Demographics and Technology Diffusion: Evidence from Mobile Payments

This paper leverages insights from the adoption of mobile payments in India to argue that the age composition of the population can impact the diffusion of new technologies. Using data from a leading bank, we find that younger adults tend to prefer mobile payments over traditional cards. More broadly, age outweighs other observable consumer characteristics in explaining variation in the use of mobile payments across consumers. In a simple model of technology adoption, these age-driven differences in attitudes toward technology create stronger adoption incentives for businesses that are more likely to face younger consumers. We validate this prediction using store-level data on mobile payment adoption by merchants. Using both a difference-in-difference estimator exploiting actual age differences across districts and an instrumental-variable strategy using historical determinants of fertility to generate variation in age distribution across areas, we show that the adoption of the technology by businesses was higher in regions with younger population. These findings suggest that aging can pose an obstacle to the diffusion of financial innovation.