Digital Payments Trust in Latin America and the Caribbean

Abstract

The adoption of electronic payments has increased globally, driving economic growth by enabling smoother transactions. Digital payments enhance speed, security, trust, and efficiency, prompting governments to implement policies that promote financial inclusion through new payment technologies. However, trust in the financial system is crucial for adoption, given concerns about security, fraud, and data breaches. In Latin America and the Caribbean, where economies are vulnerable to external financial shocks, and trust in financial institutions is low, digital payment adoption presents both financial and social challenges. This study analyzes the impact of financial trust on the likelihood of using digital payments in 17 countries, based on the 2023 Latinobarómetro survey (19,205 individuals). Using logit models, it examines financial trust’s influence across income levels. Results show that trust in financial institutions increases the likelihood of digital payment adoption by 62%, with a stronger effect among high-income individuals. Younger age, higher education, and mobile phone ownership also correlate positively with adoption. This study highlights the need to foster financial trust to boost digital payments, enhance financial inclusion, and reduce cash usage—key for tackling inequality and informality. A major limitation is the lack of longitudinal data for further analysis.

1. Introduction

The adoption of electronic payments has increased globally over time (Ramayanti et al., 2024). These payment methods facilitate money circulation within an economy, stemming from business, household, and government transactions to exchange goods and services. Electronic payments contribute to economic growth by enabling faster transactions, enhancing security, and improving efficiency (Chatterjee, 2020; Huang et al., 2025; Koh et al., 2021; Zhang & Zhou, 2021). Moreover, the adoption of new payment technologies fosters financial inclusion within the formal financial system (Adel, 2024). This, in turn, can help alleviate poverty and promote economic stability (Demir et al., 2022; Lee et al., 2023; Park, 2020). Specifically, having a bank account encourages individuals to utilize additional financial services, including electronic payments (Bold et al., 2012; Chatterjee, 2020). Furthermore, electronic payments contribute to reducing cash usage, which brings multiple economic benefits, such as lower costs associated with cash handling, decreased illicit activities, reduced informality, and mitigation of shadow market economies and corruption (Setor et al., 2021; Singh & Bhattacharya, 2017). However, despite these theoretical and institutional advantages, empirical evidence on the impact of electronic payments on economic growth remains inconclusive. For example, Humairoh et al. (2025) found no significant short- or long-term relationship between electronic payment instruments and economic growth in the case of Indonesia. Their findings reject the hypothesis of a dynamic adjustment, indicating a weak and delayed economic response to the increased use of non-cash payments. Similar results were reported by Wong et al. (2020) for OECD countries. These findings suggest contextual, temporal, and institutional factors may mediate this relationship.

This raises important questions about the underlying conditions that enable the effective use of digital financial tools. One such condition is the level of institutional trust. In particular, trust in the financial system may be fundamental in encouraging individuals to adopt and regularly use digital payments. Empirical evidence demonstrates a relationship between trust in the financial system and the use of electronic payments, especially for other regions (Liu et al., 2019; Sahi et al., 2021). According to survey information in LAC, low trust in the financial system has been identified as a barrier to using financial services, according to data from the World Bank: the Global Findex Database (Demirgüç-Kunt et al., 2022). These factors make it essential to consider empirically analyzing this relationship in LAC, especially in an environment where almost half (45%) of the LAC population on average does not use electronic payments for their transactions, and 52% of people on average have little or no confidence in the financial system by 2023 (Latinobarómetro, 2023).This happens because the financial system offers electronic payment services to its clients. Therefore, if the individual or company has enough confidence in the financial system, they will use electronic payments to carry out their transactions. Otherwise, they will use another means of payment, such as cash. In this sense, among the main fears that companies and individuals face when using electronic payments are that they are lost or diverted to the wrong people, that there is a retention of their deposited savings, and violation of data privacy, among other factors (Keefer & Scartascini, 2022; Yang et al., 2022; Zhou, 2011), as well as feeling dissatisfied with the policies of the banks, the cost of banking services, and interruptions in the payment system (Broekhoff et al., 2024). Therefore, users must visualize and understand the flow through which their money travels to the recipients (Chiang et al., 2017). In such a way, trust is an essential component of any financial system. Distrust of the financial system can reduce a country’s savings and thus impact economic growth (Koh et al., 2021). Some people do not trust banks because they are dissatisfied with their policies, concerned about the cost of banking services, and experiencing disruptions in the payment system.

Therefore, it is crucial to analyze the impact of trust levels in the financial system on financial services, particularly in Latin American and Caribbean (LAC) economies, where trust in the financial system is generally lower than in other regions. This is primarily attributed to the population’s historical experiences with past financial crises and the high vulnerability to external shocks caused by global financial downturns (Bortot, 2003; Fungáčová et al., 2019; Keefer & Scartascini, 2022; Melvin, 2003). Examples of internal financial crises in LAC include Ecuador and Argentina in 2000 and 2001, respectively, where banks froze or rationed the withdrawal of savings deposited by their clients. Other factors influencing trust levels in LAC include high levels of economic inequality and widespread informality in various forms (López-Concepción et al., 2023), high levels of external debt, fiscal imbalances, and a high sensitivity to raw material prices. All this is accompanied by low levels of financial inclusion, limited access to formal financial services (Chatterjee, 2020), and a high use of cash compared to other regions (McAndrews, 2020; Rabinovich & Pérez Artica, 2023). In addition, there is an increase in cyber-attacks on various financial institutions and an increase in fraud with electronic payment mechanisms (Gulyas & Kiss, 2023; Tian et al., 2023; Zhou, 2011). Therefore, analyzing the influence of trust on electronic payments constitutes an indispensable tool to promote policies for the greater adoption of electronic payments.

