of Indonesia since financial inclusion play such a vital role on supporting the national economic development and increasing the individual’s prosperities by lowering deprivation and financial disparity. The pandemic era in 2020 has turned the world’s economic system into a digital economy system (Soto-Acosta, 2020). This situation happened since there is a physical interaction limitation that is implemented all over the world which then impacting to the most accelerated growth of digital technologies functions in history (Polyakova et al., 2024). This phenomenon then leads into some changes in the systems on several sectors such as educations and other economic sectors that started to use smart technology to supports its persistent activities, including the financial sectors (Janah & Setyawan, 2022). The technology adoption within the financial industry often known with the terms of “Financial Technology” or “Fintech” which covers several activities or services in financial industry such as financial data analysis software, digital payment platforms, and digital 4 authentication process (Barberis, 2014). The existence of Financial Technology (Fintech) itself has brought a revolutionary transformation on the finance industries that makes transactions become quicker and more efficient (Setiawan et al., 2021). The phenomenon of Fintech rapid growth is also happening in Indonesia which also experiencing 21.2% increasing number of Fintech companies in Indonesia and also increasing rate of the total users for digital payment industry that reach up to 60+ million users and 30+ million users for the online loans industry, specifically for the peer-to-peer lending services in 2023 (AFTECH, 2023; BCG, 2023). The growth of financial technology and the limited access to many financial services due to the physical interaction limitation during the pandemic era leads to a great opportunity for the digital financial inclusion adoptions. This situation then can lead to achieve the global financial inclusion which is encouraged by the increasing demand of financial technology that creates more digital channels for Fintech products. The goals of achieving financial inclusion through the enhance development of digital finance requires each person in this era to have the ability to utilize the available digital financial services (Bokkens, 2021). Because of that, there are two crucial things that everyone’s needs to have in this era in order to have the ability to optimally utilize the available digital financial services which are financial and digital literacy (Demirguc-Kunt et al., 2018; Z. Hu et al., 2019; Radovanović et al., 2020; Shen et al., 2018).