FINANCE MANAGEMENT

ORIGINAL PAPER
© CC BY 4.0

DOI: 10.26794/2587-5671-2022-26-6-192-211
JEL G40, G53, L29, O33

Financial Technology Adoption — ​A Case of Indian MSMEs

U. Guptaa, B. Agarwalb, N. Nautiyalc
a, b
Amity University, Uttar Pradesh, India;
c
Sohar University, Sohar, Oman
ABSTRACT
Micro, small, and medium enterprises (MSME) are the backbone of every economy. Financial inclusion of MSMEs is
essential for any country aspiring to economic development. Innovative solutions offered by fintech companies can
support the financial inclusion of MSMEs. Digital payments, alternative loans, insurance, investments, regulatory, and
robo-advisory services are just a few of the services that fintech companies provide to MSMEs. The purpose of this study-
is to examine the role of financial technology on registered micro, small, and medium enterprises in India. The objec-
tive of the study is to reveal the behaviour of MSMEs towards financial technology acceptance and show how various
demographic variables of owners/managers influence the acceptance of financial technology in the case of MSMEs.. The
methodological basis of the study is a management survey of 117 MSMEs in India. The questionnaire had 25 questions;
measurement items used in the questionnaire were derived from previous studies carried out in developing countries.
The results were processed and tested for significance using modern econometric methods such as the Kruskal-Wallis H
test, and the Mann-Whitney U test. The result of the study indicates that the financial technology acceptance rate among
the MSME sector is high as maximum MSMEs consider themselves moderate financial technology adopters. MSMEs
have a high understanding of different financial services provided by fintech companies. Prior Experience of the owner/
manager, brand familiarity, government support, and behavioural variables such as perceived ease of use, perceived
usefulness, trust, and satisfaction was proved to be effective while adopting financial technology services whereas, de-
mographic variables such as gender, age, education level of owner/manager was found to be ineffective. The study con-
cludes that fintech companies are providing quality services by acting as a single window, supporting the financial needs
of MSMEs at low interest rates, simplified processes and lower transaction costs. MSMEs are using fintech products and
services as a key part of their financial management, with increasing adoption there is a growing opportunity for fintech
companies, incumbents, and non-financial organisations. The result of the study contributes to the novel understanding
of the acceptance and preference of the MSME sector towards financial technology.
Keywords: financial management by small businesses; financial technology; Indian MSMEs; fintech companies; fintech
products; financial technology adoption; behavioural factors

For citation: Gupta U., Agarwal B., Nautiyal N. Financial technology adoption — ​a case of Indian MSMEs. Finance: Theory
and Practice. 2022;26(6):192-211. DOI: 10.26794/2587-5671-2022-26-6-192-211

INTRODUCTION According to the RBI bulletin,2 roughly 19% of Fintech

Financial technology, often known as “Fintech”, has companies in India were in the digital payments area
revolutionized the banking industry’s ecosystem as of August 2020. Digital lending came in second
around the world [1]. The global FinTech market value with 17 percent, and WealthTech came in third with
is estimated to be approximately 7301.78 billion US$ 14 percent. In 2020, India has about 2,200 Fintech
as of 2020 and projected to grow at a CAGR of 26.87%, enterprises and start-ups, making it the world’s second
as per Statista Research Department.1 India’s FinTech largest Fintech hub behind the United States.
sector is expected to reach from US$ 50 billion in 2021 There is no global definition for the term “Fintech”,
to US$ 150 billion by 2025. Fintech service providers as definitions of Fintech vary widely across the globe.
have aided in the unbundling of banking into core Depending on which side of the industry you come
activities such as payment settlement, maturity from, Fintech means quite different things to different
transformation, risk-sharing, and capital allocation [2]. people. Fintech is defined as an industry that uses

2
RBI Bulletin: FinTech: The Force of Creative Disruption
1
Statista Research Department Report on Fintech Jun 7, 2022. dated: 11.11.2020. URL: https://rbidocs.rbi.org.in/rdocs/
URL: https://www.statista.com/topics/2404/fintech/ (accessed Bulletin/PDFs/7FINTECHEED4C43FC31D43C9B9D7F8F31D01
on 10.03.2022). B08E.PDF (accessed on 02.10.2021).

© Gupta U., Agarwal B., Nautiyal N., 2022

192 FINANCE: THEORY AND PRACTICE  Vol. 26, No. 6’2022  financetp.fa.r u
 U. Gupta, B. Agarwal, N. Nautiyal

technology to make financial institutions and the does not exceed one crore rupees3 and turnover does not
delivery of financial services more efficient, although exceed five crore rupees, a small enterprise, where the
there is no universally agreed-upon definition. Fintech investment in plant and machinery or equipment does
is a process that combines “finance and technology not exceed ten crore rupees and turnover does not exceed
together”. Internet banking, mobile payments, fifty crore rupees; and a medium enterprise, where the
crowdfunding, peer-to-peer financing, Robo-Advisory, investment in plant and machinery or equipment does
online identity, and other incremental and disruptive not exceed fifty crore rupees and turnover does not
advances are examples [3]. There are many financial exceed two hundred and fifty crore rupees.4 Micro, Small,
needs of customers that can be fulfilled using Fintech and medium-sized enterprises (MSMEs) are increasingly
services. using Fintech services across the globe. The Global
SME adoption rate is 25%. In India, Fintech Services
Financial Technology are adopted by the MSME sector at a very fast pace.
provides basic forms of financial MSME firms are a distinct customer category, with
services requirements that differ from those of consumers and
• Banking and Payment: This includes online major organizations.
foreign exchange, digital banking, payment processors, The study involves understanding the knowledge of
and mobile point of sale (mPOS) payment machines MSMEs about Financial Technology and ascertaining
and readers. the MSME behavior towards Financial Technology
• Financial Management: This includes online acceptance as the needs and working of this sector
billing and invoice management tools, online cash are very different. The study will also ascertain the
flow and liquidity management tool, and Online impact of different demographic variables such as Age,
bookkeeping and payroll tools. Education, Experience, and Gender of Owners/Managers
• Financing: This includes online lending on Financial Technology acceptance. According to [4],
platforms, online marketplaces, aggregators, the human capital of an MSME i.e., owner/manager is
and brokers. Online equity (including equity a significant determinant in predicting the financing
crowdfunding), debt securities, online invoice preferences of MSMEs. Also, human capital can be
financing, and dynamic discounting. measured using three variables, namely age, education,
• Insurance: This comprises peer-to-peer and experience [5] The significance of personal features
insurance, usage-based insurance, and insurance of MSME owners/managers has also been explained by
premium comparison sites. [6]. They realized that gender, education, and ethnicity
According to the EY global Fintech adoption index, are the most important factors influencing MSME
India’s fintech adoption has increased to 87% in financial decisions.
2019 from 52% in 2017. Fintech aims to improve the These days, the MSME sector is spending a huge
accessibility of financial services for both individuals amount on technology development and up-gradation.
and enterprises. Fintech improves clients’ experiences Given the growing importance of these recent changes
by connecting them to the digital world, making them in India’s MSMEs, the current study poses the following
more efficient, cost-effective, and seamless. Fintech has research questions:
changed the ecosystems of all businesses. Today, all • Identifying MSMEs’ knowledge of financial
banking transactions are usually digital, Banks, financial technology.
institutions, and lenders can provide loans and advances • To ascertain the MSMEs’ behavior towards
easily and quickly using just their mobile phones because financial technology acceptance.
of Fintech [3]. Today, Fintech is used in all sectors of
3
1 INR = 0.760 RUBLES. 1 CRORE = 7,602,470 RUBLES
the economy, which includes the MSME sector also.
URL: https://www.xe.com/currencyconverter/ (accessed on
The definition of the MSME sector is also different 10.08.2021).
in different nations. In India, MSME is defined as per 4
MSME. Annual Report 2020–21. Ministry of Micro, Small, and
Medium Enterprises; 2021 URL: https://msme.gov.in/sites/
(MSMED) Act, 2006 where a micro-enterprise, where default/files/MSME-ANNUAL-REPORT-ENGLISH%202020–
the investment in plant and machinery or equipment 21.pdf (accessed on 03.02.2022).

