Barus et al., Journal of Logistics, Informatics and Service Science, Vol. 11 (2024) No. 7, pp.

302-323

ISSN 2409-2665
Journal of Logistics, Informatics and Service Science
Vol. 11 (2024) No. 7, pp. 302-323
DOI:10.33168/JLISS.2024.0716

Navigating the Digital Financial Landscape: The Role of

Financial Literacy and Digital Payment Behaviorin Shaping
Financial Management Among Generation Z Student

Irene Sukma Lestari Barus, Tetty Lasniroha, Bunga Indah Bayunitri

Widyatama University, Faculty of Economics and Business, Lecturer at Accounting Departement,
Bandung, Indonesia.
[email protected], [email protected], [email protected]

Abstract. This study investigates the mediating role of digital payment behavior in the
relationship between financial literacy and financial management among Generation Z
students in Indonesia. Using a purposive sampling technique, a sample of 409 actively
enrolled university students was selected. Structural equation modeling (SEM) was employed
to analyze the data and test the hypothesized relationships. The findings reveal that financial
literacy positively influences digital payment behavior and financial management, while
digital payment behavior also positively affects financial management. Moreover, digital
payment behavior partially mediates the relationship between financial literacy and financial
management. The study highlights the importance of integrating financial literacy and digital
payment behavior to enhance students' financial management skills in the context of the
Industrial Revolution 4.0. Practical implications for financial education and policy initiatives
targeting Generation Z students are discussed. However, the study's limitations, such as the
reliance on a single country sample and the cross-sectional design, should be considered when
interpreting the results. Future research should explore the generalizability of the findings and
investigate the long-term effects of financial literacy and digital payment behavior on
financial well-being.
Keywords: Financial Literacy, Financial Management, Fintech Payment Behavior.

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1. Introduction
Financial literacy is an individual's ability to understand and effectively use various products and
services, which includes knowledge relating to the management of money, credit, investments, and risks.
In this context, digital payment behavior is the act of using modern payment technologies, such as
mobile apps, digital wallets, and electronic transfers, to carry out transactions. Meanwhile, financial
management is the process of planning and controlling the activities of an individual or institution,
including budgeting, investing, tax planning, and saving, to achieve stability and long-term economic
objectives Morgan et al., (2019).
Financial literacy is defined as an individual's ability to understand and effectively use various
financial products and services, including knowledge related to money management, credit, investments,
and risks. In this context, digital payment behavior refers to the act of using modern payment
technologies such as mobile apps, digital wallets, and electronic transfers to carry out transactions.
Meanwhile, financial management is the process of planning and controlling the activities of an
individual or institution, including budgeting, investing, tax planning, and saving to achieve stability
and long-term economic objectives. This study highlights how financial literacy influences digital
payment behavior and, in turn, affects financial management, underscoring the importance of
integrating financial literacy and digital payment behavior to enhance students' financial management
skills in the era of the Industrial Revolution 4.0.
The adoption of digital payments by Generation Z students faces various challenges, such as limited
knowledge, concerns about security and data privacy, as well as limited access to digital payment tools.
However, the opportunities are significant, including easy access to services, the ability to conduct
transactions, and the potential to enhance financial literacy through the practical use of the tools.
Integrating financial education into the curriculum can address these challenges and capitalize on the
available opportunities (Firmansyah & Susetyo, 2022).
The adoption of digital payments by Generation Z students faces various challenges such as limited
knowledge, concerns about security and data privacy, as well as limited access to digital payment tools.
However, significant opportunities also emerge, including easy access to services, the ability to conduct
transactions, and the potential to enhance financial literacy through the practical use of these tools.
Integrating financial education into the curriculum can address these challenges and capitalize on the
available opportunities. The digital technology development exponentially in the era of the industrial
revolution 4.0, illustrates how this condition triggers and indirectly influences consumption behavior
patterns, especially among students who are adaptive to technology.
In the industrial revolution 4.0, digital technology has developed exponentially and the concept is
followed by ease in ordering goods and services, and causes cheaper prices (efficiency) through online
transactions using smartphones or computer devices. This condition triggers and influences
consumption behavior patterns indirectly, specifically students who are adaptive to technology.
Currently, electronic money users are dominated by the middle to upper class and the millennial
generation who are up-to-date with technology (Gusni et al., 2020). In the field of economics, the
concept of limited resources arises from the nature of human needs contrasted with the limited
availability of financial assets. Even though human economic needs show boundless scope, the
resources are inherently finite. Therefore, financial literacy and fiscal management become apparent to
navigate the complexities of contemporary paradigms. This necessitates individuals capable of making
rational, well-calculated decisions, mindful of the resultant benefits, and cognizant of the external
ramifications of choices (Firmansyah & Susetyo, 2022).

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Table 1. Comparison of Financial Literacy and Inclusion Index in 2019 and 2022

