ICTMT 2025 | International Journal of Research and Innovation in Social Science (IJRISS)
ISSN: 2454-6186 | DOI: 10.47772/IJRISS
Special Issue | Volume IX Issue XXVIII November 2025
Page 445
www.rsisinternational.org
The Impact of Fintech Adoption on Small and Medium Enterprises
in Malaysia
Rati Hasim
1
, Diana Rose Faizal
2*
1,2
Fakulti Pengurusan Teknologi dan Teknousahawanan, Universiti Teknikal Malaysia Melaka,
Malaysia
*Corresponding Author
DOI: https://dx.doi.org/10.47772/IJRISS.2025.92800044
Received: 10 November 2025; Accepted: 16 November 2025; Published: 20 December 2025
ABSTRACT
The rapid advancement of Financial Technology (FinTech) has reshaped global industries by integrating digital
tools such as e-wallets, mobile banking, artificial intelligence, and blockchain into financial services. In
Malaysia, the SMEs has increasingly adopted these technologies to enhance operational efficiency, improve
customer experience, and support digital transformation. Despite this growth, small and medium-sized
enterprises (SMEs) continue to face challenges in fully realizing the financial benefits of FinTech adoption due
to barriers such as cybersecurity risks, limited infrastructure, regulatory compliance, and difficulties in measuring
return on investment (ROI). This study investigates the factors influencing FinTech adoption among retail
business owners in Malaysia and examines its impact on financial performance. Guided by the Unified Theory
of Acceptance and Use of Technology (UTAUT) model, a quantitative research design was employed using a
structured questionnaire distributed to retail business owners familiar with FinTech applications. A purposive
sampling method was adopted with a target of 384 respondents, and data will be analyze using SPSS. The
findings are expected to provide empirical evidence on the relationship between FinTech adoption and business
performance, particularly in the context of SMEs. The study contributes to academic literature on technology
adoption and offers practical insights for policymakers, regulators, and retail entrepreneurs in enhancing digital
financial integration. By addressing gaps in existing research, this work underscores the role of FinTech in
supporting competitiveness, sustainability, and inclusive growth in Malaysia’s retail industry.
Keywords: Fintech; Small and Medium Enterprises; Sustainability; Digital Tools; Performance
INTRODUCTION
The rapid advancement of Financial Technology (FinTech) has significantly transformed global industries,
particularly the retail and financial sectors. FinTech refers to the integration of innovative digital tools such as
mobile payments, e-wallets, blockchain, artificial intelligence (AI), and cloud-based systems into financial
services to enhance efficiency and customer experience (Schueffel, 2016; Gomber et al., 2017). By leveraging
these technologies, businesses have been able to simplify financial transactions, improve operational efficiency,
and strengthen customer engagement. In Malaysia, the retail sector has increasingly embraced these solutions,
with technologies such as online banking, e-wallets, and QR-based payment systems driving the shift toward
digitalization. These tools not only streamline transactions but also provide retailers with deeper insights into
customer behavior, supporting more effective marketing, inventory management, and decision-making strategies
(RinggitPlus, 2023; DigiPay Guru, 2023).
Globally, FinTech adoption has been recognized as a critical driver of financial inclusion and business
competitiveness. In many emerging economies, digital finance platforms have enabled underserved populations
and small businesses to access formal financial services that were previously unavailable due to geographical,
structural, or cost-related barriers (Demirgüç-Kunt et al., 2018). For retailers, the application of FinTech is not
limited to payments but also extends to financing solutions, supply chain management, and customer loyalty
programs. With increasing digital penetration and changing consumer behavior, especially after the COVID-19
pandemic, the importance of FinTech as a catalyst for transformation in the retail sector has become even more
pronounced (World Bank, 2022).
