Financial Technology Adoption and Digital Transformation in Strengthening MSME Performance and Competitiveness: Evidence from Food and Beverage MSMEs in Malang Regency

Abstract

This study examines the effect of financial technology (fintech) adoption and digital transformation on the performance and competitiveness of micro, small, and medium enterprises (MSMEs) in the food and beverage sector in Malang Regency, Indonesia. Using a quantitative, explanatory research design, data were collected from 100 MSME actors, exceeding the minimum sample of 98 respondents determined through the Slovin formula, and analyzed using Structural Equation Modeling–Partial Least Square (SEM-PLS) with SmartPLS version 4.1.1.8. The measurement model met the criteria for convergent validity, discriminant validity, and reliability. Structural model results show that fintech adoption has a positive and significant effect on MSME performance (β = 0.222; p = 0.001) and on competitiveness (β = 0.432; p = 0.000); digital transformation also has a positive and significant effect on performance (β = 0.595; p = 0.000), the strongest path in the model, and on competitiveness (β = 0.411; p = 0.000). However, MSME performance was not found to significantly affect competitiveness (β = -0.055; p = 0.691). These findings indicate that competitiveness among food and beverage MSMEs in Malang Regency is driven directly by fintech adoption and digital transformation rather than through an intervening improvement in business performance, with digital transformation, encompassing digital marketing, e-commerce, and digital financial recordkeeping, exerting the most substantial influence overall. This study contributes empirically by jointly testing fintech adoption and digital transformation, within a single structural model, as strategic resources shaping MSME performance and competitiveness in the food and beverage sector; this integrated test is a novelty relative to prior studies that have generally examined the two technologies separately or relied on literature reviews rather than empirical testing. Practically, the findings imply that MSME actors and local policymakers need to move beyond basic digital adoption toward strengthening digital financial literacy, data security, digital recordkeeping, and market-oriented digital strategies in order to convert technology use into durable competitive advantage. The study is grounded in the Resource-Based View, which frames technology as a strategic resource underlying sustainable competitive advantage.