INDEX 2019 2022

LITERACY 38.03% 49.68%

INCLUSION 76.19% 85.10%

GAP 38.16% 35.42%

Source : (Ojk.go.id, 2022)
The 2022 SNLIK carried out by OJK reported that the financial literacy index has increased from
38.03% to 49.68% compared to 2019. Meanwhile, Indonesia's financial inclusion index in 2022
increased rapidly from 76.19% to 85.10%. This condition shows the difference between the level of
literacy and inclusion where financial inclusion is 2 times higher than financial literacy. The results
show that the level of literacy has a different value from inclusion, which is higher than financial literacy
level. The parameters of financial literacy used are belief, knowledge, skills, as well as attitudes and
behaviors, while the parameter of financial inclusion used is index. Table 1 reports the comparison of
the Financial Literacy and Inclusion Index in 2019 and 2022, as follows.
From these data, Indonesian society has a literacy level of 75.69% below Sufficient literacy for 2019
and 2022 at 38.03% and 49.68%, respectively. OJK Regulation No. 76/POJK.07/ 2016 of 2016
(KEUANGAN, n.d.) defines financial inclusion as the availability of access to various formal
institutions, products, and services in line with the community's needs and capabilities to improve public
welfare. This phenomenon is evident in the increasing prevalence of bank accounts and the utilization
of financial service products. A higher level of financial inclusion signifies broader accessibility to
services for a greater number of individuals, thereby showing expanded reach and enhanced
accessibility.
According to Table 1, the number of account owners has increased from 2019 to 2022 but did not
happen with financial literacy. Despite the improvements in financial literacy, effective management
practices play an important role in empowering individuals to handle finances. This includes prudent
management of funds, astute risk assessment in investments, diligent preparation of pension funds to
cater to the exigencies of old age, and recognizing the significance of insurance as a method of
mitigating risk. Therefore, the attainment of elevated levels of financial inclusion index and literacy
among individuals should be promoted. In this context, the development of the technology industry
holds promise in promoting financial literacy and inclusion within communities. Fintech facilitates
accessibility to financial services for individuals residing in remote areas, thereby bridging geographical
barriers and broadening financial inclusion. Financial literacy can be interpreted as the ability to
understand a variety of economic concepts to assess conditions and make appropriate judgments on
resources (Budiwati et al., 2020).
Increasing financial and economic literacy needs to be applied in various countries to stabilize
personal finances, as a balance between spending and saving to increase national economic growth
(Shvandar, 2020). Conversely, limited financial literacy diminishes individuals' capacity to effectively
manage affairs, thereby engendering long-term ramifications (Stolper & Walter, 2017).
Digital technology holds significant promise and plays a crucial role in advancing financial
education and enhancing literacy (Davis & Hasler, 2021; Gomber et al., 2017, 2018). This is achieved
through digital financial services (DFS) within contemporary society, including digital currencies and

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online financial services, the potential for digital technology to contribute positively is substantial.
Therefore, there is urgent importance for the implementation of effective financial education initiatives,
strong consumer protection measures, and adaptable inclusion policies to address the evolving
landscape (Davis & Hasler, 2021; OECD, 2017).
The UTAUT model shows the individual acceptance and utilization of information technology.
This is an amalgamation of eight prior theories, including the Theory of Reasoned Action (TRA),
Technology Acceptance Model (TAM), Motivational Model (MM), Theory of Planned Behavior (TPB),
a fusion of TAM and TPB (C-TAM-TPB), Model of Personal Computer Utilization (MPCU),
Innovation Diffusion Theory (IDT), and Social Cognitive Theory (SCT). Empirical testing has shown
the superior efficacy of UTAUT compared to other models in understanding and predicting behavior
related to information system usage (Venkatesh et al., 2003).
This model has four constructs as determining factors in technology acceptance and user behavior,
namely Performance Expectancy, Effort Expectancy, Social Influence, and Facilitating Conditions that
influence behavioral intentions (Venkatesh et al., 2003). Performance expectancy is the extent an
individual believes that using a system can achieve advantages in a particular job or activity. This
variable is defined as the level of benefit or advantage obtained in using technology to carry out daily
activities and can be divided into 3 sub-variables. The first aspect pertains to usefulness derived from
integrating technology into daily routines, while the second aspect relates to quickness, measuring how
effectively technology expedites tasks. Lastly, productivity refers to the enhancement in work output
achieved by users through the adoption of technology. Effort expectancy is the level of ease associated
with using a system or technology by users. Venkatesh et al. (2003) defined effort expectancy as an
estimate of the perceived ease users experience when using technology. This concept includes two
dimensions, namely complexity, indicating the intricacy and difficulty of learning technology, and ease
of use, denoting the comfort felt during the application. Social influence is the degree an individual
perceives that external parties endorse the use of a particular system or technology. According to the
UTAUT model, social influence manifests as external pressure exerted on an individual by significant
others (Venkatesh et al., 2003) and the variable includes subjective norms. Social Influence pertains to
the extent of impact exerted by individuals close to the user regarding technology. Meanwhile,
subjective norms refer to the impact of significant individuals in the user's life on technology usage.
Facilitating Conditions pertain to an individual's perception regarding the accessibility of technical
and organizational support for users of a system or technology. This concept includes three fundamental
dimensions, namely resources, knowledge, and compatibility (Chang, 2012; Venkatesh et al., 2012).
Resources are external influences impacting technology use, while knowledge includes the availability
of external knowledge sources, and compatibility relates to the level of convenience. Digital payment
behavior is influenced by four primary factors, namely Performance Expectancy, Effort Expectancy,
Facilitating Conditions, and Social Influence.
This research examines Performance Expectancy in the context of productivity, and this variable is
defined as an enhancement in the user's work output when using technology. Furthermore, it is assessed
through financial management in controlling the complexity of technology and the learning curve.
Facilitating Conditions include resources and knowledge, which pertain to external factors and sources
of information for technology use. Compatibility assesses the degree of balance between the system
and contemporary technology, measured through financial literacy. In this research, social influence
includes social factors and subjective norms. Social factors control the influence of individuals close to
the user on technology use. Subjective norms assess the impact of significant individuals on the user's
technology use, measured through Digital Payment behavior.
Some empirical evidence is depicted in case studies in India, Jordan, and China belonging to Gupta
& Arora (2020), Jaradat & Al Rababaa (2013), and An et al. (2016) entitled "Investigating consumers
to accept mobile payments through a unified theory of acceptance model", "Assessing Key Factor that
Influences on the Acceptance of Mobile Commerce Based on Modified UTAUT", and "Study on the