This research aims to provide empirical evidence on the impact of trust in the financial system on the adoption of electronic payment methods using a probabilistic model. The study draws on data from 17 LAC countries for 2023, derived from the Latinobaóometro survey, which collected responses from over 19,205 individuals across these countries. It is important to note that this topic has been underexplored in literature, particularly in developing countries, and this study seeks to fill this gap. Furthermore, the research stands out for using a large, representative sample at the population level, in contrast to other studies that rely on smaller, self-conducted surveys.

In this context, the study examines the determinants of digital payment adoption in Latin American and Caribbean countries, particularly emphasizing the role of trust in the financial system. It also analyzes how trust in the financial system influences electronic payments across different income levels, testing two hypotheses. The findings of this study hold significant implications for policymakers and financial institutions in LAC region. The positive correlation between financial trust and the adoption of digital payments highlights the need for targeted policies aimed at building and strengthening trust in financial institutions. Policymakers should prioritize the development of financial education programs that increase awareness of the benefits, security, and accessibility of electronic payments, particularly for vulnerable groups. Enhancing financial literacy can reduce mistrust and facilitate broader adoption of digital payment methods.

Additionally, the research emphasizes the critical importance of narrowing the digital divide. This can be achieved through targeted policies that improve access to digital financial services for lower-income populations and those residing in rural areas. Governments and financial institutions should consider implementing incentives to encourage the adoption of electronic payments. These might include subsidies for mobile phones, reduced transaction fees for small-value payments, and educational initiatives to promote financial inclusion. By addressing these factors, policymakers can significantly boost digital payment adoption and contribute to fostering economic growth across the region.

The study provides empirical evidence on the crucial role of the financial system and its policies in driving electronic payments in Latin American and Caribbean countries, showing the transcendence of trust, security, and transparency in digital payment methods, driving greater financial inclusion. Moreover, the study highlights the importance of reducing the digital divide gap, presenting an opportunity for policymakers to introduce and reinforce technological and digital policies to expand digital payment usage. Specifically, targeted policies focused on financial literacy, which builds trust and transparency in the financial system and improves access to digital financial services for lower-income and vulnerable populations, could significantly increase the adoption of electronic payments. Therefore, the paper’s main contribution is identifying and understanding the determinants of electronic payment adoption in Latin America and the Caribbean, providing insights for policymakers, financial institutions, and researchers interested in promoting financial inclusion and digitalization of payments in the region. This research contributes to the scarce literature analyzing the effect of trust in banks on electronic payments. Previous studies have primarily focused on its effect on mobile payments. This research covers a broader range of electronic payments, analyzing mobile payments and including other electronic payment instruments such as cards, transfers, and QR payments. Additionally, it focuses on LAC countries, where empirical evidence is much more limited. Moreover, it provides empirical evidence differentiated by income levels. This research stands out for using a large, population-representative sample, whereas other studies rely on small samples from their surveys. For future research, it would be valuable to complement survey data with transactional payment data. Furthermore, analyzing factors such as costs and fees and their influence on the use of electronic payments in areas with greater trust in banks could provide deeper insights. The main limitation of this field of study is the lack of available information, which prevents the possibility of conducting longitudinal analyses.

This research is divided into five sections. The following section reviews the literature and presents the study’s hypotheses; the third section describes the data and applied econometric methodology; the fourth section discusses the results; and finally, the fifth section presents the conclusions.

2. Literature Review and Development of Hypothesis

2.1. Theoretical Framework

This research is based on the theory of institutional trust, particularly on the model of Mayer et al. (1995), which states that institutional trust is structurally linked to the quality and behavior of institutions and is built on three dimensions perceived in the institution: capacity, benevolence, and integrity. When citizens perceive that financial institutions have the competence to manage resources correctly (capacity), act ethically and predictably (integrity), and consider the well-being of users (benevolence), they are more likely to develop trust in them. In the financial context, these dimensions are essential for individuals to adopt innovations such as electronic payments, which imply a certain level of vulnerability, primarily when perceptions of risk, insecurity, or instability exist.

This approach is complemented by Acemoglu and Robinson (2012, 2019) and Acemoglu and Johnson (2023), who reinforced this notion by arguing that economic development depends on the nature of institutions. His theory distinguishes between inclusive institutions, which promote participation, equitable access, and the protection of rights, and extractive institutions, which concentrate power and limit opportunities. In the context of this research, the former would foster institutional trust among citizens, drive innovation, and facilitate the adoption of new technologies. At the same time, the latter erode institutional legitimacy, hinder the adoption of innovations, and hinder progress.

In short, institutional trust not only reduces the perceived risk that the use of electronic payments would facilitate but also reflects a broader framework of governance and legitimacy of the financial system (van der Cruijsen et al., 2023). This relationship goes beyond individual and technical factors, as the adoption of digital payment technologies also depends on the ability of institutions to generate trusted environments, especially in Latin American contexts with historically fragile institutional trust (Parra et al., 2021).

