Financial Technology and MSME Performance: The Role of Financial Literacy and Digital Readiness in the Value Creation Process

Abstract

Context: Financial Technology (FinTech) offers Micro, Small, and Medium Enterprises (MSMEs) opportunities to accelerate transactions, expand access to financing, improve cash management, and increase market access. However, the adoption of this technology does not always lead to improved performance. Research Gap: Previous studies have primarily examined the direct relationship between FinTech, financial literacy, digital readiness, and performance using survey methods. A limitation is the lack of clarity regarding the processes that cause the same technology to yield different performance outcomes. Objective: This study aims to explain how FinTech, financial literacy, and digital readiness interact in driving changes in MSME performance and to identify the conditions that lead to the successful or failed creation of business value through the use of FinTech. Method: An explanatory multiple-case study was conducted on eight MSMEs in West Java. Data were collected through in-depth interviews, observations, financial statements, digital transaction data, marketplace dashboards, and internal documents. Analysis was conducted using within-case analysis, process tracing, pattern matching, and cross-case synthesis. Key Findings: (1) FinTech improves performance only when integrated into financial routines; (2) financial literacy transforms digital data into higher-quality decisions; (3) digital readiness determines SMEs’ ability to assimilate FinTech; (4) high technology usage may fail to improve performance when data is not integrated, and decisions remain intuition-based. Contributions: This article distinguishes between the adoption and assimilation of FinTech, positioning financial literacy as an interpretive capability and digital readiness as an enabling condition. Implications: SME digitization programs need to integrate technological, financial, organizational, and risk aspects, rather than merely promoting the use of applications.