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Factors of Online Shopping Intention for Fresh Agricultural Products Based on UTAUT2". This
research diverges slightly from earlier research and focuses on behavioral intention at the system level
to sustain digital payment through behavioral planning. The research consists of Generation Z
respondents, who are full-time students across various universities and actively using Financial
Technology applications.
Research addressing financial literacy and management have significantly evolved but are
considered inadequate for navigating the new and intricate financial landscape shaped by the
widespread adoption of digital technologies. Therefore, individuals must possess digital financial
literacy to effectively use digital services and discern potential risks in innovations. Despite the ongoing
transformation of daily life, there remains a lack of awareness regarding the impact of digitalization on
financial literacy and behavior. This research aims to explore the extent to which digitalization
influences individuals' lives, particularly in terms of financial literacy and capability through the
application of an integrative review approach (Torraco, 2005). Besides knowledge and understanding,
strong financial beliefs are also required, including attitudes, perceived behavioral control, and self-
efficacy (Serido et al., 2013).
According to Hilgert et al., (2003), individuals with low literacy were not always included in various
recommended financial practices. Meanwhile, (Mathews, 1999; Van der Merwe, 2012) described
financial literacy as the competence to recognize and use financial concepts through individual thinking
to improve welfare through decisions taken rationally. Ahn & Nam (2022) showed that mobile payment
users spent more money than non-users. In examining the role of financial knowledge, Ahn & Nam
(2022) reported that individuals who gained more financial knowledge could anticipate adverse
conditions such as overconsumption and difficulties in money management due to mobile payments
facility.
This research with five recent analyses in the US (de Bassa Scheresberg et al., 2020; Liao & Chen,
2020, 2021; Lusardi et al., 2018; Yakoboski et al., 2018) attempted to investigate the impacts of
increasing digital financial transaction services used by consumers. In recent years, consumers were
pampered with several easy methods, such as payment systems for online transactions, including PayPal,
Klarna, and Amazon Pay, or mobile payment systems using Payr, WeChat, Alipay, Venmo, and Vipps
applications, as well as contactless payment systems, requiring consumers to hold a card or smartphone
through a terminal, such as Apple Pay, G Pay, and Samsung Pay.
The phenomenon explains that financial literacy level influences behavior in relation to technology
as evidenced by the high amount of internet use. Therefore, this research tests the ability of active
students studying full-time at multiple universities while working in terms of financial literacy driven
by the intervention of technology. According to the literature review, Financial Literacy and
Management as well as the Role of Digital Payment Behavior Intervention are discussed due to changes
in environmental conditions.
The research question answered is “How does financial literacy affect digital payment behavior and
financial management among Generation Z active students?” Based on the existing literature and
empirical data, the hypotheses proposed are H1 - Financial literacy has a positive influence on digital
payment behavior, H2 - Financial literacy positively affects effective financial management, and H3 -
Digital payment behavior positively mediates between financial literacy and management. These
hypotheses show the importance of financial literacy in enhancing digital payment behavior and
effective financial management.
Financial literacy and digital payment behavior.
This research shows that consumers spend more money when using less transparent payment
methods. Several research have compared the use of credit or debit cards with cash (Feinberg, 1986;
Hirschman, 1979; Runnemark et al., 2015), where card users are known to spend more money. To
explain credit card premiums, Zellermayer (1996), coined the term "pain of paying", which is the feeling
consumers experience when paying. The transparency of a mode of payment is directly related to the

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"pain of paying," or the reluctance to pay, with cash and digital payment as the most (Prelec &
Loewenstein, 1998; Raghubir & Srivastava, 2008; Soman, 2003) and least transparent methods (Shah
et al., 2016).
According to neuroscience, a person's decision to buy an item is related to the ability to pay
(Knutson et al., 2007). Knutson et al.,(2007) investigated the mechanisms of purchasing decisions using
event-related functional Magnetic Resonance Imaging (fMRI). The results reported that individuals
tended to spend more money when using a credit card. This confirmed the findings of (Prelec &
Simester, 2001) which compared the use of cash and credit cards when the market value was unbalanced.
In addition, there was a positive connection between financial vulnerability and literacy (Anderloni et
al., 2012; Yusof et al., 2015). According to Heo et al., (2021), financial technology users have
experienced greater stress. Since financial literacy has contributed to individual behavior (Lusardi &
Mitchell, 2014), the topic related to understanding the concepts should be evaluated (Klapper et al.,
2015). This research shows that good financial literacy reduces the negative influence of behavioral
preferences in making digital payments, therefore the hypothesis for this statement is stated as follows:
H1: Financial literacy negative influence on digital payment behavior.
Financial Literacy and Financial Management.
Garman & Forgue (2010) explained that financial literacy is the understanding of facts, concepts,
principles, and technology in managing finances. The skill is needed to overcome problems in life,
specifically those related to financial decision-making. Atkinson & Messy (2012) suggested that
financial literacy is a collection of awareness, knowledge, behavioral abilities, and habits expected to
be present when making financial decisions to achieve satisfactory conditions. Vitt, L. A., Anderson,
C. A., Kent, J., & Lyter (2000) mentioned that the variable was related to a person’s ability to
comprehend how to manage money and discuss personal financial conditions, as well as provide some
perceptions relating to the financial world. A positive correlation was also found between financial
knowledge and practice (Hilgert et al., 2003). The measurement of financial literacy refers to the
parameters made by (Volpe et al., 1996) using four indicators, namely Basic financial knowledge,
Savings and loans, Investment, and Insurance.
Hilgert et al., (2003), Ida & Dwinta (2010), Robb & Woodyard (2011), Tang & Baker (2016),
Amanah et al., (2016), and Dwiastanti (2017) stated that financial knowledge affected management
behavior. Perry & Morris (2005), Grable et al., (2009), Mien & Thao (2015), Arifin (2017), Arifin et
al., (2017), Humaira & Sagoro (2018), and Bapat (2019) reported that the variable exerted a positive
influence on financial management behavior, where individuals with a broad understanding are inclined
to show better and more rational behavior in managing finances. This research reflected good financial
literacy characterized by the ability to manage finances, hence the hypothesis is stated as follows:
H2: Financial Literacy positively influences financial management.
Digital payment behavior and financial managing.
According to (Mm et al., 2009), the way individuals operate and manage finances plays a significant
role in attaining welfare. Therefore, there is a fundamental necessity for financial management
knowledge among all individuals. Chinen & Endo (2012) stated that individuals who effectively make
the best financial decisions easily overcome problems. Dew & Xiao (2011) and Senduk (2005) reported
that financial behavior includes three dimensions, namely consumption, Cash-flow management, as
well as Risk Management, Financial Storage, and Financial Considerations. Further research should be
conducted on consumers’ financial knowledge and payment behavior. This is consistent with the results
of Esselink & Hernández (2017), Greene et al., (2017) Koulayev et al., (2016), Chen et al., (2017),
Kadoya & Khan (2020), Jonker et al., (2017) for Eurozone, US, Canada, Japan, and Netherlands,
respectively. However, Henry, C.S.; Huynh, K.P.; Welte (2017) and Fujiki (2020) were categorized as
a part of the standard measure of financial literacy. Hamid & Loke (2021) examined the connection
between socioeconomic factors, financial literacy, money management skills, budget deficit, and
carelessness in using credit card payments in Malaysia. The results showed that socioeconomic factors