ICTMT 2025 | International Journal of Research and Innovation in Social Science (IJRISS)
ISSN: 2454-6186 | DOI: 10.47772/IJRISS
Special Issue | Volume IX Issue XXVIII November 2025
Page 446
www.rsisinternational.org
Despite this promising potential, many small and medium-sized enterprises (SMEs) in Malaysia continue to
struggle with adoption and sustained utilization of FinTech. Several challenges hinder SMEs from realizing the
full benefits of digital finance. First, the measurement of return on investment (ROI) remains difficult, making
business owners uncertain about the tangible financial outcomes of adoption. Second, limited digital
infrastructure and low levels of digital literacy, especially among traditional retailers, reduce readiness to
embrace new technologies. Third, cybersecurity threats and regulatory compliance issues create additional
concerns, as SMEs often lack the expertise and resources to implement robust safeguards. According to CPA
Australia (2023), although more than 75% of Malaysian businesses have adopted at least one FinTech service,
approximately 25%—mostly micro and small firms—remain hesitant due to high costs, risk aversion, and lack
of technical capacity. Furthermore, most SMEs continue to rely on personal savings and conventional bank loans,
with minimal engagement in alternative FinTech-based financing options. This digital divide between larger,
resource-rich firms and smaller businesses highlights the vulnerability of SMEs and raises questions about
whether FinTech adoption genuinely translates into measurable improvements in financial performance.
Adding to these concerns, the lack of standardized frameworks for evaluating the financial impact of FinTech
adoption poses another challenge. Many SMEs adopt digital tools in response to market pressure or government
incentives without having clear performance indicators to assess outcomes such as cost reduction, revenue
growth, or profitability improvements. As a result, while adoption rates appear to be rising, the true financial
value of these innovations for small retailers remains ambiguous. This ambiguity is further compounded by
inconsistent levels of regulatory support and varying degrees of technological readiness across different
segments of the retail industry.
Given the rapid digital transformation and government initiatives such as the Financial Sector Blueprint (2022–
2026) aimed at accelerating FinTech integration, it is crucial to investigate whether FinTech adoption contributes
to improved financial performance in the retail industry. In particular, understanding how SMEs, which represent
the backbone of Malaysia’s economy, navigate the opportunities and barriers of digital finance is essential. This
study seeks to (i) identify the factors influencing FinTech adoption among retail businesses in Malaysia, (ii)
determine its impact on financial performance, and (iii) evaluate the level of acceptance of FinTech among retail
companies, with particular attention to the challenges faced by SMEs. By addressing these objectives, the
research aims to fill the existing knowledge gap and provide insights that can guide policymakers, regulators,
industry players, and businesses in leveraging FinTech for sustainable growth.
LITERATURE REVIEW
FinTech has undergone a significant transformation over the decades, evolving from basic banking technologies
such as credit cards and electronic transfers to advanced innovations including artificial intelligence (AI), big
data analytics, and blockchain. These developments have not only enhanced operational efficiency but also
improved financial inclusion and customer experiences worldwide (Arner, Barberis, & Buckley, 2016; Gai, Qiu,
& Sun, 2018). In Malaysia, regulatory support through initiatives like the Financial Sector Blueprint and the
Digital Banking Licensing Framework has accelerated the growth of FinTech applications such as DuitNow,
Touch ’n Go eWallet, and GrabPay, which are now widely adopted in the retail sector (Bank Negara Malaysia,
2022). These initiatives have created a conducive ecosystem for digital financial services and encouraged both
consumers and businesses to participate in Malaysia’s digital economy.
The importance of FinTech lies in its ability to make financial services more efficient, transparent, and accessible.
Applications such as mobile wallets, digital banking, and peer-to-peer lending reduce transaction costs, minimize
errors, and promote financial inclusion by serving previously underserved populations (Zavolokina, Dolata, &
Schwabe, 2016; Demirgüç-Kunt et al., 2018). FinTech also supports small and medium-sized enterprises (SMEs)
by providing alternative financing channels such as crowdfunding, invoice financing, and buy-now-pay-later
schemes, which help address the limitations of traditional bank lending. Moreover, AI-driven analytics enable
better fraud detection, data-driven decision-making, and improved customer personalization, further enhancing
business competitiveness and resilience (Haddad & Hornuf, 2019; Chen, Wu, & Yang, 2021). Thus, FinTech
not only drives efficiency but also plays a critical role in promoting entrepreneurship, competitiveness, and
sustainable economic development.
