Digital payment and the formalization of rural household finance: evidence from landholding households in China

Introduction Developing modern agriculture and improving arable land allocation depend on financial support aligned with land-based production. However, rural credit markets in China have long been trapped in a “double bind” of insufficient formal credit supply and high-risk informal lending. Methods Using four waves (2016–2022) of China Family Panel Studies data on landholding households, we examine whether and how digital payment promotes the formalization of rural household finance. Results The results show that digital payment significantly shifts borrowing from informal sources toward banks and other formal institutions. This effect operates mainly through two channels—strengthening demand for formal borrowing and improving access to formal financial products. In doing so, digital payment provides more stable funding for land-related investments such as land transfers and farmland infrastructure. The effect is stronger among financially vulnerable households, underscoring its inclusive nature. Discussion The findings show how digital finance can bridge sustainability and development in dynamic land-use and rural socioeconomic–environmental interactions, and offer policy implications for leveraging digital payment to improve rural financial ecosystems and better coordinate land and financial capital.