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FINANCE MANAGEMENT

• To analyze the impact of different demographic financial and technical resources than micro, small,
variables on the behavior of MSMEs towards and medium enterprises (MSMEs) [10], which results
acceptance of financial technology. in MSMEs seeking alternative financing channels
This research will not only add to the scientific outside the traditional banking industry and capital
community’s body of knowledge, but it will also markets to satisfy their increasing financing needs
be significant for the following reasons: First, [11]. Further, the small business sector continues
this study adds to the limited research on India’s to suffer from acute skills shortages, which makes
MSMEs. Second, this study will demonstrate the the process of obtaining finance more difficult. Also,
MSME sector’s preference for and acceptance of access to finance is frequently identified as a critical
financial technology. Third, this is one of the first barrier to growth for MSMEs [12]. A growing body
studies to examine MSME attitudes about financial of literature has highlighted the extent to which
technology acceptance by incorporating different MSMEs are credit constrained across developing
factors influencing the attitudes of individuals and countries, emphasizing the importance of relieving
organizations. this constraint to achieve higher growth. Creating
We believe that this study can significantly advance opportunities for MSMEs in emerging markets is
knowledge on financial technology and small company also a critical step toward economic development
technology adoption in general by examining the most a n d p ove r t y r e d u c t i o n . A l s o , s o p h i s t i c a t e d
important elements influencing MSMEs’ willingness to technology and innovation are highly important for
use financial technology services. The role of financial private firms [13].
technology is discussed in recent literature (Table 1),
but the adoption of financial technology services has Fintech
received less academic attention because it is new in FinTech, which stands for financial technology,
context, which is another way that this study makes generally refers to financial innovations made
progress. This study is the first step in creating an all- possible by technology. All the major companies
encompassing, integrated plan to explain why Indian are utilising this technology edge, from “start-ups”
MSMEs are adopting fintech services. This study is one to “big techs” to established financial institutions.
of a kind since it blends MSMES with fintech, despite the Financial technology (Fintech) and innovations in
fact that earlier research has stressed the significance traditional business models can take advantage of
and function of fintech. the credit gap [14]. The services offered by Fintech to
The next section contains a summary of the relevant micro, small, and medium-sized enterprises (MSMEs)
research. The third section provides an overview of give them new perspectives and opportunities for
the variables, developed instruments, and procedures company financing [15]. If MSMEs adopt financial
used for the study. The study’s analysis and findings are technology-driven solutions in their day-to-day
detailed in section four. The conclusion and implications work, then it will accelerate their growth rapidly.
of the outcome were presented in the concluding part. Financial technology can be used in many ways,
not just for accessing finance. Financial activities
LITERATURE REVIEW such as taking insurance, doing financial planning,
Micro, small, and medium enterprise of India making invoices and investments, etc. are way
Micro, small, and medium enterprises (MSMEs) are easier with financial technology. Fintech companies
a critical part of an economy given their significant offered various types of services such as digital
contributions towards the gross domestic product, payments, alternate lending, insurance, investments,
tax revenue, and employment [7, 8] but access to regulatory and robo-advisory [15]. As seen in (Table
external finance is difficult for them [9]. Unlike 2), fintech is currently active in several financial
major firms, which can raise funds through global areas. Also, technology-driven changes in business
financial markets, most MSMEs must rely entirely models will accelerate the growth of Asia’s MSMEs
on domestic banking institutions to obtain credit. [15]. By modernizing inefficient processes and
This is because huge corporations have greater reducing the role of costly intermediaries, financial

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 U. Gupta, B. Agarwal, N. Nautiyal

Table 1
Summary of Prior Studies discussing Role of Financial Technology

Organization Discussion

World Bank Groupa This report highlights the consumer risk associated with the use of Fintech Services

T&Ab Different business models of Fintech are discussed which is feasible as per the Indian
Market.

Esya Centrec Digital Infrastructure of India is discussed along Skills, Awareness, Literacy level of
consumer is also highlighted. Trust & Privacy concerns of using Fintech are highlighted.

ADBId This report discusses how digitalization increases access to finance in India

RBSA Advisorye Current and Future Landscape of Fintech sector in India; factors impacting Fintech
sector of India

Source: compiled by the authors.