2.2. Trust in the Financial System and Usage of Digital Payments

The individuals’ and firms’ trust in the financial system influences the use and quality perception of the financial services provided by financial institutions. Therefore, greater trust in the financial system is associated with higher number of users of the financial system, bank account holders, and the maintenance of formal savings in the financial structure (Heyert & Weill, 2024; Keefer & Scartascini, 2022; Koomson et al., 2023; Mehrotra et al., 2021), which also is accompanied by the increase of formal savings for pensions and investments (Koh et al., 2021) and the rise of use of digital payments (Shree et al., 2021).

Trust in financial institutions and payment services is a crucial interest variable, particularly in crisis environments (Bijlsma et al., 2022). Previous studies have shown that trust in the financial system positively influences the use of digital payments (Liu et al., 2019; Sahi et al., 2021). However, there are few studies analyzing this relationship (Bijlsma et al., 2022; van der Cruijsen et al., 2023) that also exclusively analyzed a single payment instrument, such as mobile payments, without considering other digital payment instruments such as financial transfers, cards, and others. For instance, Mayer (2008) mentioned that financial institutions are trust-intensive in Europe, showing that trust plays an important role in the financial development of financial institutions. These findings agreed with (Shree et al., 2021) results in India, showing that the use of digital payment methods is influenced by users’ perception of the credibility of these instruments accompanied by their trust in the financial system and their payments, which also depend on users’ socioeconomic factors, such as their age, gender, and income. Similarly, Dinh (2024) analyzed the factors affecting the e-payment behavior of Vietnamese consumers. Their results showed that e-payment usage depends on the users’ perception of trust in the payment mechanisms. Furthermore, Oney et al. (2017) found that perceived security and trust have a significant influence on the use of digital payments in North Cyprus. For the Kingdom of Bahrain, Albastaki et al. (2024) showed that the critical factors for the use of digital payments are data security, trust, ease of use, usefulness, and accessibility. Xin et al. (2015) mentioned that trust is an important predictor of the intention to adopt mobile payment in New Zealand, which is aligned with the users’ perception of the reliability of the mobile service provider and seller, the functionality of mobile payment systems, and their social background. Similarly, Chandra et al. (2010) identified the reputation of the mobile service provider as an important factor in creating trust in the context of digital payment adoption in Singapore. Duane et al. (2014) demonstrated that trust is the most powerful factor influencing consumers’ willingness to use smartphones to make digital payments in Ireland compared to perceived usefulness and ease of use. Therefore, they concluded that users will not make digital payments until they are convinced that smartphone mobile payment systems are safe and trustworthy given digital payments represent technological innovations (Keefer & Scartascini, 2022).

In the Latin American context, Bailey et al. (2022) showed that trust in the digital payment system and bank trust influence the adoption of digital payments in Colombia, which is aligned with other (Arango-Arango et al., 2017) results, identifying trust as a limitation to the adoption and use of digital payments in Colombia. Png and Tan (2020) mentioned that an increase of one standard deviation in trust in banks would be associated with a reduction in the use of cash of 15.2 percent in 36 countries (including two Latin American countries). Similarly, an increase of one standard deviation in privacy concerns would be linked with an increase in cash use of 11.1 percent. Moreover, López-Concepción et al. (2023) showed an inverse relationship between trust in the financial system and technology adoption in six Latin American countries, suggesting that lower trust in banks and firms increases the negative association and perception that science and technology might make life easier, healthier, and more comfortable.

In this context, there is a gap in the literature on empirical evidence analyzing the effect of trust in the financial system and the usage of digital payments. This study seeks to fill this gap using Latin American countries, given previous research focused on countries outside the region. Moreover, this research analyzes more available digital payment methods and not only mobile payments, as the previous literature has focused only on this payment tool, which is a crucial variable given that Latin America has not reached higher levels of adoption of mobile payments, unlike other regions (Demirgüç-Kunt et al., 2022). However, there has been a large increase in the use of digital payments such as electronic transfers by computer and banking apps, cards, and others. Developing a deep analysis for Latin American countries is crucial due to their structural differences compared to other regions as well as the location of users, which is another factor that might affect the behavior of digital payment users (Liu et al., 2019). Therefore, the first hypothesis of the study is the following:

Hypothesis 1.

Trust in the financial system positively influences the usage of digital payments.

2.3. Trust in the Financial System, Usage of Digital Payments, and User’s Income Level

The income level of banking users might influence both the level of trust in the financial system and the usage of digital payments. Bijlsma et al. (2022) showed a positive relationship between users’ trust in the banking payment system and services and their personal and household income in the Netherlands. Moreover, Broekhoff et al. (2024) mentioned that people experiencing higher financial difficulties given their income limitation have less trust in banking payment services, which also depends on the locality or analyzed area. In the Colombian case, Arango-Arango et al., 2017 demonstrated that income level is a determinant of the adoption and use of digital payments, supported by the fact that financially vulnerable citizens have limited access to digital infrastructure and rely more on cash for their transactions, which also shows that cash allows making transactions autonomously as well as controlling the monthly budget (Arango-Arango et al., 2017; Broekhoff et al., 2024; van der Cruijsen et al., 2023). In the Peruvian case, Aurazo and Vega (2021) identified a higher probability of making payments with digital instruments for users located in the upper quintiles of per-capital household expenditure and those who live in urban areas with a high presence of financial institutions, concluding that higher-income users present greater use of digital payments. Furthermore, Fungáčová et al. (2019) analyzed the determinants of trust in banks for 52 countries during the period 2010–2014. They found that trust in banks tends to increase according to the income, like the findings in Italy. Shim et al. (2013) and van der Cruijsen et al. (2023) showed that self-assessed financial well-being, which is related to the users’ income level, is positively related to their trust in the financial systems and banks in the United States and the Netherlands, respectively.