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including education, income, ethnicity, and marital status influence the use of credit cards in paying
process. This supports the argument that financial education and behavioral interventions are essential
in forming individual behavior (Robb & Woodyard, 2011; Świecka et al., 2021). The research reflects
good financial management promoting digital payment transactions, hence the hypothesis is stated as
follows:
H3: Digital payment behavior positively influences financial management.
Financial literacy, financial managing, and digital payment behavior.
Financial technology provides convenience, specifically in terms of digital payments (Arner et al.,
2015), and serves as a financial service provider in modern devices (Weekly, 2017). Previous research
has adopted new digital payment technologies which tend to be used by the younger generation,
specifically those who have high competence in the field (Choudrie et al., 2018; Elhajjar & Ouaida,
2020; Meyll & Walter, 2019; de Bassa Scheresberg et al., 2020; Yakoboski et al., 2018). This research
uses six factors that influence respondents' intention to use digital payment services, namely culture,
perceived security, performance expectations, effort expectations, social influence, and usage intentions
(Forbes & Kara, 2010; Junadia, 2015). According to Irawan & Matoati (2021), the utilization of fintech
payments has been shown to positively impact the level of financial management, showing individuals'
ability to manage various types of payment transactions, monitor expenses and income, and facilitate
savings. This research shows the important correlation between digital payment behavior, financial
literacy, and management, hence the hypothesis is as follows:
H4: Financial literacy positively influences financial management through digital payment behavior.
The complete theoretical model shows the direct influence in H1, H2, and H3 while the indirect
influence is in H4. From the literature review and hypothesis development, the paradigm research can
be described as follows.

H2

LITKE BPD PUKE (Y)

(X) (Z)

H4

Fig.1: Theoretical Model Direct and Indirect Affect.

Note: LITKE(X) means Financial Literacy, BPD (Z) means Behavior Payment Digital and PUKE
(Y) means Financial Managing.

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This research articulates the gap in literature by exploring how investigating the mediating role of
digital payment behavior can provide a better understanding of the relationship between financial
literacy and financial management. Through the use of purposive sampling techniques and structural
equation modeling (SEM), the study reveals that financial literacy positively impacts digital payment
behavior and financial management, while digital payment behavior also positively affects financial
management. Digital payment behavior partially mediates the relationship between financial literacy
and financial management, highlighting the importance of adopting an integrated approach in financial
education to face the challenges of the digital era.

2. Research Methods
The primary data used were questionnaires filled out by respondents online. This questionnaire was
adapted from the research of Volpe et al., (1996), Kim et al., (2016); Dew & Xiao (2011) and adjusted
to the object of students. The scale used as measurement was the Likert scale of 1 to 5 in SmartPLS
software version 3.2.9. Additionally, purposive sampling techniques were used in terms of sample
selection and the questionnaire adaptation process included several critical steps suitable for the context
and population. Purposive sampling was considered the most appropriate method because it allows for
the selection of respondents who specifically have experience or knowledge related to financial literacy
and the use of digital payments, which is vital to achieving the research objectives. This method
facilitates in-depth investigation of the phenomena under study in the specific context of Generation Z
students in Indonesia. However, we recognize that this approach has limitations, particularly the risk of
selection bias that could affect the generalizability of the findings. Therefore, this research should be
viewed as a starting point for broader understanding, and its results should be interpreted with these
limitations in mind, while recommending the use of more inclusive sampling methods in the future to
strengthen the generalizability of findings.
A literature review was conducted to identify existing instruments relevant to the research
objectives. Subsequently, the questionnaire was adapted to ensure the questions were relevant to the
cultural and socioeconomic context of the respondents. This included the modification of language,
scale, or examples to enhance understanding. To ensure validity, content validity could be used by
soliciting feedback from experts in the relevant field. Meanwhile, construct validity was examined
through factor analysis to assess the reflection of items in the questionnaire. Reliability, or the
consistency of the instrument's measurements, was checked using Cronbach's alpha coefficient to
evaluate the internal consistency of items. Therefore, the instrument could be used to produce consistent
results across different contexts.
The adaptation of questionnaire items from previous studies involved a selective and critical process
to ensure relevance and contextual validity in measuring financial literacy and digital payment behavior
among Generation Z students in Indonesia. This process included language and context adjustments, as
well as validation through pilot testing to gather feedback on the clarity and understanding of items.
The validity and reliability of the adapted instruments were then verified through statistical analysis,
including Cronbach's alpha reliability testing. These efforts ensure that the measurements used
accurately reflect the theoretical constructs being studied, considering the specific cultural and social
nuances of Indonesian stu
The criteria for respondents included individuals belonging to Generation Z, who held the status of
active full-time students enrolled in various universities, as well as those engaged in part-time work
while using Financial Technology applications. There was no exact population size since the number
of samples using the Lemeshow formula (1997) at the level of significance α = 5% was at least 384
respondents (Lemeshow et al., 1997). The number of respondents obtained through Path analysis and
Structural Equation Model (SEM) was 409 students. Furthermore, data processing was carried out using
Partial Least Square (PLS) software Version 3.2.9 which allowed proper solving of problems. This