Notes: a World Bank. Consumer Risks in Fintech: New Manifestations of Consumer Risks and Emerging Regulatory Approaches. World
Bank; 2021 Apr. URL: https://documents1.worldbank.org/curated/en/515771621921739154/pdf/Consumer-Risks-in-Fintech-New-
Manifestations-of-Consumer-Risks-and-Emerging-Regulatory-Approaches-Policy-Research-Paper.pdf (accessed on 15.01.2022);
b
T&A Consulting. Opportunities for Swiss Fintech In India — ​Executive Summary. 2021. URL: https://www.s-ge.com/en/publication/
guide/20213-c5-india-fintech-fint1 (accessed on 15.01.2022);
c
ESYA Centre. Digitalising Indian Retail capacity building for a global context. ESYA Centre. 2021. URL: https://www.esyacentre.org/
documents/2021/2/12/digitalising-indian-retail-capacity-building-for-a-global-context (accessed on 15.01.2022);
d
Nemoto N., Yoshino N. Fintech for Asian SMEs. URL: https://www.adb.org/sites/default/files/publication/502781/adbi-fintech-smes.
pdf (accessed on 10.01.2022).
e
RBSA Advisors. Fintech Industry in India Future of Financial Services. 2021. URL: https://rbsa.in/wp-content/uploads/reports/re-
search-reports/RBSA-Advisors-Presents-FinTech-Industry-in-India-February2021.pdf (accessed on 10.02.2022).

products are more fairly priced and traded in the fintech businesses. As per Invest India,5 the value of
market. Also, the working capital requirement [16], fintech transactions in India is expected to increase
which is the biggest obstacle to survival in the from US$ 66 billion in 2019 to US$ 138 billion in 2023
early stages of the business, can be unlocked with at a CAGR of 20%. $ 8.53 billion (in 278 deals) was
financial technology. SMEs can benefit from financial invested in India’s Fintech industry in FY 22, 323 banks
technology in a variety of ways, including safer and participated in India’s Unified Payments Interface (UPI)
faster payments, improved customer experience, as of May 2022, and the system recorded 5.9 billion
increased transparency, well-managed bookkeeping, monthly transactions totaling more than $ 130 billion.
and delivering a competitive advantage. Payments, Lending, Wealth Technology (WealthTech),
Personal Finance Management, Insurance Technology
The Indian Fintech sectors (InsurTech), and Regulation Technology (RegTech)
India’s FinTech industry may be nascent, but it is are sectors that make up the Indian Fintech business
expanding quickly especially to a substantial market ecosystem. According to the Medici India Fintech report,6
because of the innovative startup ecosystem, and there are 2,174 active fintech start-ups in India, 405 of
supportive government policies and regulations. The them are companies that offer digital payment services,
fintech sector in India has experienced rapid expansion
in recent years as shown in (Fig. 1). Paytm, Pine 5
BFSI — ​Fintech & Financial Services. URL: https://www.
Labs, PayU, and Faircent are some of the well-known investindia.gov.in/sector/bfsi-fintech-financial-services
names on the list of the many Fintech businesses that (accessed on 17.01.2022).
6
India FinTech Report 2020 by Medici. URL: https://www.
are increasingly based in India. SoftBank has been fintechcouncil.in/pdf/India-Fintech-Report‑2020-Executive-
making active investments in numerous promising Summary.pdf (accessed on 15.08.2021).

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Table 2
Different areas of financial technology

Areas Fintech segment Brief Description

This subset of Fintech encompasses entire lending

Peer-to-Peer lending markets, including peer-to-peer lenders and
Credit, Lending, and Marketplace for loans marketplaces that connect borrowers with both private
Deposits Crowdfunding and institutional lenders.
Digital currencies Platforms for crowdfunding and equity financing is
covered as well

P2P (person-to-person), P2M (person-to-merchant), and

M-wallets
G2P (government-to-person) transactions are examples
Merchant payments
Payments of services that allow money to flow from one person to
International remittances
another. It also covers payment services provided using
Digital currencies
mobile or other technologies

This segment pertains to technology-assisted wealth

Investment Management Robo advisors, Smart contracts
advisory services

Tax filing/processing, Credit

Personal Finance With the help of technical tools and services, individual
scoring services
Management financial profiles can be actively managed
Financial planning

Smart contracts, It comprises services that facilitate the provision of

Market provision E-Aggregators, information and services of the market in a more timely
Cloud computing and cost-effective manner

This covers small business insurance and Usage-based

InsurTech Insurance aggregator
insurance

Source: Report of the Working Group on Digital Lending including Lending through Online Platforms and Mobile. URL: https://rbidocs.
rbi.org.in/rdocs/PublicationReport/Pdfs/DIGITALLENDINGF6A90CA76A9B 4B 3E 84AA0EBD 24B 307F1.PDF (accessed on 18.11.2021).

365 are digital lending businesses, 486 are involved in more than triple from $ 3 trillion now to $ 10 trillion by
wealth management and personal finance, and 111 are 2026. Digital payments (non-cash) will account for roughly
involved in the insurtech sector. 65 percent of all payments by 2026 which means 2 out
Most people in India are cash driven. A step toward of 3 transactions will be through digital modes. There is
establishing a cashless society has been made with the a significant increase in UPI transactions from 2018 to
help of Fintech innovations. The use of fintech has 2020 (Fig. 2). Fintech services are also economical since
significantly changed how people manage their finances they combined streamlined products with cutting-edge
and conduct daily business. As per Mckinsey Digital Report technology. Financial services that were previously
20197 digital payments market in India is predicted to
our%20insights/digital%20india%20technology%20to%20
7
Kaka N. Digital India: Technology to transform a connected transform%20a%20connected%20nation/digital-india-
nation. 2019. URL: https://www.mckinsey.com/~/media/ technology-to-transform-a-connected-nation-full-report.pdf
mckinsey/business%20functions/mckinsey%20digital/ (accessed on 20.08.2021).

