Articles

The Effect of Digital Payment on MSME Performance: Mediating Role of Transaction Velocity and Security

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Within an Accounting Information System (AIS) framework, digital payments function as automated data-capture tools integrated into the revenue cycle. By using digital payments or payment gateways, organizations can record transactions accurately and in real time, thereby eliminating manual processes that are susceptible to human error. A robust AIS ensures that all cash inflows are authorized and recorded, which supports reliable financial reporting and objective measurement of micro, small, and medium enterprise (MSME) performance. Digital payments further enhance financial and operational outcomes for MSMEs by increasing transaction velocity and security. The present study investigates and empirically validates (a) the causal relationships among digital payment, transaction velocity, transaction security, and MSME performance, and (b) the mediating roles of transaction velocity and security in the relationship between digital payment and MSME performance. Data were collected through a survey using questionnaires distributed to respondents selected via purposive sampling. The study uses primary data and focuses on four constructs: digital payment, transaction velocity, transaction security, and MSME performance, each measured by 21 reflective indicators. Respondents included MSME entrepreneurs at the managerial level (owners or managers) operating in the wholesale and retail, culinary, fashion, agribusiness, and service sectors. The survey targeted MSMEs on the islands of Java, Bali, and Sumatra, yielding 145 valid data points. Structural equation modeling with partial least squares was employed for data analysis, using SmartPLS version 3.29 for data processing and hypothesis testing. All hypotheses concerning the direct effects of exogenous constructs on endogenous constructs were significantly supported. Furthermore, empirical findings indicate that transaction velocity and security mediate the causal relationship between digital payment and MSME performance.

Legal Issues Involved in Electronic Payments System in India

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The Indian economy has developed rapidly after the induction of digital interfaces in commerce, trade, and industry particularly after the popularisation of electronic payment systems or digital banking. Since 2016 when the Government of India announced demonetization, electronic payments have been rising and are expected to continue in the future because the government has promoted these types of payments. Internet penetration in India was 47 percent in 2022 and it was more than 100 percent in urban areas as compared to rural areas, now with the expansion of the information technology-enabled generation which is using digital modes of payments more in their daily transactions has resulted in more than 140 crore rupees each day through various methods of digital prevailing in India. State Governments are also prioritizing and making more efforts to ensure that the unprivileged people should have to be provided access to web services so that they may also make payments conciliatory through this method.  Resultantly, there are 103 billion digital transactions worth Indian rupee 166 trillion in the financial year 2023.  It is also expected that digital transactions will also rise to 411 trillion by the year 2027.  Consequently, on advent of high tech system of fund transfer and its enormous use several cases of fraud have also been taking place on daily basis. The legislation has enacted various laws in connivance with the global laws, to resolve the problem, but they are still prevailing.  The present study has been conducted to identify the legal issues and the results arising from these issues and to recommend some pathways to recover from these obstacles.  This study further explains the further way to improvement in fund transfer and making payments using digital mode.  Consequently, it is found that the present legal system does not have sufficient provisions to stop such fraud, and blockage of money with the UPI, payment gateways, banks, and merchants.  There is no single online solution to these problems.  The banking ombudsman is working on resolving some of the issues, but due to the red tapism, such transactions of payment failure and fraud websites could not be resolved.  Sufficient amendments dealing with such transactions have not been incorporated in the present Consumer Protection Act.  Hence, it is recommended that there should be a virtual hearing in the office of the ombudsman as well as in the court of President Consumers Protection.

E-Wallet Application Penetration for Financial Inclusion in Indonesia

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Indonesia is an archipelago country with more than 270 million inhabitants spread across urban and rural regions. This makes digital payment penetration a challenge in itself. Private and government e-wallet service providers have sought to increase the use of cashless services to address structural deficiencies in the country’s economy, such as poor financial inclusion and heavy reliance on manual remittances. This study discusses penetration problems that occur in the e-wallet industry and formulates the strategy so that the use of digital payment platforms can be carried out evenly in all regions of Indonesia. This study notes that technology enablement such as smartphone and internet penetration does not correlate with e-wallet penetration. Many underlying factors affect the penetration, such as key driving forces, infrastructure readiness, and people’s perception of the safety and security of mobile transactions. Bank Indonesia and e-wallet providers are responsible to educate people about the advantages along with possible risks of adopting e-wallet as a non-cash payment method.