The Effect of Regulation, Collaboration, and Financial Literacy on Financial Technology Adoption

Abstract

The purpose of the study to determine the effect of regulation, collaboration, and financial literacy on the adoption of financial technology for Small and Medium Enterprises. This research was conducted based on a causal design to analyze the relationship between regulatory, collaboration, financial literacy, and adoption of financial technology through hypothesis testing. The research sample involved 95 small and medium-sized businesses in East Java, Indonesia. The sampling method uses purposive sampling with the following criteria: (1) A minimum of 5 employees and a maximum of 99 employees; (2) Businesses use financial technology applications, namely OVO, GoPay, DANA, or LINK; (3) Businesses are carried out in the East Java region. This research uses Partial Least Square (PLS) analysis technique. Results show that regulation has a significant effect on financial literacy. Moreover, collaboration has a significant effect on financial literacy. Additionally, financial literacy has no significant effect on the adoption of financial technology and regulation does not significantly influence the adoption of financial technology. Furthermore, collaboration has a significant effect on the adoption of financial technology. Regulation and collaboration can be used to support increasing financial literacy for small and medium businesses. The higher level of understanding of the regulation and implementation of the collaboration carried out will increase financial literacy and can support the adoption of financial technology for small and medium businesses. This study uses regulatory and collaborative variables that have not been studied much in relation to financial literacy. On the other hand, not many studies have examined the relationship of financial literacy to the adoption of financial technology.