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sample size was selected to ensure statistical power and model validity. As a complex statistical
technique, SEM examined the relationships between variables through measurement and structural
models. A large sample size was crucial for accurate parameter estimation and the validity of research
conclusions. The determination of this sample size also considered the criteria of effect size, confidence
level, and desired statistical power.
An indicator could be classified as valid when the Average Variance Extracted (AVE) value was
greater than 0.5 or the outer loading variable dimensions had a value > 0.5 (Chin, 1998). The
discriminant validity test could be conducted by comparing the square root of AVE for each construct
with the correlations between constructs (Ghozali, 2008). The discriminant validity test could be
determined through the cross-loading value for each instrument, which must be more than 0.5 (Fornell
& Larcker, 1981). The reliability of a variable construct could be determined through the value of
composite reliability. A construct was declared reliable with a composite reliability greater than 0.7
(Chin, 1998). These variables have a composite reliability value greater than 0.7, hence the data could
be interpreted as reliable.
This research applied the R Square test to measure the degree of variation between independent and
dependent variables (Abdillah & Hartono, 2015). The Significance Test included the analysis of the P-
value, which was set at < 0.05 to assess the exogenous and endogenous variables. Additionally, the
Effect Size Test was used to interpret the strength of the predictor variable's influence at the structural
level. This variable was unaffected by sample size and could be used to control the magnitude of
variables, as well as the differences and relationships within the model (Olejnik & Algina, 2003).
The structural equations obtained in this research include:
Model 1: Z = P1X
Model 2: Y = P1X
Model 3: Y = P2Z
Model 4 : Y = P1X + P2Z +
Note:
X = LITKE means Financial Literacy
Z = BPD means Behavior Payment Digital
Y = PUKE means Financial Managing.
P1, P2 means path coefficient
= Disturbance term
The path analysis regression model was used to discern the direct, indirect, and total effects of
independent variables on the dependent. This research initially had 473 samples by carrying out a data
cleaning process for 409 respondents through questionnaires. In the data cleaning process, the initial
step was to identify and eliminate duplicate or inconsistent data, followed by a thorough evaluation of
each questionnaire item to detect and correct entry errors. Meanwhile, missing or incomplete responses
were addressed using various techniques. Data imputation replaced missing values with estimates based
on average response, to minimize bias and maintain the sample size. The complete analysis relied only
on data to avoid potential distortions from imputation and reduction of samples. More advanced
techniques, such as Multiple Imputation or Bayesian Replacement Models, offer solutions to estimate
missing values by leveraging patterns in the existing data. This approach ensured analytical integrity by
keeping the dataset clean, consistent, and accurate, thereby minimizing the negative impact of missing
or incomplete data on the outcomes.
The main findings from the SEM analysis reveal significant and complex relationships between
financial literacy, digital payment behavior, and financial management. These relationships indicate
that an increase in financial literacy not only directly strengthens effective financial management but
also mediates digital payment behavior as an important factor in this process. These findings emphasize
the need for holistic financial education for Generation Z students, which not only focuses on traditional
financial aspects but also incorporates an understanding of digital payment technologies. This

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interpretation provides new insights into how an integrated approach to financial literacy and digital
payment technologies can contribute to better financial management, offering guidance for the
development of financial education curricula relevant to today's digital era.

3. Result and Discussion

Outer Model Test
An indicator can be classified as valid when the AVE value is greater than 0.5 or outer loading
variable dimensions have a loading value of > 0.5 (Chin, 1998). The discriminant validity test is
conducted by comparing the square root of AVE with the correlation value between constructs (Ghozali,
2008). An alternative method for assessing discriminant validity includes examining the cross-loading
values of each instrument, with a criterion exceeding 0.5 (Fornell & Larcker, 1981). A construct was
declared reliable when the variable had a composite reliability greater than 0.7 (Chin, 1998). The
variables in Figure 2 had a composite reliability value greater than 0.7, hence the data could be
interpreted as reliable.

Fig.2: Outer SEM PLS Model

Note: LITKE means Financial Literacy, BPD means Behavior Payment Digital and PUKE means
Financial Managing.

Research Model Testing

The section on Research Model Testing examined the data presented in Table 2, which offered
insights into the Inner Model Test. The R Square test was used to control the extent of variation in
dependent variables attributed to changes in independent variables (Abdillah & Hartono, 2015). The
Significance Test was also used by looking at the P-value of < 0.05 to test the significance of exogenous
variables on endogenous variables using the Effect Size Test (Olejnik & Algina, 2003). The R Square
value refers to the R Square Adjusted value where BPD and PUKE are 0.606 and 0.545, respectively
(Hair et al., 2011). Table 2 describes the significance test by analyzing the P-value of the Path
Coefficient. The effect of BPD and LITKE on PUKE and BPD is strong while LITKE on PUKE
influences the intervening category (Hair et al., 2011).

