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

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.