On the other hand, in the Latin American case, one of the most important reasons why poor households may not keep their savings in a bank account is that they do not trust the financial system and financial institutions, and they perceive that their money will not be quickly available for their usage in bank accounts (Galiani et al., 2020). Moreover, Keefer and Scartascini (2022) found that people living in urban areas with higher income levels compared to those living in rural areas have greater confidence in the financial system, concluding that the lack of trust of people with low financial resources reflects their demotivation to trust in the financial system, preferring cash transfers. Moreover, Bold et al. (2012) and Galiani et al. (2020) showed that most beneficiaries of cash transfer programs in Latin America (vulnerable people) make a single, quick withdraw of the funds deposited in their bank accounts by the program in each payment period, which demonstrates that the income level plays a crucial role in the trust in banks and the use of digital payments.

Adel (2024) mentioned that significant inequality has led to a large unbanked or underbanked population given that lower-income individuals often face barriers (e.g., high transaction fees, lack of access to banking infrastructure, limited internet access, fewer smart devices, low financial literacy, and scarce knowledge of digital financial products and services), which negatively affects their trust in the financial and banking system. Consequently, these individuals are less likely to adopt digital payment systems, viewing them as complicated or unsafe for their financial needs and savings. Ozili (2024) established that the adoption of digital payments in Latin America requires at least the provision of financial products and services, internet access, the availability of smartphones, and the financial literacy level of users because low-income individuals often face significant challenges in accessing the internet and technology, which limit their ability to use digital payments independently of their low cost. Finally, Ahmed et al. (2024) mentioned that policies and regulations are key developers to increase the trust of lower-income individuals in digital payment systems, showing that inclusive and transparent digital financial regulations and reduced cost of digital transactions might engage the use of digital payments and decrease the perceived risk associated with them. Therefore, the second hypothesis of the study is the following:

Hypothesis 2.

The income level of banking users determines the degree of trust in the financial system and the usage of digital payments.

3. Research Methodology

3.1. Data

The Latinbarometro 2023 survey for 17 Latin American countries was used in this study to (i) analyze the effect on the usage of digital payments given the level of trust in the financial system and (ii) determine if the income level of banking users influence on the degree of trust in the financial system and usage of digital payments. The survey contained the responses of 19,205 individuals of 17 Latin American countries, and each sample was representative at the population level for each country. The data used in this research include approximately a similar number of respondents per country, ensuring a homogeneous representation of the 17 Latin American countries and strengthening the regional validity of the results. Specifically, the 19,205 people surveyed corresponding to the 17 LAC countries are distributed across 1200 people in 10 countries, 1000 people in 6 countries, and 1204 in 1 country. Each country accounts for about 6% of respondents. This sample representation provided an advantage in relation to other related research, which uses smaller samples based on own surveys and case studies.

In addition, it is interesting to use this information because it collects the behavior and change in people’s habits after the pandemic, something of great importance in the context of digital payments and the greater adoption of technologies (Latinobarómetro, 2023). The main question of interest in the survey is the following: Of all your transactions, please mention what is the proportion of digital payments (credit or debit cards, mobile money, or instant payments using QR codes)? On average, approximately half (55%) of the LAC population uses electronic payments, while the remaining (45%) on average do not use electronic means for any payment they make. Additionally, to understand the effect of trust on the use of electronic payments, another question asked in the survey was the following: Do you trust banks? Finally, other control variables, such as age, gender, income level, education up to secondary school, whether working, area of residence (rural), and mobile phone ownership, were used in this study.

Table 1. Descriptive data, LAC, year 2023.

Variables	Variables Description	Mean	Std. Dev.	Min	Max
Dependent Variable
Likelihood of using electronic payments	1 = Usese electronic payments, 0 = does not use electronic payments	55.4%	0.497	0	1
Independent Variable
Financial system confidence	1 = Has confidence in banks, 0 = has no confidence in banks	80.9%	0.393	0	1
Control Variables
Age
Age up to 23 years	1 = Up to 23 years old, 0 = other age	15.8%	0.365	0	1
Age 24 to 30 years	1 = Between 24 to 30 years old, 0 = other age	16.8%	0.374	0	1
Age from 30 to 40 years old	1 = Between 30 to 40 years old, 0 = other age	20.3%	0.402	0	1
Age from 40 to 60 years old	1 = Between 40 to 60 years old, 0 = other age	31.1%	0.463	0	1
Age over 60 years	1 = You are over 60 years old, 0 = other age	16.0%	0.367	0	1
Gender	1 = female, 0 = male	52.5%	0.499	0	1
Income level
High income (Q5)	1 = High income, 0 = other income	3.0%	0.172	0	1
Upper-middle income (Q4)	1 = Upper-middle income, 0 = other income	7.1%	0.256	0	1
Middle income (Q3)	1 = Has average income, 0 = other income	40.8%	0.491	0	1
Lower-middle Income (Q2)	1 = Has lower-middle income, 0 = other income	28.2%	0.450	0	1
Low income (Q1)	1 = Has low income, 0 = other income	18.2%	0.386	0	1
Education	1 = Studied up to secondary school, 0 = other	41.8%	0.493	0	1
Employment status	1 = Worked the previous week, 0 = did not work	63.8%	0.481	0	1
Area	1 = Lives in rural areas, 0 = lives in urban areas	5.3%	0.225	0	1
Has a mobile phone	1 = Has a cell phone, 0 = has no cell phone	90.3%	0.296	0	1
N	19,205

