Is adopting cashless transactions a rational or irrational decision? Evidence from informal sectors

This study examines whether the recent surge in cashless transactions is driven primarily by rational factors (e.g., individual evaluations of usefulness, ease of use, resource availability) or irrational factors (e.g., herd-like behaviors shaped by social norms, emotional responses to external shocks like the COVID-19 pandemic). The study focuses on workers in the informal sector-traditionally viewed as the least likely to adopt new technologies-to better understand their underlying decision-making mechanisms. Data were collected from 509 informal workers and analyzed using partial least squares structural equation modeling. The findings reveal that rational factors exert a greater influence on cashless adoption behavior than irrational factors. Further analysis using ordered logit regression indicates that adoption frequency is significantly higher among younger, higher-income, and better-educated individuals. This study contributes to the literature by extending the broader analysis of cashless adoption into the understudied informal sector and by categorizing decision drivers into rational and irrational factors. The results offer valuable insights for future research efforts and have important implications for policymakers and stakeholders seeking to promote digital financial inclusion and advance digital-economy-oriented strategies through the expansion of cashless systems.