196 FINANCE: THEORY AND PRACTICE  Vol. 26, No. 6’2022  financetp.fa.r u
 U. Gupta, B. Agarwal, N. Nautiyal

250

200

in billion USD(US$)
150

100

50

0
2017 2018 2019 2020 2021 2022E 2023E 2024E 2025E 2026E

Digital Assets Digital Investments

Digital Payments Neobanking

Fig. 1. Increase in different Fintech sectors in India

Source: Statista Research Department. URL: https://www.statista.com/topics/8077/digital-lending-industry-in-india/ (accessed on
17.01.2022).

provided by salespeople, desktop computers, and branches medium and large enterprises are embracing
are now mobile because of these technologies and can financial technology in significant ways, even ahead
move around freely on laptops and mobile phones. By of their Western counterparts, especially when it
learning about user habits, technologies like machine comes to mobile technology. Despite India’s great
learning and predictive behaviour analytics enable users to performance in the adoption of mobile technology,
make educated decisions about their savings and spending. today’s small businesses in India are not realizing
The digital payment spaces have witnessed a their full potential. MSME owners and managers
significant push due to mobile wallets, smart phones, may be apprehensive about innovations due to
near-field communications, and QR codes as described the financial costs involved in adopting innovative
in Table 3 where the volume of digital transactions has technologies [18] and/or because of the uncertainty
increased from 1695.2 to 43711.8 in a span of nine years revolving around new technologies [19].
(2012–2021). MSMEs, which are significant players The processes of financing activities in MSMEs
in the global economy, have embraced mobile money. are very different from those of large firms. Also,
MSMEs are currently utilising mobile money for financial acceptance of any kind of technology for MSMEs
services like insurance, savings, and credit. They have is highly complicated in nature as not only firm-
begun receiving payment via mobile money (for their level variables but also owner-specific variables
labour or for the sale of goods or services). influence the level of acceptance. The financial
behavior of the owner-manager is influenced by
MSME strategies to adopt Fintech the entrepreneur dimension and entrepreneur
Financial technology is required not only for the cognition such as age, experience, education, and
growth of micro, small and medium enterprises ownership structure. It has also been found that
but also for the growth of the Indian economy. MSMEs are adopting fintech through mobile phones.
Also, high technological skills provide strategic Also, entrepreneurial experience and prior family
advantages to businesses [17]. As per NSSO,8 Indian business have a positive impact on entrepreneurial
goals [20]. The more a person is inclined to adopt
8
NSSO. Operational characteristics of unorganized technology or gain technological knowledge, the
manufacturing enterprises in India. 2007. URL: http://doc.
inflibnet.ac.in/datarepository/index.php/catalog/79 (accessed
more interested they will be in the adoption of
on 01.02.2022). Fintech Services.

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FINANCE MANAGEMENT

2 500 000 000

2 000 000 000

1 500 000 000

1 000 000 000

500 000 000

2018 2019 2020

Fig. 2. Volume of UPI Transactions in India

Source: compiled by the authors. URL: https://www.npci.org.in/ (accessed on 17.10.2021).

Individuals’ and organizations’ adoption behavior Table 3

towards technology acceptance is defined by a variety Volume of Total Digital Transactions
of models that have been studied in earlier research.
The Technology Acceptance Model (TAM) is one of the YEAR VOLUME VALUE
most common models used by researchers in the study of
2012–2013 1695.2 710 774.2
individual and organizational technology adoption [21].
TAM proposed that perceived usefulness and perceived 2013–2014 2451.2 784 684.1
ease of use have a direct impact on behavioral intention
2014–2015 3517.9 822 722.4
to use the actual system [21, 22]. Various extensions to
the TAM were also conducted, which included trust [23], 2015–2016 5947.1 920 469
satisfaction [24], government support [25], and brand
2016–2017 9780.8 1 121 649
[26]. In this study, various factors are considered that
could impact the intention of MSMEs which has been 2017–2018 14 714.4 1 370 844
derived from past literature (Table 4).
2018–2019 23 260.2 1 637 134.25

RESEARCH METHODOLOGY 2019–2020 34 124 1 620 894.13

Instrument development
2020–2021 43 711.8 1 414 851.73
The researchers employed a modified questionnaire
for data collection. The measurement items used in Source: compiled by the authors. URL: https://www.npci.org.in/
the questionnaire were derived from previous studies (accessed on 17.10.2021).
carried out in developing countries.
The questionnaire consists of 25 questions, which attitude of respondents towards financial technology
are divided into three parts. The first part covers acceptance, using a five-point Likert scale ranging from
demographic and socioeconomic variables such as 1 (Strongly Disagreed) to 5 (Strongly Agreed) for specific
age, gender, education level, and experience in current activities in business (Table 5).
business. The second part identifies questions related
to the understanding of MSMEs related to financial Validity and reliability of the questionnaire
technology. The third part is devoted to the questions The validity of the questionnaire was determined by
related to the behavioural factors that could impact the consulting subject experts and conducting a pilot study

198 FINANCE: THEORY AND PRACTICE  Vol. 26, No. 6’2022  financetp.fa.r u
 U. Gupta, B. Agarwal, N. Nautiyal

Table 4
Summary of Prior Studies using TAM Model

Author Variables Involved Data Source Implication

Perceived Ease for Use, A paper-based

Voice recognition scored the highest
Perceived Trust, Perceived questionnaire was
Y. Wang et al. [27] in the PU scenario, according to the
Usefulness, Perceived Privacy, used to poll 361
findings
User attitude, User acceptance people

Bitcoin the money has several key

favorable factors in PEU and PU
Perceived Ease for Use,
D. Folkinshteyn and Secondary data for both developers and end-users,
Perceived Risk, Perceived
Lennon [28] source arising from its free open-source
Usefulness
nature, putting the user in control,
and greater transaction efficiency

Perceived ease of use,

Perceived usefulness, Attitude, The influence of local supervision,
External variables as local fit of technology, and influence of
R. Lindsay et al. [29] 43UK police force
supervision, the influence of peer external variable is the most
peers Behavioural Intention influential factors
and Actual Usage

Need for interaction, Social Intentions of

Apart from TAM model culture is the
influence, Perceived risk, consumers to
G. Mortimer et al. [30] important factor for the adoption of
Perceived ease of use, adopt mobile
m-banking
Perceived usefulness banking

The study’s findings corroborate the

Perceived ease of use,
suggested model to a great extent,
Perceived usefulness, Attitude,
allowing researchers to better
subjective norm, image, banks
understand the impact of subjective
initiative, internet banking 300 responses
B. Marakarkandy et al. [31] norms, image, banks’ initiatives,
self-efficacy, internet usage were collected
internet banking self-efficacy,
efficacy, trust, perceived risk,
internet usage efficacy, trust,
trialability, and government
perceived risk, and government
support
backing on online banking adoption

The findings revealed that buyers

with varying levels of brand
familiarity have certain similarities.
Perceived ease of use, 366 responses
Customers should be familiarised
J.L.M. Tam [32] Perceived usefulness, Attitude, were collected in
with a service while marketers
Brand Familiarity the Korean market
capture opportunities to offer a
favorable experience to gain future
purchases

Consumers’ Behaviour Intention

Resources, Social Influence, was highly influenced by utilitarian
358 responses
Z. Irani et al. [33] Self-Efficiency, Utilitarian outcomes, self-efficacy, perceived
were collected
outcomes resources, and social influence,
according to the findings

Source: author compilation.