Source: (Latinobarómetro, 2023).

presents the descriptive statistics for each variable.

Additionally, 61% of middle-income individuals in LAC use electronic payments, making them the most likely segment of the population to adopt digital payments. Meanwhile, 40% of low-income individuals use electronic payments, making them the least frequent users compared to other income groups (Figure 1).

3.2. Methodology

A binomial logistic regression model was employed to estimate the probability of using electronic payment methods based on explanatory variables. In this model, the dependent variable (Y) is binary, taking values of either Y = 1 (use of electronic payments) or Y = 0 (non-use). The logistic function transforms a linear combination of independent variables, ensuring that the predicted probabilities remain within the [0, 1] interval. The model is estimated using the maximum likelihood method, which aims to determine the values of β that maximize the likelihood function—a measure of the probability of observing the given data given the specified model parameters (Wooldridge, 2010). It is represented as follows:

$$\begin{array}{l}\mathit{logit}\left(P\left(Y_i=1|X_i\right)\right)=\mathit{ln}\left({\displaystyle \frac{P\left(Y=1|X_i\right)}{1-P\left(Y=1|X_i\right)}}\right)={\beta }_0+{\beta }_1{X}_i+{\beta }_2{X}_i\dots +{\beta }_k{X}_k\\ ={\beta }_0+{\beta }_1{Confidenceinthefinancialsystem}_i+{\beta }_2{Age}_i\\ +{\beta }_3{Gender}_i+{\beta }_4{Incomelevel}_i+{\beta }_5{Education}_i\\ +{\beta }_6{Employmentstatus}_i+{\beta }_7{Area\left(rural\right)}_i\\ +{\beta }_8{Hasacellphone}_i\end{array}$$

where Y = probability of using electronic payment methods (Y = 1 uses electronic payments); X = explanatory variables, with the main variable of interest being trust in the financial system. Other control variables include age, gender, income level, education, employment status, area of residence, and mobile phone ownership. $P\left(Y=1|X_i\right)$ is the probability that the dependent variable is 1 given a set of explanatory variables X, and ${\beta }_0+{\beta }_1{X}_i+{\beta }_2{X}_i$ are the coefficients of the model that are estimated from the data. The logistic function is defined as follows:

$$\left(P\left(Y=1|X\right)\right)={\displaystyle \frac{1}{1+e^{-({\beta }_0+{\beta }_1{X}_i+{\beta }_2{X}_i\dots +{\beta }_k{X}_k)}}}$$

In the logit model, the estimated coefficients $\beta$ are not interpreted directly; only the signs remain. To interpret the $\beta$ resulting in terms of probabilities, the coefficients are transformed into odds ratios (OR). The OR represents the ratio between the probability that Y = 1 and that Y = 0, with different values of an explanatory variable X:

$$Odds\left(\left(Y=1|X\right)\right)={\displaystyle \frac{P\left(Y=1|X\right)}{1-P\left(Y=1|X\right)}}$$

The OR measures the change in these odds when X increases by one unit. They are obtained by applying the exponential function to the coefficients:

$${OR=e}^{\beta }$$

To interpret the OR in percentage terms, the general rule is as follows:

$$\left(OR-1\right)\ast 100\%$$

This calculation yields by what percentage the odds of Y = 1 increase or decrease when X increases by one unit, where OR > 1 means a positive effect, increasing $X_i$ increases the odds ratio of Y = 1 (the event is more likely in the first group), OR < 1 means a negative effect, and increasing $X_i$ decreases the odds ratio of Y = 1 (the event is less likely in the first group).

4. Results

The estimates on the probability of using electronic payments in the 17 LAC countries are herein presented. Each country is similarly representative of the 19,205 people surveyed, which validates the regional result. The results (

Table 2. Results of logistic model at general population level in LAC, odds ratios.

	Electronic Payments Use
	Odds Ratios
Confidence in the financial system	1.624 ***
	(−11.36)
Age
Up to 23 years old	1.574 ***
	(−8.72)
Age between 24 to 30	1.590 ***
	(−9.25)
Age between 30 to 40	1.484 ***
	(−8.37)
Age 60 or older	0.569 ***
	(−10.52)
Gender (women = 1)	0.872 ***
	(−4.00)
Income level
High income	1.928 ***
	(−6.65)
Upper-middle income	2.329 ***
	(−11.89)
Middle income	2.344 ***
	(−18.61)
Lower-middle income	1.935 ***
	(−13.68)
Education (Secondary or less = 1)	0.894 **
	(−3.18)
Employment status (Works = 1)	1.415 ***
	−9.23
Area (Rural = 1)	0.646 ***
	(−5.87)
Has a cell phone	1.844 ***
	(−10.32)
Country control	Yes
N	19,205

***, **, and * indicate statistical significance at the 1%, 5%, and 10% levels, respectively.

and

Table 3. Model results by income levels of the population in LAC, odds ratios.

