The Impact of Digital Financial Literacy on Consumer Over-Indebtedness: Evidence on Underlying Mechanisms

Variables	Stage1	Stage2
	DFL	OOI	SOI
DFL		-0.142*** (-2.859)	-0.411*** (-9.903)
IV	0.721*** (48.650)
Age	-0.002*** (-24.427)	0.000 (0.120)	0.000 (0.499)
Gender	0.004** (2.508)	-0.023*** (-4.730)	0.005 (1.245)
Marriage	0.002 (0.859)	0.002 (0.245)	-0.021*** (-4.210)
CPC member	0.017*** (11.318)	-0.007 (-1.479)	-0.010*** (-2.823)
Health	0.007*** (11.225)	-0.019*** (-8.845)	-0.018*** (-11.789)
HH size	0.001** (2.442)	-0.022*** (-12.968)	0.003** (2.256)
Lndebt	0.001*** (7.689)	0.062*** (67.391)	0.019*** (28.687)
Child dependency ratio	-0.013*** (-2.839)	0.063*** (4.716)	0.017* (1.752)
Elder dependency ratio	-0.015*** (-3.213)	0.056*** (3.295)	0.001 (0.105)
Rural resident	-0.010*** (-7.268)	-0.012** (-2.209)	0.011*** (2.817)
Region	-0.027*** (-5.054)	0.024 (1.384)	0.059*** (3.335)
r2_p	0.338
F statistic	213.13

Descriptive statistics of the sample

Variables	Mean	SD	Min	Max
OOI	0.212	0.409	0	1
SOI	0.064	0.245	0	1
DFL	0.114	0.121	0	0.84
Age	47.174	8.836	18	60
Gender	0.803	0.398	0	1
Marriage	0.905	0.294	0	1
CPC member	0.353	0.478	0	1
Health	3.486	0.97	1	5
HH size	3.478	1.435	1	12
Lndebt	5.227	5.613	0	14.208
Child dependency ratio	0.139	0.176	0	0.833
Elder dependency ratio	0.058	0.129	0	0.75
Rural resident	0.324	0.468	0	1
Region	1.808	0.826	1	3
Financial planning	0.021	0.143	0	1
Commercial insurance	0.189	0.391	0	1

Analysis of urban-rural heterogeneity

Variables	OOI		SOI
Variables	Urban Marginal	Rural Marginal	Urban Marginal	Rural Marginal
DFL	-0.231*** (-4.491)	-0.183*** (-10.255)	-0.292*** (-4.733)	-0.190*** (-10.627)
Age	0.000 (0.940)	-0.000 (-0.598)	-0.001 (-1.180)	0.001*** (3.763)
Gender	-0.017 (-1.584)	-0.026*** (-4.513)	-0.016* (-1.785)	0.009** (2.359)
Marriage	0.002 (0.154)	0.005 (0.519)	-0.019* (-1.793)	-0.023*** (-4.371)
CPC member	-0.014* (-1.729)	0.001 (0.135)	-0.008 (-1.018)	-0.011*** (-3.051)
Health	-0.022*** (-6.669)	-0.016*** (-5.860)	-0.018*** (-6.264)	-0.019*** (-11.586)
HH size	-0.022*** (-8.103)	-0.024*** (-10.222)	-0.000 (-0.134)	0.003** (2.359)
Lndebt	0.068*** (16.260)	0.060*** (21.615)	0.027*** (19.416)	0.014*** (21.725)
Child dependency ratio	0.081*** (3.407)	0.058*** (3.609)	0.019 (0.948)	0.019* (1.779)
Elder dependency ratio	0.049* (1.812)	0.073*** (3.404)	-0.007 (-0.293)	0.003 (0.240)
Region	-0.020 (-0.369)	0.021 (1.164)	0.009 (0.166)	0.059*** (3.877)
N	8834	18298	8834	18298
r2_p	0.458	0.506	0.307	0.285

Operational definition of DFL

Digital Financial Literacy	Dimension	CHFS Questions	Measurement Criteria	Weight
Risk Awareness	Risk Attitude	If you had funds for investment, which investment project would you be most willing to choose?	From 1= risk preference to 5= risk aversion	0.060
Risk Awareness	Risk Awareness	Which do you think has a higher risk: stocks or funds?	1=Correct;0=otherwise	0.135
Basic Financial Knowledge	Simple Interest Calculation	Assuming the bank’s annual interest rate is 4%, if you deposit 100 yuan for a 1-year fixed term, what will be the principal and interest after 1 year?	1=Correct;0=otherwise	0.095
	Understanding Inflation	Assuming the bank’s annual interest rate is 5%, and the inflation rate is 8% per year, what will happen to the purchasing power of 100 yuan deposited in the bank after one year?	1=Correct;0=otherwise	0.076
	Knowledge of Financial Products	How would you rate your overall understanding of stocks, bonds, and funds?	1=Scores 1- 3,0=otherwise	0.118
Digital Financial Skills	Computer Usage	Currently, which of the following types of durable goods does your family own?	1=Owning a computer (Desktop/Laptop/Tablet, etc.),0=otherwise	0.027
	Online Smartphone Usage	Do you use a smartphone/the internet?	1=yes; 0=otherwise	0.008
	Online Shopping Experience	Have you made any online purchases in the past year?	1=yes; 0=otherwise	0.021
Digital Financial Experience	Digital Borrowing Experience	Have you ever used an internet platform to borrow money?	1=yes; 0=otherwise	0.340
	Digital Payment Experience	Do you use mobile payments in your daily life?	1=yes; 0=otherwise	0.010
	Digital Wealth Management Experience	Have you ever purchased internet wealth management products?	1=yes; 0=otherwise	0.110

