An index of Digital Financial Participation for EU countries: Where does Luxembourg stand?

We propose an index of digital financial participation to benchmark the level of engagement/participation of EU citizens in an increasingly digitalized financial system. Drawing on data from Eurostat, we adopt a number of variables that reflect households’ and individuals’ digital skills, digital access, digital device usage as well as other factors to first construct a series of sub-indices that measure different dimensions of digital financial participation. In a second and final step, we combine these composite sub-indices into an overall composite indicator of Digital Financial Participation for EU countries. The information contained in the weights of the sub-indicator variables, as well as the weights of the sub-indicators in the final com- posite indicator provide potentially useful information for policymakers to assess the potential barriers to digital financial participation and inclusion in the EU. We also construct the indicator using the multi-directional Benefit of the Doubt approach to obtain directional improvement vectors that can help to guide policymakers in fostering participation in digital financial activities and digital financial inclusion.

Key words: composite indicator, benefit of the doubt, data envelopment analysis, financial inclusion, digital inclusion, payments, digitalization, performance benchmarking

JEL classification: C14, C43, C44, I30