	(1)	(2)	(3)	(4)	(5)
	Low Income	Lower-Middle Income	Middle Income	Upper-Middle Income	High Income
Confidence in the financial system	1.657 ***	1.703 ***	1.499 ***	1.454 *	2.406 ***
	(−5.53)	(−6.63)	(−5.6)	(−2.17)	(−3.6)
Age
Up to 23 years old	1.510 **	1.464 ***	1.663 ***	2.689 ***	0.901
	(−3.01)	(−3.79)	(−6.38)	(−5.17)	(−0.37)
Age between 24 to 30	1.482 **	1.789 ***	1.466 ***	2.955 ***	0.896
	(−3.16)	(−6.09)	(−4.91)	(−5.52)	(−0.38)
Age between 30 to 40	1.633 ***	1.503 ***	1.375 ***	1.738 **	1.833 *
	(−4.48)	(−4.62)	(−4.23)	(−2.97)	(−2.15)
Age 60 or older	0.683 **	0.514 ***	0.534 ***	0.693	0.754
	(−3.22)	(−6.50)	(−7.12)	(−1.81)	(−0.93)
Gender (women = 1)	0.843 *	0.874 *	0.885 *	0.927	0.705
	(−2.06)	(−2.06)	(−2.29)	(−0.59)	(−1.75)
Education (Secondary or less = 1)	1.286 **	0.981	0.758 ***	0.614 ***	1.233
	(−2.91)	(−0.30)	(−5.11)	(−3.52)	−0.95
Employment status (Works = 1)	1.408 ***	1.548 ***	1.367 ***	1.447 **	1.335
	(−3.83)	(−5.98)	−5.29	−2.6	−1.35
Area (Rural = 1)	0.618 **	0.845	0.515 ***	0.948	0.935
	(−2.90)	(−1.14)	(−5.66)	(−0.18)	(−0.16)
Has a cell phone	1.753 ***	1.876 ***	1.932 ***	1.417	1.38
	(−4.79)	(−5.35)	(−6.21)	(−1.63)	(−1.17)
Country control	Yes	Yes	Yes	Yes	Yes
N	3489	5414	7828	1357	581

***, **, and * indicate statistical significance at the 1%, 5%, and 10% levels, 378, respectively.

) show the odd ratios of the estimation and their significance levels, where the relationship between trust in the financial system and the probability of using electronic payment methods is observed. To interpret the odds in percentage terms, the following calculation of the coefficients presented was performed (OR − 1) ∗ 100%. An OR > 1 means a positive effect, while an OR < 1 means a negative effect.

Hypothesis 1.

Trust in the financial system positively influences the usage of digital payments.

The results (Table 2) reveal a statistically significant relationship between the likelihood of using electronic payments and bank trust. Specifically, an increase in trust in banks is associated with a 62% higher probability of individuals using electronic payments than those with low trust in banks within LAC. Therefore, the hypothesis proposed in this research cannot be rejected. These results provide empirical evidence highlighting the importance of a financial system that instills confidence in the LAC population to promote the adoption of electronic payments. Increased trust in the financial system, in turn, would mitigate perceived risks associated with electronic payments, such as concerns about fraud and loss of funds, thereby encouraging their wider use. Consequently, a rise in trust in banks also reinforces the perception that electronic payments are convenient and efficient. This would contribute to greater financial inclusion by improving access to the financial system. As a result, the use of financial services and products, such as electronic payments, is expected to become increasingly common due to their security, simplicity, efficiency, and speed, ultimately reducing cash usage. This is particularly significant in the context of LAC, where financial inclusion remains limited, and a high reliance on cash is associated with negative impacts such as informality and corruption.

Furthermore, the control variables incorporated in the model (Table 1) show that specific characteristics influence the probability of using electronic payments, such as age, gender, education, employment status, and residential area. Regarding the age of the people, those under 40 are more likely to use electronic payment methods. Young people aged 24 to 30 are the primary users, with a 59% greater probability of using electronic payments compared to those aged 40 to 60, followed by young people up to 23 years of age and 30 to 40 years of age, with 57% and 48% greater probability, respectively. Moreover, those over 60 are 43% less likely to use it than those aged 40 to 60. Regarding gender, women are 13% less likely to use electronic payment methods than men. Regarding education, it is shown that people with a secondary education level or less are 11% less likely to use electronic payments. Regarding employment status, those working are 41% more likely to use electronic payments. Regarding people’s income, the probability of using electronic payment methods is higher for those with middle income Q3 and upper-middle income Q4 compared to the poorest Q1 by 1.33 times, followed by those with lower-middle income Q2 with a higher probability of 94% and those with high income Q5 with 93% probability of using electronic payments for their transactions compared to the poorest Q1. The poorest Q1 are less likely to use electronic payment methods for their transactions than those with higher income levels. Additionally, people with cell phones have a higher probability of 84% of using electronic payments in LAC, and this is one of the factors that most increase the likelihood of using electronic payment methods.