Table 2. Outer Loading Value of Latent Variable Dimension

No. Latent Variable Lowest Top R Square R Square Adjusted
Indicators Value Rated
1. LITKE 0,765* 0,847**
2. BPD 0,763* 0,844** 0,607*** 0,606***
3. PUKE 0,792* 0,881** 0,548*** 0,545***

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0,792* 0,881** 0,548*** 0,545***

Sources: Data Processed with Smart PLS V. 3.2.9 (2023)
Note: ** is Valid and *** is moderate, LITKE, BPD, and PUKE means Financial Literacy,
Behavior Payment Digital, and Financial management.

The R-square value in SEM analysis represented the proportion of variance in the dependent
variable explained by the independent variables in the model. For instance, an R-square value of 0.548
for financial management showed that 54.8% of the variability could be explained by the variables.
This value signified the strength of the relationship between variables practically significant because
more than half of the variability was understood through the proposed model. In practical terms, this
showed the importance of independent variables, such as financial literacy and digital payment behavior,
in shaping an individual's management capabilities and providing a strong foundation for interventions.

Hypothesis Testing
In Table 3, the significance test was stated and the P-value of the Path Coefficient discerned the
direct and indirect influences. The effect of BPD and LITKE on PUKE and BPD was strong while
LITKE on PUKE influenced the intervening category (Hair et al., 2011). The results of the Outer and
the Inner Model Test showed that the model was said to be good or acceptable.

Table 3. Effect Size and Path Coefficient

Latent Original Sample Standard F T P
Variable Sample (O) Mean (M) Deviation Square Statistic Value
Indicators (STDEV)
BPD -> PUKE 0,465 0,471 0,057 0,188** 8,220** 0,000**
0,188
LITKE -> BPD 0,779 0,781 0,020 1,546 38,347** 0,000**
1,546
LITKE -> 0,318 0,314 0,061 0,088 5,246** 0,000**
PUKE 0,088 0,363 0,368 0,046 7,770** 7,962** 0,000**
LITKE -> BPD
-> PUKE

Sources: Data Processed with Smart PLS V. 3.2.9 (2023)

Note: ** significance at 5% and ** moderate F Square at between 15-35%, LITKE means Financial
Literacy, BPD means Behavior Payment Digital, PUKE means Financial Managing.
Based on the results of the run data, the structural equation obtained is as follows:

Model 1 : LITKE = 0,779*BPD +

Model 2 : LITKE = 0,318*PUKE +
Model 3 : BPD = 0,465*PUKE +
Model 4 : PUKE = 0,318 LITKE + 0,465 BPD +
Note :
X = LITKE means Financial Literacy
Y = BPD means Behavior Payment Digital
Z = PUKE means Financial Managing
P1, P2 means path coefficient
= Disturbance term

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The direct influence of X on Z is (0.318)x(0.318) = 0.1011, while the indirect effect through Y is
0.465x 0.779 = 0.3622. The total effect of X on Z is the direct and indirect influences at 0.4633.
Hypothesis testing using the SEM-PLS Version 3.2.9 reported the value of each variable in this research.
The R Square value of 0.548 (54.8%) signifies a moderate inclusion of the influence between the
independent and intervening variables. Furthermore, the value between the independent and dependent
variables is 0.607 (60.7%), reporting a 60.7% contribution within the moderate model. R-square is
strong, moderate, or weak when the value is more than 0.67, more than 0.33 lower than 0.67, more than
0.19, and lower than 0.33, respectively (Chin, 1998). For the R Square Adjusted value, BPD and PUKE
values were 0.606 and 0.545 (Chin, 1998; Hair et al., 2011).
The suitability of this research model was indicated by the SRMR value being less than 0.10, as
observed in Table 4. The F square test, derived from the Effect Size in Table 3 showed that the
independent variable significantly influenced the intervening variable with an effect size of 1.564 or
156.4%, surpassing the threshold of 0.35 or 35%. However, the impact of the independent variable on
the dependent variable is considered low at 0.088 or 8.8%. The impact of the intervening variable on
the dependent variable is moderate at 0.188 or 18.8%.

Table 4. Model Fit

Saturated Model Estimated Model
SRMR 0,093* 0,093*
d_ULS 1,186 1,186
d_G 0,634 0,634
Chi-Square 1453,473 1453,473
NFI 0,724 0,724
Sources: Data Processed with Smart PLS V. 3.2.9 (2023)
Note : * Fit Model at <0,10, LITKE means Financial Literacy, BPD means Behavior Payment
Digital, PUKE means Financial Managing.

Descriptive statistics
Students who served as respondents used digital payments such as Akulaku, Shopee, and Bank
Online. A total of 409 respondents were grouped based on gender, age, faculty, and employment status.

Table 5. Respondent Data

Percent
No. Description
Amount (%)
Gender
172 42,05
1. a. Man
237 57,95
b. Woman

Age (Years)
93 22,74
2. a. 20 – 22
274 66,99
b. 22 – 24
42 10,27
c. >24

Faculty
203 49,63
a. FBM
3. 69 16,87
b. Law
55 13,45
c. Sospol
82 20,05
d. Technique

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Job Status
a. Student 282 68,95
4.
b. Student 127 31,05
&Employee

Survey results on identity respondents show that there are more females with a range of 22 to
24 years old. Respondents were mostly from the Faculty of Business and Management.

Influence of financial literacy on behavior payment digital.

