Fintech utilization, financial management behavior, and MSMEs’ financial performance: Does financial literacy matter?

Abstract

This research assesses the impact of innovative financial technologies—specifically Fintech Payments and Peer-to-Peer (P2P) Lending- along with financial management behavior on the financial performance of Micro, Small, and Medium Enterprises (MSMEs) in Denpasar, Indonesia. Additionally, it examines the moderating role of financial literacy in these relationships. Primary data were collected through structured questionnaires from 400 MSME owners/managers who met specific operational and adoption criteria. The data were analyzed using Partial Least Squares Structural Equation Modeling (PLS-SEM) to test the structural model, evaluate construct validity and reliability, and assess moderating effects. The study reveals that Fintech Payments, P2P Lending, and financial management behavior all have positive and significant impacts on MSMEs’ financial performance. However, financial literacy moderates these effects differently: it weakens the impact of Fintech Payments on financial performance while strengthening the relationships of P2P Lending and financial management behavior with financial performance. These findings suggest that MSMEs benefit from adopting sound financial management practices and P2P lending technologies, particularly when supported by adequate financial literacy. From a policy perspective, fostering financial literacy and integrating behavioral finance with FinTech adoption strategies can enhance MSMEs' financial sustainability. Future research is encouraged to explore additional variables influencing MSME financial outcomes and to expand empirical evidence across broader contexts. This study advances the understanding of behavioral and technological factors in MSME financing using the Theory of Planned Behavior as a theoretical framework.