Hypothesis 2.

The income level of banking users determines the degree of trust in the financial system and the usage of digital payments.

Furthermore, results (Table 3) are presented demonstrating that the impact of trust in the financial system on the likelihood of using electronic payment methods varies according to the income levels of individuals in LAC.

For high-income individuals, an increase in trust in banks is associated with a 140% higher likelihood of a person using electronic payments than those with low trust in banks belonging to this same social class. For upper-middle and middle-income individuals, an increase in trust in banks is associated with a 50% and 45% higher likelihood of a person using electronic payments, compared to those with low trust in banks belonging to this same social class, respectively. For low-middle and low-income individuals, an increase in trust in banks is associated with a 66% and 70% higher likelihood of a person using electronic payments compared to those with low trust in banks belonging to this same social class, respectively.

These results reflect that changes in trust in banks can have a different impact depending on people’s income level (Bijlsma et al., 2022). In particular, high-income individuals are more significantly impacted. This population segment is characterized by more significant resources in the financial system, such as access to technology, knowledge, and financial education. These factors make them more likely to adopt new technologies, especially when they perceive that the benefits outweigh the risks, such as the greater convenience and efficiency of electronic payments. Furthermore, they are less concerned about risks associated with electronic payments, such as fraud or theft, as their finances are often better protected through insurance and diversification, providing them with greater security and making them more willing to embrace these methods. For people with medium and upper-middle incomes, however, increases in trust in banks have a lower impact on their adoption of electronic payments compared to individuals in other income groups. Although confidence in banks is influential, this segment of the population may still face additional barriers related to access to technology, security concerns, and less familiarity with electronic payments, which reduces the effect of an increase in trust compared to those with higher incomes (Arango-Arango et al., 2017). People with low incomes traditionally do not have easy access to formal banking services. Therefore, they are more focused on improving their financial inclusion, and by gaining confidence in the banking system, they could adopt electronic payment technologies. This increased trust would help overcome barriers related to mistrust and provide more significant opportunities to access financial services. In contrast, individuals with medium incomes are already more integrated into the financial system, making the impact of banking trust on their payment behaviors less pronounced. However, it is also essential to consider that low-income individuals have a lower capacity to absorb financial risks and are more sensitive to risk during a crisis. As a result, their perception of the financial system is crucial for utilizing this formal financing channel and, consequently, promoting financial inclusion among this population segment.

5. Discussion of Results

The fact that trust in the financial system is one of the main factors for using electronic payments makes it a strategic tool for countries to promote digitalization in payments in LAC. These results have implications for related policies and strategies. It is necessary to implement national financial education programs that teach citizens the benefits, security, and use of electronic payments (Urban et al., 2020). This would reduce mistrust and encourage the use of electronic payments. Additionally, material related to personal finances could be integrated into school and university curricula, which includes the benefits of using electronic payments, allowing for greater awareness of the new generations (Zhu, 2019), especially since the results from LAC also show that young people are more likely to use electronic payments than people of other ages. For example, the “Teach Children to Save” program in the United States improves children and adolescents’ understanding of managing their finances using electronic payments, supporting a culture of trust in digital payments in younger generations (Teach Children to Save|American Bankers Association, 2025). Digital transformation involves a cultural change. Therefore, the government must promote it as well. This is the case in Sweden, a country close to becoming a cashless economy. Government authorities have implemented educational workshops that include information on mobile payments, cards, digital wallets, and online security (Arvidsson, 2019).

Furthermore, this study shows that lower-income people are the least likely to use electronic payments in LAC. This implies that countries should implement policies such as subsidies for the acquisition of mobile devices and a reduction in fees for low-value electronic transactions, especially for small businesses (Amboage et al., 2024). In addition, payment infrastructure in marginalized rural and urban areas should be improved, ensuring that local businesses adopt electronic payment technologies and facilitating access to low-cost bank accounts and mobile banking platforms, for example, M-Pesa in Kenya (Ngugi et al., 2010). Governments can implement tax incentives for small businesses and rewards for frequent users to also stimulate the adoption of electronic payments, as in Sweden (Arvidsson, 2019). In addition, specific policies could be implemented, such as payment of government aid, such as conditional transfers or social subsidies, exclusively through digital channels to encourage the adoption of electronic payments among the most vulnerable groups (Lab & Forum, 2022).

This research shows that it is imperative to foster trust in the financial system to digitalize payments in an economy. Therefore, to strengthen trust in the financial system, regulation must be strengthened and policies developed to ensure that electronic payment platforms offer a high level of security and protection against fraud, increasing trust among users, especially among those who are new to the use of technology (Gulyas & Kiss, 2023). Moreover, there is a significant gap in the current literature regarding in-depth research on special groups within the LAC region, particularly vulnerable populations such as residents in remote areas, ethnic minorities, and the elderly. These groups often face unique challenges and obstacles when it comes to adopting and using digital payments. For instance, residents in remote areas may lack access to reliable internet or mobile infrastructure, ethnic minorities might face language or cultural barriers, and the elderly may have limited familiarity with digital technologies. Ignoring the specific needs and circumstances of these groups could result in policies that are not sufficiently targeted, potentially exacerbating existing inequalities. It is crucial to measure the relationship between these groups’ unique characteristics and their ability to engage with digital payment systems in future research. Addressing these gaps will enable policymakers to design more inclusive and effective strategies for digital payment adoption across all segments of society.

