Digital Payment Adoption and MSME Business Performance: The Mediating Role of Digital Trust and Financial Capability

Abstract

This study aims to analyze the effect of digital payment adoption on the business performance of Micro, Small, and Medium Enterprises (MSMEs) and to examine the mediating roles of digital trust and financial capability within Indonesia's digital economy. Employing a quantitative approach with Partial Least Squares Structural Equation Modeling (PLS-SEM), data were gathered from 300 MSME owners and managers actively utilizing digital payment systems across North Sulawesi and Eastern Indonesia. Empirical results demonstrate that: (1) digital payment adoption positively and significantly affects MSME business performance (β = 0.412; p < 0.001); (2) digital trust partially mediates the relationship between digital payment adoption and MSME business performance (indirect effect β = 0.154; p < 0.001); and (3) financial capability partially mediates the relationship between digital payment adoption and MSME business performance (indirect effect β = 0.125; p < 0.001). The total variance in MSME business performance explained by the structural model is 65.8% (R² = 0.658). These findings advance the integration of the Technology Acceptance Model (TAM) and the Resource-Based View (RBV), offering actionable managerial implications for policymakers and entrepreneurs in optimizing digital transaction ecosystems.