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FINANCE MANAGEMENT

with 50 participants. The participants were asked to parametric substitute for the one-way ANOVA and an
rate the questionnaire and express their thoughts on extension of the Mann-Whitney U test. The second
whether the questions were appropriate. Experts were assumption is that the independent variable must
also asked to provide additional information to make contain two or more categorical, independent groups.
the questions more understandable. The experts were The third assumption is that data must be independent of
also asked if any more beneficial questions could be observations. The fourth assumption is that distributions
added, as well as whether any extraneous ones might in every group should have the same distribution curve
be removed. The questionnaire has been modified to (which also means the same variability). After examining
the best extent possible before conducting the survey. the data, this statistical test was used to generate reliable
The questionnaire was also tested for reliability using and legitimate results for analyzing the significant
Cronbach’s alpha. The results of Cronbach’s alpha difference in the Fintech Service acceptance based on
indicate an instrument is reliable if alpha values are respondents’ age, education, and experience.
above 0.70. There are 25 items in the questionnaire The Mann-Whitney U test has similar assumptions
to analyze the motives, preferences, and acceptance to the Kruskal-Wallis H test except for the second
of financial technology. The alpha value of 21 items assumption. For example, the Mann-Whitney U test is
(excluding demographic questions) is.891, which used when an independent variable contains only two
indicates that the instrument is reliable. categorical, independent groups [39]. Therefore, to
Sampling and data collection analyze the significant difference in the Fintech Service
The snowball sampling approach, a non-random acceptance based on respondents’ gender, the Mann-
sample technique, has been used to acquire data. Whitney U test is used.
The original respondents introduced additional key
informants who participated and were introduced to RESULTS AND DISCUSSION
other respondents, leading to the usage of snowball Analysis of knowledge of MSMEs towards Financial
sampling. A total of 150 questionnaires were shared Technology
with owners/managers of the firm operating in the We obtained information by asking the respondents
Shahdara industrial area, situated in Delhi in North questions about their understanding of financial
India. Shahdara industrial areas are covered under 24 technology, what kind of technology behaviour they
approved industrial areas by the Labour commissioner have for adopting any new technology, and the reasons
of Delhi. The time period for the collection of for adopting Fintech services.
responses was from December 2020 to February Table 6 reveals the behavior of the respondents while
2021. Out of the total questionnaires distributed, adopting any new technology in business. 37.6% of
117 responses were considered for the analysis, the respondents consider themselves early adopters, which
response rate being 78%. means that the MSME sector is making its way toward
Data analysis technology in their business. 45.3% of respondents are
The data was recorded, coded, and analyzed using moderate adopters, who reflect the characteristics of
statistical software via SPSS (version 21). The the MSME sector and have previously adopted success
data collected from the questionnaire is analyzed stories. The remaining respondents are non-adopters
statistically with the help of frequency distribution, who are not willing to adopt new technology in their
percentage analysis, mean scores, the Kruskal-Wallis business.
H test, and the Mann-Whitney U test. The Kruskal- Table 7 discloses the understanding of financial
Wallis H and Mann-Whitney U tests were applied, and technology among respondents. It reveals that the
the assumptions made about the data were verified. maximum respondent has a basic understanding of
The Kruskal-Wallis H test is a rank-based non- financial technology (40.2%). 35% of the respondents
parametric test that may be used to decide if there are have a high awareness of financial technology services.
statistically substantial variations among two or more Results show that only 12% of respondents have a low
groups of an independent variable on a continuous understanding, and 6.8% have very low knowledge of
or ordinal dependent variable. It is viewed as a non- financial technology.

200 FINANCE: THEORY AND PRACTICE  Vol. 26, No. 6’2022  financetp.fa.r u
 U. Gupta, B. Agarwal, N. Nautiyal

Table 5
Source of the questionnaire

CONSTRUCT ITEM SOURCE

Knowledge of Financial Technology 3 GPFI*
Perceived ease for Use 4
F.D. Davis [34]
Perceived Usefulness 3
Trust 4 G. Kim et al. [35]

Satisfaction 3 Ngubelanga et al. [36]

Brand 2 Setiawan [37]
Government Support 2 L.-C. Hiew et al. [38]

Source: author compilation.

Note: GPFI. (2020). Promoting digital and innovative SME financing. World Bank Group. URL: https://www.gpfi.org/sites/gpfi/files/
saudi_digitalSME.pdf (accessed on 01.07.2021).

Table 6 Table 7
Behaviour for Adopting Technology Understanding of Financial Technology among
MSME Sector
Types of Adopters Number %
Non- Adopter 20 17.1 Understanding of Financial
Number %
Technology
Moderate Adopter 53 45.3
Very low 8 6.8
Early Adopter 44 37.6

Source: author compilation. Low 14 12

Basic 47 40.2
Table 8 discloses the key purpose for adopting Fintech
services. 49% of respondents consider time savings as High 41 35
one of the important features for the adoption of Fintech
Very high 7 6
services. 40% of respondents consider anywhere access
an important reason for the adoption of Fintech services. Source: author compilation.
IT security concerns could be the cause of this [40]. Table 8
Key Purpose for adopting Financial Technology
Analysis of MSMEs behaviour towards Financial
Technology Acceptance Motives for Adoption Number %
Statements were considered to measure (using
a 5-point Likert scale) the impact of MSMEs Anywhere access 40 34.2
preference towards Fintech Services. To record the
Quick and easy
MSME preference, logical statements are recorded 21 17.9
implementation
and tabulated using percentage and mean rating
evaluation. These statements were formed based Timesaving 49 41.9
on the Technology Acceptance Model [41, 42]. To
Transparency in services 7 6
better fit the present study perspective, some of the
statements have been modified. The amplitude of Total 117 100
consistency towards statements is denoted from 1 to
5 (five denotes strongly agreeing, while one strongly Source: author compilation.