On the other hand, in addition to trust in banks, which is one of the main factors contributing to the probability of using electronic payments, it was identified that cell phone ownership and the income of individuals are other important factors. There are opportunities regarding the impact of cell phone ownership on electronic payments since there are more cell phone subscriptions in the region than people, making them potential users. According to the World Bank, there were 111 mobile cellular subscriptions per 100 people in the world in 2023 (World Bank, 2023). Confidence in the financial system is crucial for the uptake of digital payment platforms, as consumers who trust their banks are more inclined to utilize these services. The expanding middle class provides an advantage since they are the demographic most likely to embrace electronic payments. However, financial inclusion presents a challenge, as lower-income groups are less inclined to access these services, underlining the necessity for wider access. Another significant benefit is the robust adoption among young individuals, who are generally more at ease with technology. Their preference for digital payments is expected to shape future generations, speeding up the transition away from cash in everyday transactions.

Although LAC has made progress in adopting electronic payment methods, there is still a long way to go. Advancing further requires structural changes in LAC countries, particularly given the region’s high levels of poverty and inequality, which make this transition more challenging. Additionally, the strong cultural preference for cash in everyday transactions adds another hurdle. Therefore, empirical evidence is crucial in guiding the shift toward digital payments.

6. Conclusions

In Latin America and the Caribbean (LAC), distrust in financial institutions has historically been a significant issue in many countries, driven by episodes of banking crises, high inflation, and inadequate regulation. However, consumer confidence has gradually increased as banks have strengthened regulatory frameworks, enhanced transparency, and implemented more robust security systems. This growing trust has encouraged more individuals to open bank accounts and adopt electronic services, such as electronic payments, thereby advancing financial inclusion in a region where large segments of the population remain unbanked. The existing literature on this topic is limited and even more so in the context of LAC (Broekhoff et al., 2024; Chang & Hung, 2018; van der Cruijsen et al., 2023).

This study was based on data from 19,205 individuals across 17 LAC countries from the 2023 Latinobarómetro survey. The data used in this research include approximately a similar number of respondents per country. This study provides empirical evidence—using a logistic model—of the positive relationship between trust in banks and the use of electronic payments in the region. Additionally, it demonstrates that the influence of trust in banks on electronic payment adoption varies by income level, being most effective among high-income individuals, followed by those with low and lower-middle incomes. The more substantial effect observed among high-income individuals is attributed to their full integration into the financial system, where trust further reinforces their propensity to use electronic payments. Among low- and lower-middle-income individuals, increased trust can be decisive in overcoming skepticism and facilitating access to digital payments; however, its impact remains constrained by limited access to technology and financial services. In contrast, the effect among the middle class is smaller, as they already rely on traditional payment methods and may not perceive an urgent need to transition to digital alternatives. However, trust can still influence their adoption.

These findings have important implications for developing strategies and policies to promote financial inclusion and the adoption of electronic payments. Understanding how trust in banks influences different income groups allows for implementing targeted measures to reduce access barriers, enhance confidence in the financial system, and encourage the adoption of digital payment technologies. For instance, recognizing that trust plays a stronger role in electronic payment adoption among high-income groups can help policymakers design more effective strategies for middle-, lower-middle-, and low-income populations. Initiatives such as subsidies for digital devices or more affordable internet access could facilitate technology adoption and expand the use of electronic payments in these segments. Additionally, financial institutions could develop tailored products to meet the specific needs of each demographic. An example of this approach is using electronic payments to distribute government subsidies, as implemented by Colombia during the COVID-19 pandemic. Furthermore, in the LAC region—where digital fraud and financial crimes pose significant risks—strengthening user protection mechanisms is essential to fostering greater adoption of electronic payments across all social groups. Policies should also leverage the increasing penetration of smartphones and mobile networks, which facilitate using banking applications and mobile payment services. However, the effectiveness of these technologies will ultimately depend on the perceived security and reliability of the banking system (Broekhoff et al., 2024; Chang & Hung, 2018). Thus, electronic payments are becoming increasingly attractive in the region due to their improvements in efficiency and convenience compared to traditional payment methods, such as cash.

Future research could expand on these analyses by incorporating survey data alongside transactional payment data, services fees, and networking quality. Additionally, integrating longitudinal studies would provide valuable insights. Exploring the impact of transaction costs, service fees, and accessibility on the relationship between trust in banks and electronic payments could offer deeper understanding of these dynamics. However, a primary limitation of this field remains the scarcity of available data disaggregated by minorities, which restricts the ability to conduct comprehensive longitudinal analyses. Furthermore, the database used in this study focuses on individual performance rather than financial or transactional information from bank institutions or financial systems, which presents another limitation to consider. To address this gap, future research could integrate data from financial institutions to gain a more comprehensive view of the factors influencing digital payment adoption. Additionally, it would be valuable to explore forecasting the use of electronic payments through scenario analysis. This approach would involve modeling various scenarios based on factors such as economic conditions, technological advancements, and shifts in consumer behavior to predict future adoption rates and patterns of electronic payment methods. Such analyses could offer valuable insights for policymakers and financial institutions, helping them anticipate trends and make proactive decisions to enhance the adoption of digital payments.