Baseline regression results

Variables	OOI Marginal Effects	SOI Marginal Effects
DFL	-0.179***	-0.226***
Age	-0.000	0.001***
Gender	-0.023***	0.005
Marriage	0.002	-0.022***
CPC member	-0.007	-0.014***
Health	-0.018***	-0.020***
HH size	-0.022***	0.003**
Lndebt	0.062***	0.018***
Child dependency ratio	0.063***	0.019**
Elder dependency ratio	0.055***	0.004
Rural resident	-0.014***	0.021***
Region	0.021	0.070***
r2_p	0.489	0.293

Mediation effect of financial planning

Variables	Financial Planning Marginal Effects	OOI Marginal Effects	SOI Marginal Effects
DFL	0.100*** (15.334)	-0.173*** (-10.551)	-0.222*** (-11.520)
Financial Planning		-0.047*** (-3.614)	-0.046** (-2.564)
Age	0.000*** (4.283)	-0.000 (-0.189)	0.001*** (3.275)
Gender	-0.008*** (-4.243)	-0.024*** (-4.695)	0.005 (1.279)
Marriage	0.008*** (2.682)	0.002 (0.259)	-0.022*** (-4.386)
CPC member	0.005** (2.312)	-0.006 (-1.303)	-0.013*** (-3.858)
Health	0.002** (2.241)	-0.018*** (-8.660)	-0.019*** (-13.131)
HH size	-0.002*** (-3.013)	-0.023*** (-12.872)	0.003** (2.393)
Lndebt	-0.000* (-1.939)	0.062*** (26.036)	0.018*** (29.391)
Child dependency ratio	0.013** (2.113)	0.063*** (4.787)	0.019** (2.006)
Elder dependency ratio	0.014** (1.977)	0.056*** (3.426)	0.005 (0.419)
Rural resident	-0.017*** (-6.201)	-0.014*** (-2.897)	0.021*** (6.343)
Region	-0.021*** (-3.000)	0.020 (1.198)	0.070*** (4.307)
r2_p	0.122	0.489	0.293

Mediation effect of commercial insurance participation

Variables	Commercial Insurance Marginal Effects	OOI Marginal Effects	SOI Marginal Effects
DFL	0.537*** (27.932)	-0.163*** (-9.810)	-0.209*** (-10.871)
Commercial Insurance Participation		-0.024*** (-5.093)	-0.023*** (-5.695)
Age	-0.001* (-1.698)	-0.000 (-0.235)	0.001*** (3.191)
Gender	-0.022*** (-3.718)	-0.024*** (-4.734)	0.005 (1.250)
Marriage	0.047*** (5.308)	0.003 (0.409)	-0.021*** (-4.253)
CPC member	0.006 (0.971)	-0.006 (-1.341)	-0.013*** (-3.872)
Health	0.021*** (8.260)	-0.018*** (-8.482)	-0.019*** (-12.890)
HH size	0.006*** (2.703)	-0.022*** (-12.747)	0.003** (2.552)
Lndebt	0.003*** (6.170)	0.062*** (26.057)	0.018*** (29.187)
Child dependency ratio	-0.037** (-2.217)	0.062*** (4.667)	0.018* (1.887)
Elder dependency ratio	-0.066*** (-3.323)	0.054*** (3.295)	0.003 (0.271)
Rural resident	-0.052*** (-9.021)	-0.015*** (-3.090)	0.020*** (6.082)
Region	0.019 (1.087)	0.019 (1.152)	0.069*** (4.264)
r2_p	0.074	0.490	0.295

References

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Articles in this issue

DOI: https://doi.org/10.2478/irfc-2026-0003 | Journal eISSN: 2508-464X | Journal ISSN: 2508-3155

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Language: English

Page range: 32 - 48

Published on: Jun 30, 2026

Published by: International Academy of Financial Consumers

In partnership with: Paradigm Publishing Services

Keywords:

Digital financial literacy,

Consumer over-indebtedness,

Financial planning,

Commercial insurance participation

Related subjects:

Business and economics,

Political economics,

Economic policy,

Business management,

Corporate social responsibility (CSR), compliance management, business ethics,

Industries,

Banks, financial service provider, insurers,

Law,

Commercial law,

Consumer protection

© 2026 Tianzi Gong, published by International Academy of Financial Consumers
This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 3.0 License.

Volume 11 (2026): Issue 1 (June 2026)