FINANCE: THEORY AND PRACTICE  Vol. 26, No. 6’2022  financetp.fa.r u 201
FINANCE MANAGEMENT

Table 9
Percentage of Respondents, Mean Score, Interpretation, and Recommendation

Construct Items Statement 1 2 3 4 5 Mean Recommendations

Respondents agreed with the

Using Fintech Services,
statement, implying that Fintech can
PE 1 I can meet my Business 0 0 5.1 82.1 12.8 4.08
bridge the credit gap that MSMEs
needs easily
currently face
Respondents agreed with the
It is easy to use Fintech statement, demonstrating the MSME
PE 2 0 0 3.4 78.6 17.9 4.15
Services sector’s willingness to accept new
technologies
Perceived Ease Using Fintech Services
for use improves the efficiency Respondent agreed with the
of Business, as statement which shows that Fintech
PE 3 0 0 3.4 73.5 23.1 4.20
accessing information providers are playing an efficient
about different role in proving services
platforms is faster
Respondent agreed with the
Fintech Services
statement which highlights one of
PE 4 reduces the time of 0 0 2.6 60.7 36.8 4.34
the biggest advantages of Fintech
transaction
i. e. It saves a lot of time
Respondent agreed with the
Fintech Financial statement which shows that
PU 1 Products has Lower .9 0 5.1 59.8 34.2 4.26 Financial Product available digitally
Transaction fees is causing less burden to MSMEs
financially
Respondents agreed with the
Perceived Fintech Financial statement which highlights the
Usefulness PU 2 Products has a faster 0 0 5.1 57.5 37.6 4.32 efficiency of doing transactions
rate of Approval digitally rather than in traditional
mode
Respondent agreed with the
Fintech Financial
statement which highlights the
PU 3 Products has less 0 0 3.4 69.2 27.4 4.24
ease of doing business with less
Paperwork
paperwork
Though I prefer Fintech
services there is a
minimum risk involved Respondents agreed with the
while making my statement which shows that MSMEs
TR 1 3.4 .9 0 77.8 17.9 3.10
queries and/or making identify the risk related to digital
banking transactions transactions
through Fintech
Services Providers
Respondent agreed with the
I believe using Fintech
statement which shows that the
Trust Services my Business/
TR 2 .9 0 17.1 48.7 33.3 4.14 MSME sector trust the Fintech sector
Personal information
for their business and personal
is safe
information
Respondent agreed with the
I believe my money
statement which shows that users
TR 3 is safe in E-wallets/ 0 0 9.4 63.2 27.4 4.18
are trusting the Financial provider/
Mobile apps
companies they are using
Respondent agreed with the statement
In general, I believe,
TR 4 0 0 8.5 59 32.5 4.24 which can be interpreted as an
I trust Fintech Services
acceptance of doing business Digitally

202 FINANCE: THEORY AND PRACTICE  Vol. 26, No. 6’2022  financetp.fa.r u
 U. Gupta, B. Agarwal, N. Nautiyal

Table 9 (continued)

Construct Items Statement 1 2 3 4 5 Mean Recommendations

Respondents agreed with the

Fintech Services
statement as many attractive
platforms provide fair/
ST1 0 0 6.8 70.9 22.2 4.15 financial products are offered on
reasonable services
different platforms by Fintech
and products
Service providers
Respondents agreed with the
I believe Fintech statement as respondents can
Satisfaction ST2 Services facilitate .9 0 7.7 62.4 29.1 4.19 compare different products across
better decision making different platforms and facilitate
decision-making
I get my refunds
quickly while doing any Respondents agreed with the
ST3 transaction through 0 0 4.5 60.7 35.0 4.31 statement as the maximum time for
Fintech Service any refund is within 48 hours
Providers
Respondent agreed with the
statement which shows that only
I prefer to accept the
established Financial service
services provided
Provider products are accepted in
BR 1 by familiar brands 0 0 6.0 54.7 39.3 4.33
the market. It also highlights one of
of Fintech Services
the features of small businesses i. e.,
platforms
Brand trust in previously used products by
peers or used by them earlier
Respondent agreed with the
I do not use any new statement which shows that
BR 2 app for my banking .9 0 6.0 57.3 35.9 4.27 customers do not rely on any new
transaction service provider. Brand Familiarity
plays an important to respondents
I believe the
government has Respondent agreed with the
introduced favorable statement which shows that
GS 1 0 0 9.4 58.1 32.5 4.23
legislation and respondents are aware of
regulations for Fintech government initiatives and policies
Services in recent years
I believe the
Government
government is
Support
active in setting new
Respondent agreed with the
infrastructure such
statement which shows that the
GS 2 as the infrastructure 0 0 11.1 53.8 35.0 4.24
Government is also inclined toward
telecom network,
Financial Technology development
which has a positive
role in promoting
Fintech Services
Source: author compilation.

disagrees). In addition, the following criteria are used • The mean score between 2.60 and 3.40 means
for the analysis: neutrality.
• A mean score of 1.00 to 1.80 indicates strong • The mean score between 3.40 and 4.20 means
disagreement. “agree”.
• A mean score of 1.80 to 2.60 indicates • A mean score of 4.20 to 5.00 indicates that the
disagreement. authors strongly agree [43, 44].

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FINANCE MANAGEMENT

Table 10
Demographic Profile of Respondents

Characteristics Value Frequency Percentage (%)

Female 25 21.4
Gender
Male 92 78.6

20–30 Years 5 4.3

31–40 Years 43 36.8

Age 41–50 Years 43 36.8

51–60 Years 15 12.8

61 or More 11 9.4

No Formal Education 14 12

Senior secondary Graduate 43 36.8

Education level Vocational Diploma 16 13.6

Postgraduate 41 35

Ph.D. 3 2.6

Less than 3 years 8 6.8

3–6 Years 13 11.1

Experience 6–9 Years 34 29.1

9–12 Years 34 29.1

12 or More 28 23.9

Source: author compilation.

