10 CHAPTER II LITERATURE REVIEW II.1 Theoretical Foundation This section of this research is consisted of all of the theoretical foundation that become the basis concept of this research. All of the theoretical foundation is taken from the previous research that is related to the context of each variable within this research. II.1.1 Digital Literacy The first theory regarding digital literacy is first mentioned by Paul Gilster in 1997 (Gilster, 1997). Gilster (1997) mentions in his book that digital literacy has a meaning of someone’s capability on perceiving several information that comes from various sources which being provide by several digital technologies or computers. However, the theoretical concept of digital literacy that is being mentioned by Paul Gilster is being considered and perceived as a conservative context of digital literacy which only emphasizes on the literacy capability regarding the digital information which only involved the writing, reading, and managing digital information in various formats (Bawden, 2008). The theory of digital literacy then keeps growing. On 2001, the Canadian SchoolNet National Advisory Board (SNAB, 2001) as cited in Martin (2008) states that digital literacy is not only focusing on successfully perceiving the digital information and technologies, but also aware about how to optimally utilize and operate all of digital technologies in an appropriate way. This statement then also being strengthen by the concept of digital literacy which being determined by the European Commission in 2003 as cited in Martin (2008) which emphasizes the digital literacy concept on the someone’s capability on optimally utilizing the growing of internet and communication and information technologies (ICT). Martin (2008) then summarize the concept of digital literacy which includes several aspects: (1) The ability to involve the optimal utilization of digital technologies in every aspects of a person’s daily life; (2) The concept of digital literacy can be perceived differently according to someone’s life conditions and will always developing following the growing of someone’s life; (3) The concept of digital literacy is expanding more than only the ability to use information and communication technologies; (4) Digital literacy is an action of optimally utilize and reflects on the implementation of the digital technologies usage in order to solve some of life hurdles; (5) Digital literacy also includes the capability on determining someone 11 as a digital literate people and also evaluate someone’s enhancement progress of their digital literacy capabilities. II.1.2 Financial Literacy The growth of financial literacy concepts starts from the concerning condition of an economic condition that happened in United States which then can lead into a severe economic downturn due to the inability of individuals to make a wise financial decision so that many people cannot choose and utilize the right financial products that can be used for purchasing a house for their living and preparing sufficient money for their pension life (Hung et al., 2009). Then, The President Advisory Council on Financial Literacy (PACFL) as cited in Hung et al., (2009) sets out a definition for financial literacy which is a concept that stands for an individual’s capability to control their economic capital or financial reserves efficiently to achieve an individual’s financial well-being states or conditions. Damayanti et al., (2018) states that financial literacy is covering several aspects such as capability on financial decision making, financial planning, and the capability on managing emergence life events which impacting the daily financial choice proficiently. Furthermore, the statement also explains that financial literacy also can be considered as an essential matter since it can be a solution for many issues such as decreasing the number of deprivations in the society. This could happen since the increasing level of financial literacy will also increase individual’s ability to make a wise financial decision which also can lead into the increasing level of the whole nation’s economic well-being. II.1.3 Digital Financial Inclusion Digital financial inclusion is a term that cannot be separated from the ground concept of financial inclusion. The terms of financial inclusion have a meaning of an initiative on providing such authorized and affordable financial services so that individuals or businesses in the society can easily approach and also optimally make use of it (Tay et al., 2022). The rapid development of Financial Technology in financial sectors within this era then gives a new prospect for the implementation of financial inclusion which is the digital financial inclusion (Demirguc-Kunt et al., 2018). Digital financial inclusion is a term that is developed after the world had successfully faced three stages of evolution that happened in financial sectors which includes (1) microcredit; (2) microfinance; (3) financial inclusion (Wang & He, 2020). The Global Partnership of Financial Inclusion or GPFI (2016) defines digital financial inclusion as an effort 12 to optimally utilize digital financial platforms or financial technology to reach a broader objective of financial inclusion. The definition then continues with an explanation that the utilization of the digital financial platforms are being used to extend the benefits of financial inclusion to the vulnerable communities by providing affordable financial products, such as deposits, loans, coverage, and protection, to fulfill their needs.