Do digital payment systems reduce corruption? A cross-country analysis

Abstract

Digital financial tools, such as mobile money, electronic transfers, and card-based payments, are increasingly viewed as potential instruments for enhancing transparency and reducing corruption by minimising face-to-face transactions and generating traceable financial records. Therefore, the study examines the relationship between digital payment systems and corruption levels across 60 countries, utilising panel data from the Global Findex Database and Transparency International’s Corruption Perceptions Index (CPI) for the period 2014 – 2024. Using fixed-effects panel regression models and robustness tests, the study finds a statistically significant and positive association between the use of digital payments and improved corruption scores. However, government-to-person (G2P) transfers through mobile phones and cards do not show a significant impact, likely due to limited adoption and the absence of robust institutional frameworks to ensure oversight. Control variables such as Gross Domestic Product (GDP) growth and urbanisation, are not significant predictors, while education exhibits a weak negative association with the CPI, possibly reflecting increased public scrutiny in more educated societies. The findings suggest that while digital payments hold promise in curbing corruption, their effectiveness depends on broad digital inclusion, substantial infrastructure investment, and effective institutional reform. The study highlights policy implications for governments and development agencies seeking to integrate digital finance into broader anti-corruption and governance strategies. Overall, digital financial inclusion emerges as a meaningful, though not standalone, strategy for reducing corruption.