Analysing the impact of Fintech service acceptance As shown in Table 10, the demographics of the
based on different demographic variables respondents are comprised of gender, age, education,
Acceptance of Fintech services (a dependent and experience in current business. Of the total
variable) is measured by using 20 statements in respondents, 78.6% were men and 21.4% were women.
Table 9. Each statement is tested for a significant The majority of the respondents were in the age
value of 0.05 and 0.10. Also, the Kruskal-Wallis groups of 31–40 years and 41–50 years (36.8% each).
H test was conducted to analyze the impact The majority of the respondents held education up to
of age, education, experience, and gender on senior secondary (36.8%), 13.6% of the respondents held
the respondents (independent variables). The vocational diplomas, 35% were post-graduates, 12% of
demographic profile of respondents is discussed in the respondents did not hold any formal education, and
Table 10. It has also been used to test the hypotheses the remaining were Ph. Ds. After the computation of
formulated. As in the paper, we have questioned the 20 statements related to Fintech service acceptance,
Likert statements that are ordinal in nature, so these statements were then combined, and a scale score
the most appropriate test when the dependent was formed to accept or reject the null hypothesis. The
variable is rank-based, that is, ordinal in nature, is results of the Kruskal-Wallis H test are given in Table
the Kruskal-Wallis H test. The significance value is 11 and Table 12. The following hypotheses were formed
either higher or lower than 0.05 and 0.10, which is to find out the significant differences in the acceptance
used to accept or reject the hypothesis. of Fintech services.

204 FINANCE: THEORY AND PRACTICE  Vol. 26, No. 6’2022  financetp.fa.r u
 U. Gupta, B. Agarwal, N. Nautiyal

Table 11
Kruskal-Wallis H Test

Age Education Experience

Items
Chi-Square Sig. Chi-Square Sig. Chi-Square Sig.
PE 1 15.620 004 8.524 074 30.023 000
PE 2 19.208 001 10.393 034 22.523 000
PE 3 14.447 006 4.733 316 20.839 000
PE 4 16.599 002 12.154 016 18.083 001
PU 1 11.542 021 9.906 042 10.868 028
PU 2 8.505 075 8.436 077 9.539 049
PU 3 6.6166 187 10.596 031 9.866 .043
TR 1 10.212 037 3.188 527 8.815 066
TR 2 11.402 022 3.870 424 19.379 001
TR 3 8.615 071 9.687 046 11.866 018
TR 4 15.401 004 7.433 115 10.504 033
ST1 8.427 077 6.646 156 10.707 030
ST2 15.067 005 9.147 058 16.495 002
ST3 8.352 080 10.698 030 6.695 153
BR 1 9.837 043 10.290 036 16.631 002
BR 2 12.418 015 5.677 225 19.347 001
GS 1 14.788 005 3.641 457 9.209 056
GS 2 11.502 021 3.605 462 11.486 022
Source: author compilation.

Ha1: There is a significant difference in the acceptance the alternate hypothesis. Based on Age, we reject the
of the Fintech Service based on respondents’ age. alternative hypothesis (Ha1) as the significance level
Ha2: There is a significant difference in the Fintech (0.140) is more than 0.10, which means that there is no
Service acceptance based on respondents’ educational significant difference in the Fintech Service acceptance
qualifications. based on respondents’ Age. Based on Educational
Ha3: There is a significant difference in the qualification, we reject the alternate hypothesis (Ha2)
acceptance of the Fintech Service based on respondents’ as the significance level (.215) is more than 0.05 and
experience in the business. 0.10 both, which means that there is no significant
Ha4: There is a significant difference in the difference in the Fintech Service acceptance based
acceptance of the Fintech Service based on respondents’ on respondents’ educational qualification. Based on
gender. Experience in Business, we accept the alternative
Kruskal-Wallis H test and Mann-Witney U test have hypothesis (Ha3) as the significance value (0.008) is
been used to find significant differences in the Fintech less than 0.05, which means that there is a significant
Service acceptance based on different demographic difference in the Fintech Service acceptance based on
factors (Table 13) and (Table 14). respondents’ occupations. Based on Gender, we reject
The significance value of either higher or lower the alternative hypothesis (Ha4) as the significance
than 0.05 and 0.10 is used either to accept or reject level (0.340) is more than a1 0.05 and 0.10 both and Z

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FINANCE MANAGEMENT

(0.955) is more than 1.96, which means that there is no Table 12

significant difference in the Fintech Service acceptance Mann-Whitney U Test
based on respondents’ gender.
Gender
Items
FINDINGS Z Sig.
“Digitization has a strong impact on the financial
PE 1 .075 .940
services industry” [45]. After analyzing the data and
putting the hypotheses to the test, the study’s main PE 2 .770 .442
conclusions are as follows: The majority of those PE 3 .156 .876
classified as early adopters were actually young,
PE 4 1.365 .172
between 31 and 40 years old, with a percentage of
19.65%. There was extensive acceptance of technology PU 1 .474 .636
among the MSME sector as most respondents were PU 2 1.324 .185
considered moderate adopters, which is 52.13%. PU 3 1.260 .208
The results (Table 6), (Table 7) and (Table 8) show
TR 1 1.769 .077
that MSMEs have knowledge about Fintech services.
The MSME sector adopts financial technology for TR 2 .246 .805
several reasons, but the most prominent reasons TR 3 .644 .520
are saving time (41.9%), accessing the interface
TR 4 .416 .678
anywhere (34.2%), and because of quick and easy
implementation (17.9%). The results are similar to a ST1 .820 .412
prior study, which explains that Fintech products were ST2 .890 .374
created from the bottom up with the consumer in
ST3 1.475 .140
mind, who were tech-savvy and wanted transactions
to be as simple as possible [46]. Also, 40.2% of the BR 1 .480 .632
MSMEs understand financial technology, and 35% BR 2 .764 .445
have a high understanding of financial technology,
GS 1 .345 .730
which yields a great opportunity for Fintech
developers and innovators. GS 2 .074 .941
Fintech has the ability to completely revolutionize Source: author compilation.
the financial environment by offering a wide range
of financial goods at low prices [46]. This can be seen borrowers to receive funds more rapidly by speeding
from our study also, as 70.9% of respondents believe up loan applications [7, 50] Among these advantages,
that Fintech platforms provide fair and reasonable there is a significant risk involved in fintech transactions,
services and products, 59.8% of respondents believe which is agreed upon by 77.8% of respondents. Thus, the
that Fintech services have lower transaction fees, and result is similar to previous literature where consumer
73.5% of respondents agree that Fintech platforms risk had the most negative effect on the Fintech
provide efficiency in decision making as information continuation intention, while convenience had the
about different products can be collected at a much strongest positive effect. As a result, the government
faster rate. Fintech also makes it more likely for SMEs must monitor and analyze the quick and transformative
to borrow at reduced interest rates. which assists the changes brought on by Fintech so that regulators and
MSME in meeting their business requirements [47, 48]. society can keep up with the underlying technological
Fintech services are provided with an easy interface and entrepreneurial flux.9 Brand familiarity and good
that can be used by using their mobile applications, as experience also impact the behavioral intention of
MSMEs are typically run by a few people wearing many
9
Reserve Bank of India. Annual Report 2020–2021. 2021. URL:
hats [49] and they do not have much time to devote https://rbi.org.in/Scripts/AnnualReportMainDisplay.aspx
to one thing. Furthermore, these technologies enable (accessed on 10.02.2022).

