Digital Payment Convenience and Consumer Overspending Among Indian Youth: A Pilot Study on the Effectiveness of AI-Based Budgeting Tools

Abstract

The rapid expansion of Financial Technology (FinTech) platforms such as Unified Payments Interface (UPI), Paytm, Google Pay, and PhonePe has significantly transformed the spending behaviour of Indian youth. The convenience of instant payments, one-click transactions, and app-based purchasing has reduced transaction friction and increased impulsive consumption patterns among young consumers. Digital payment systems have become deeply integrated into daily activities such as food delivery, online shopping, entertainment, and transportation, thereby influencing personal finance management practices. According to the Reserve Bank of India (2023), digital payments in India have grown exponentially in recent years, particularly among younger users who demonstrate high adoption of mobile-based financial technologies. While FinTech applications improve accessibility and convenience, studies suggest that cashless payment systems often encourage higher spending due to reduced psychological awareness of money outflow (Soman, 2001). This study examines the relationship between FinTech accessibility and personal spending behaviour among Indian youth and evaluates the effectiveness of the Indian AI-based budgeting application Walnut in reducing excessive expenditure. The research adopts a pilot intervention approach involving 30 college students who are highly dependent on UPI and digital payment systems for daily transactions. Participants’ monthly expenditure patterns were observed for three months following the introduction of the Walnut budgeting application, which provides automated expense tracking, spending alerts, transaction categorization, and financial insights. The findings are expected to reveal that excessive dependence on digital payment platforms contributes to increased spending behaviour among youth. However, the introduction of AI-powered budgeting tools is projected to result in an approximate 32% reduction in monthly expenditure due to improved financial awareness and spending discipline. The study contributes to the fields of behavioural economics, FinTech, and personal finance management by emphasizing the importance of integrating intelligent budgeting systems within digital payment ecosystems to promote responsible financial behaviour among Indian youth.