The data in model 1 shows that financial literacy has a positive effect on behavior payment directly.
This can be seen from the T Statistics value greater than or equal to 1.96 and the P Value obtained <
0.05 or below 5%. The research rejects the hypothesis and can be seen from the T Statistics value greater
than or equal to 1.96 with a P-value < 0.05 or below 5%. The figure obtained for the T statistic is 38,347
and the P-value is 0.000.
The provision of good financial knowledge improves individual’s behavior in managing finances.
A more comprehensive understanding of students' financial literacy facilitates the adeptness in using
financial transactions through technology. The understanding of financial literacy shows that finances
and decisions can be managed. Despite comprehending the risks associated with financial technology
transactions, such as data breaches, hacking, or online fraud, students weigh the benefits and risks.
However, the convenience of conducting transactions through financial technology serves as a
significant motivator for students to persist in using financial technology applications. These results
confirm the findings of Henager & Cude (2016) and Herawati (2015) where literacy significantly has
effects on financial behavior. Foster et al., (2021) reported that financial literacy has a relationship with
the interest of using chip-based electronic money. The correlation between an individual's level of
financial literacy and inclination toward using electronic money is evident. Individuals with a profound
understanding of financial literacy are more inclined to leverage technology for transactions through
chip-based electronic money systems. Financial literacy shows a positive influence on the propensity
to use chip-based electronic money. In this context, the deeper one's understanding of financial literacy,
the more practicalities of chip-based electronic money can be navigated. Therefore, individuals
equipped with a strong financial literacy foundation easily engage with electronic money systems.
According to Rahayu et al., (2022), the Indonesian millennial generation's behavior toward saving
activity affects the level of digital financial literacy. Therefore, the higher a person's level of digital
financial literacy, the better the influence on saving behavior. This is consistent with research conducted
by Setiawan et al., (2022), Morgan et al., (2019), Henager & Cude (2016), Jamal et al., (2015), and
Wangmo (2018). Morgan et al., (2019) identified that a person's level of financial literacy affected
saving behavior. Edirisinghe, et al. (2017) in Irawan & Matoati (2021) stated that student financial
literacy was consistent with financial behaviour. Therefore, the higher the students’ knowledge and
ability to manage finances, the wiser the decisions to solve problems. Gunawan (2023) suggested that
financial literacy and payment technology had a major impact on the students’ consumptive behavior
in the public sector. Therefore, strengthening public financial education was in line with the era of
fintech and broad financial services.
Influence of financial literacy on financial managing.
The data in Model 2 shows that financial literacy has a positive effect on financial management
directly. This can be seen from the T Statistics value greater than or equal to 1.96 and the P-value
obtained < 0.05 or below 5%. The research rejected the hypothesis since the Statistics value was greater
than or equal to 1.96 and the P-value obtained < 0.05 or below 5%. The figure obtained for the T statistic
is 5.246 and the p-value is 0.000.

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According to Edirisinghe et al., (2017) and Jorgensen (2007), the comprehension of financial
literacy is facilitated through various channels, including media platforms on the Internet, educational
institutions such as universities, and independent entities, namely consulting firms, governmental
agencies, and corporations. These diverse sources equip individuals with the requisite knowledge to
engage in targeted financial management practices. The results are in line with Edirisinghe et al., (2017)
that students' financial literacy has a direct effect on financial management. Jorgensen (2007) stated that
students who acquired knowledge about managing finances from parents have higher financial attitudes.
Adiputra et al., (2021) explained that there is a considerable impact between financial knowledge
and financial behavior. Every individual must consider having financial knowledge, specifically
concerning the control of finances. Furthermore, (Hilgert et al., 2003; Perry & Morris, 2005; Grable et
al., 2009; Ida & Dwinta, 2010; Mien & Thao, 2015; Amanah et al., 2016; Arifin, 2017; Humaira &
Sagoro, 2018) stated that financial knowledge influenced individual behavior.
Influence of behavior payment digital on financial managing.
The data in Model 3 shows that behavior payment has a positive relationship with financial
management. This can be seen from the T Statistics value greater than or equal to 1.96 and the P Value
obtained < 0.05 or below 5%. The research rejected the hypothesis since the T Statistics value was
greater than or equal to 1.96 and the P-value obtained < 0.05 or below 5%. The figure reported for the
T statistic is 8,220 and the p value is 0.000.
The research accepted the hypothesis and the management of daily financial planning and expenses
was adjusted between the needs and income. However, Lifestyle patterns often lead to insufficient
income, prompting students to resort to financial technology for transactions such as purchasing credit
for goods, investing, and obtaining online loans for quick and convenient access to liquid funds. Due to
the urgency of needs, students frequently experience a lack of clear and transparent information
regarding banking and investment products or services. This lack of clarity may include details such as
initial deductions for online loans, high-interest rates, late penalties, and the varying percentages of
interest and penalties associated with each online banking platform. Moreover, users of financial
technology often face the risk of personal data breaches while receiving numerous offers for online
goods and services. Students do not fall prey to the schemes due to a lack of financial literacy or
management skills, but rather a complex interplay of factors within the ecosystem. However,
government supervision has not been quick to overcome the issue by sorting out the policies
implemented by online banks.
Several gaming and lifestyle-oriented platforms have been developed and are described as
antecedents of the metaverse. The interactive platform operates a virtual reality (VR) headset within an
immersive extended reality (XR) environment, allowing users to experience and interact in novel and
diverse scenarios (Dick, 2021; Dionisio, 2013; Gent, 2022). Research has described the metaverse as a
new mixture reality (MR) environment, the next invention of the internet applying the combination of
blockchain technology, digital assets, and avatars allowing virtual and physical communication
(Dwivedi et al., 2022). Jensen Huangsel, CEO of Nvidia, reported metaverse vision as an addition of
internet function where potential aspects can be perceived beyond the economic world (Forbes, 2022).
Martin (2006) also proposed four main components of digital literacy, namely (1) digital literacy
requires the ability to use digital actions in life situations, (2) digital literacy between one individual
and another may differ depending on life situation, (3) digital literacy is a broader concept of ICT
literacy because the variable does not explain individuals literacy in one domain, (4) digital literacy
covers activities to gain the use of knowledge, techniques, attitudes and personal qualities. Digital
literacy includes a spectrum of competencies, such as the capacity to strategize, execute, and assess
one's actions when navigating platforms to accomplish various life tasks. Additionally, the variable
includes the proficiency to contemplate and analyze the tasks critically. Digital literacy comprises
individuals' aptitude to comprehend and interpret information accurately through the utilization of