206 FINANCE: THEORY AND PRACTICE  Vol. 26, No. 6’2022  financetp.fa.r u
 U. Gupta, B. Agarwal, N. Nautiyal

Table 13 and managers in their business decisions [53, 54]. There

Kruskal-Wallis H Test Statistic was no significant difference found in the acceptance of
Fintech services based on the age of the owner/manager,
Dependent Independent variables which is the opposite of the previous studies, which say
variable: Fintech that motivations for using financial technology among
service acceptance Age Education Experience
the younger age group owners are greater as compared
Chi-Square 6.926 5.791 13.777 to older ones.

Degree of
4 4 4 CONCLUSION AND IMPLICATION
Freedom
Conclusion
Significant Value .140 .215 .008 The advent of the Fintech industry has made banking
Source: author compilation. simple and straightforward 10 which has changed the
ecosystem of the MSME sector. Overall, Fintech has
Table 14 brought some key changes in the MSME sector as well
Mann-Witney U test as the Indian banking ecosystem, such as improved
opportunities for financial inclusion, motivation in
Dependent variable: Fintech Independent variable entrepreneurship culture, credit assessment with the
service acceptance Gender help of technology, improved customer experience in
loan approval and disbursement, quick and easy funds
Z .955 transfer, etc. Thus, Fintech could be the solution for
Degree Of Freedom 1 the MSME sector’s different financing activities.

Significant Value .340

Practical and Managerial Implications
Source: author compilation. Our research has significant managerial and practical
consequences. First, small businesses are looking for
consumers to adopt the product/service [51]. The results alternate financing solutions apart from traditional
also show that brand familiarity also plays an important banks and financial institutions therefore, fintech
role for the respondents while adopting Fintech services. companies should seize the opportunity by building
It can be concluded that with the help of the TAM Model, trustworthy products/services. Fintech companies
we can understand the behavior of MSMEs towards should consider brand building as a crucial point in
financial technology acceptance as perceived ease of use, their marketing campaigns. Second, small businesses
perceived usefulness, trust, and government support are also showing interest in other digital services
impact the decisions of MSMEs as Fintech customers. of fintech as digital investments, wealthtech, and
To find out how Fintech services are accepted insurtech hence, fintech companies should work on
among the MSME sector varies according to different their robo-advisory and portfolio management tools
demographic variables, the Kruskal-Wallis H test was and make them more user-friendly. Third, our findings
performed, and we observe that MSME preferences with complement the government’s attempts to develop
respect to Fintech services have significant differences policies aimed at expanding Fintech services. For
on the basis of experience, but no significant differences example, the Digital India Movement, Centralised KYC,
are found on the basis of age, educational qualification, the Stand-up India movement, and Payment Systems
or gender, which is in contrast with the findings of the Vision 2019–2021. These policies have resulted in a
study by Demirguc-Kunt et al. (2018) [52], as the study significant improvement in digital transactions. The
observed differences in the acceptance of the usage
of Fintech services-based on the gender of the owner/ 10
J. Skan, J. Dickerson, L. Gagliardi. Fintech and the evolving
managers. The results of this research also have partial landscape: landing points for the industry. 2016. URL: https://
www. Accenture. com/t20160427T053810__w__/us-en/_
similarities with the previous studies which confirmed acnmedia/PDF‑15/Accenture-Fintech-Evolving-Landscape.
the significance of personal features of MSME owners Pdf (accessed on 15.07.2021).

FINANCE: THEORY AND PRACTICE  Vol. 26, No. 6’2022  financetp.fa.r u 207
FINANCE MANAGEMENT

government can introduce some policies through which sample should be used to reinforce the results for a
profile-based or personalized fintech services can be better representation of MSME sector preferences.
made available to the MSME sector. Fourth, awareness Second, the study offers a broad perspective on
programs must be conducted by the government at financial technology and the preferences of small
regular intervals to increase the awareness of MSMEs. and medium-sized businesses. Further discussion
Lastly, there is a need for a strong financial transaction of financial technology acceptability and its impact
grievance redressal system that is governed by the on MSME performance has been omitted, paving the
government to encourage more small businesses to path for future research. Thirdly, variables identified
incorporate Fintech into their businesses. through the TAM model can be tested using more
advanced statistical tools like regression analysis.
LIMITATION OF THE STUDY AND SCOPE FOR Lastly, there are a lot more variables to be studied that
FURTHER RESEARCH impact the financial behaviour of the MSME sector,
Certain limitations applied to this research can be but this paper only discusses demographic variables,
incorporated in future studies. The study used a so other variables related to firm characteristics like
sample of 117 respondents; therefore, the sample the number of employees, export activity, and industry
size should be expanded, or a new type and size of can also be incorporated.

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aboUt the aUthoRs

Upasana Gupta — PhD Scholar in the Amity College of Commerce and Finance, Amity
University, Noida, Uttar Pradesh, India
https://orcid.org/0000-0001-7895-6254
Corresponding Author
[email protected]

Dr Bhawna Agarwal — PhD, Senior Prof., Amity University, Noida, India

https://orcid.org/0000-0002-3835-2699
[email protected]

Neeraj Nautiyal — PhD, Assist. Prof., Sohar University, Sohar, Oman

https://orcid.org/0000-0002-6279-282X
[email protected]

Authors’ declared contribution:

Upasana Gupta — study conception and design, data collection and analysis, interpretation of results and draft
manuscript preparation.
Bhawna Agarwal — study conception and design, analysis and interpretation of results.
Neeraj Nautiyal — analysis and interpretation of results.

Conflicts of Interest Statement: The authors have no conflicts of interest to declare.

The article was submitted on 15.04.2022; revised on 29.04.2022 and accepted for publication on 17.05.2022.
The authors read and approved the final version of the manuscript.

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