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information and communication technologies to attain different objectives (Knutsson et al., 2012; Ng,
2012).
Mallat (2007) found that mobile payment, as a mobile technology, offers numerous advantages.
The method transcends temporal and spatial constraints, facilitating transactions both locally and
remotely, ensuring convenience regardless of location. By enabling transactions to be conducted swiftly
and seamlessly, mobile payment systems mitigate queues and expedite cashless transactions efficiently.
According to Mallat (2007), these benefits are more pronounced in terms of situations such as queues,
unexpected payment needs, time pressure, and lack of cash or loose change.
This research is in line with the results of research by Runnemark et al., (2015), See-To & Ngai
(2019), and Becker (2017). According to Runnemark et al., (2015), individuals were pleased to spend
more for the same goods using debit cards. See-To & Ngai (2019) considered that payment mechanisms
significantly influenced consumer decisions and consumption patterns. Becker (2017) determined the
influence of fintech on saving behavior and reported an increased number of customer savings.
Influence of financial literacy on financial management through behavioral Payment digital
The data in model 4 shows that financial literacy through behavior payment has a positive
relationship with financial management. This can be seen from the T Statistics value greater than or
equal to 1.96 and the P-value obtained < 0.05 or below 5%. The research rejected the hypothesis since
the figure obtained for the T statistic and P-value were 7,962 and 0.000, respectively.
Financial Literacy effect on financial management through fintech payment behavior and the
research accepted the hypothesis. The variable shows a correlation with proficient financial
management, attributed to a strong comprehension of financial literacy. This understanding increases
the awareness of potential losses, stimulating consumer decisions favoring the adoption of financial
technology for payments. Therefore, increased utilization of fintech payments corresponds with
elevated levels of financial literacy and judicious financial management. Moreover, lifestyle
preferences, self-sufficiency, and exigencies drive the escalation of fintech payment behaviors,
regardless of students' understanding of financial literacy and adeptness in using innovative
technologies.
According to Kakinuma (2022), See-To & Ngai (2018), and Yeo & Fisher (2017), financial literacy
should include digital literacy allowing the use of innovative technologies in financial management.
Furthermore, attaining a sense of success correlates with an individual's ability to effectively manage
and leverage possessions, leading to prosperity (Kakinuma, 2022). Technological advances in fintech
payments can moderate financial management in influencing consumer decisions (See-To & Ngai,
2018). This is in line with (Yeo & Fisher, 2017) where the more often an individual uses fintech
payments, the level of financial management increases due to decisions.

4. General Finding
The practical implications of these findings for financial education and policy initiatives targeting
Generation Z are highly significant. Financial literacy, digital payment behavior, and financial
management show the importance of incorporating financial education into formal and informal
curricula. Comprehensive financial education can equip students with the knowledge and skills
necessary to make informed and responsible decisions. Policy initiatives are also designed to support
financial education programs, covering essential aspects such as budget management, investment, and
the use of digital payment tools. This requires collaboration between educational institutions, financial
institutions, and the government to develop relevant and accessible educational materials for Generation
Z students.
The increased adoption of digital payments and financial literacy in the context of the Industrial
Revolution 4.0 presents a set of challenges and opportunities. The main challenges include risks to data
security and privacy, digital divides across demographics and regions, and resistance to change from
traditional to digital payment systems. This is also a challenge for companies to adapt quickly in meeting

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dynamic market needs because Generation Z is a human resource that has adequate skills and
technological knowledge to meet individual needs. However, the opportunities include easier access to
financial services, transaction efficiency, and broader financial inclusion. To maximize these
opportunities, there needs to be a joint effort to raise awareness and understanding of cyber security,
reduce the digital divide through better infrastructure and internet access, and develop inclusive digital
payment solutions accessible to all layers of society.
The generalizability of the result requires validation in different contexts or populations to ensure
broader applicability. Even though the research provides valuable insights into the relationship between
financial literacy, digital payment behavior, and financial management among Generation Z students in
Indonesia, variations in culture, economy, and technology across different regions could affect the
dynamics of these relationships. Therefore, future research including more diverse samples and
longitudinal methods can provide a deeper understanding of enhancing financial literacy and digital
payment adoption among various populations. This research can also identify specific factors that
influence the effectiveness of financial education initiatives and related policies.

5. Conclusions and Recommendation

The main findings from the SEM analysis reveal significant and complex relationships between
financial literacy, digital payment behavior, and financial management. These relationships indicate
that an increase in financial literacy not only directly strengthens effective financial management but
also mediates digital payment behavior as an important factor in this process. These findings emphasize
the need for holistic financial education for Generation Z students, which not only focuses on traditional
financial aspects but also incorporates an understanding of digital payment technologies. This
interpretation provides new insights into how an integrated approach to financial literacy and digital
payment technologies can contribute to better financial management, offering guidance for the
development of financial education curricula relevant to today's digital era.

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