ICTMT 2025 | International Journal of Research and Innovation in Social Science (IJRISS)
ISSN: 2454-6186 | DOI: 10.47772/IJRISS
Special Issue | Volume IX Issue XXVIII November 2025
Page 447
www.rsisinternational.org
Financial performance, a key measure of business health and competitiveness, is often evaluated through revenue
growth, profit margins, and capital efficiency (Venkatraman & Ramanujam, 1986; Kaplan & Norton, 1996). In
the Malaysian retail sector, which has been reshaped by e-commerce, mobile commerce, and omnichannel
strategies, accurate financial performance metrics are vital for strategic planning and long-term sustainability
(Lai, 2020; Nordin & Ismail, 2023). Retail businesses are increasingly pressured to integrate digital solutions not
only to remain competitive but also to meet changing consumer expectations for speed, convenience, and security
in financial transactions.
However, despite the proliferation of FinTech, many SMEs still face challenges in fully leveraging its benefits.
High implementation costs, lack of technical expertise, cybersecurity concerns, and complex regulatory
frameworks continue to act as barriers to adoption. In particular, SMEs often lack standardized methods to
evaluate the return on investment (ROI) of FinTech, making them hesitant to commit resources to long-term
digital transformation. This creates a digital divide between larger firms with better resources and smaller firms
that risk being left behind in the digital economy. Additionally, while government policies and incentives have
encouraged adoption, many SMEs remain cautious due to uncertainties surrounding data privacy, digital literacy,
and integration with existing business models.
To better understand the dynamics of technology adoption, this study employs the Unified Theory of Acceptance
and Use of Technology (UTAUT) developed by Venkatesh et al. (2003). The UTAUT model identifies four key
determinants of technology adoption: performance expectancy, effort expectancy, social influence, and
facilitating conditions. This theoretical lens provides a robust framework for analyzing how SMEs perceive and
adopt FinTech solutions in Malaysia’s retail sector. By linking these constructs to financial performance
outcomes, the study seeks to contribute to both theoretical understanding and practical strategies for improving
SME competitiveness in the digital era.
Furthermore, the application of UTAUT in the context of FinTech adoption among Malaysian retailers is
particularly relevant as it bridges the gap between behavioral intentions and actual financial performance
outcomes. Previous studies have largely focused on consumer adoption of FinTech, such as mobile banking and
e-wallets, but fewer have examined its organizational impact, especially among SMEs. By situating the analysis
within the retail sector, which plays a crucial role in Malaysia’s economy, this study provides valuable insights
into how digital financial solutions can drive business growth, improve resilience, and support national
digitalization goals.
Figure 1: Propose Conceptual Framework
H1: Performance
Expectancy
H2: Effort
Expectancy
SMEs
Financial
Performance
H3: Social Influence
H4: Facilitating
Conditions
ICTMT 2025 | International Journal of Research and Innovation in Social Science (IJRISS)
ISSN: 2454-6186 | DOI: 10.47772/IJRISS
Special Issue | Volume IX Issue XXVIII November 2025
Page 448
www.rsisinternational.org
The Unified Theory of Acceptance and Use of Technology (UTAUT), developed by Venkatesh et al. (2003), is
a widely applied framework for predicting user acceptance of technology. It identifies four key constructs,
Performance Expectancy (PE), Effort Expectancy (EE), Social Influence (SI), and Facilitating Conditions (FC)
as direct determinants of technology adoption. In the context of FinTech usage in the SMEs, these constructs
provide a relevant basis for hypothesis formulation as shown in Figure 1. Accordingly, the following hypotheses
are proposed:
H1: There is a relationship between Performance Expectancy and the SMEs Financial Performance
Performance Expectancy refers to the degree to which individuals believe that using FinTech will enhance their
business performance, such as by improving operational efficiency, reducing costs, and enhancing customer
satisfaction. In the retail sector, this may include mobile payment systems, automated inventory solutions, or
digital customer engagement platforms. Venkatesh et al. (2003) identified PE as the strongest predictor of
technology adoption intention in the original UTAUT model. In Malaysia, Rahi, Ghani, and Ngah (2021) found
that performance expectancy significantly influenced SMEs’ intention to use mobile financial services.
H2: There is a relationship between Effort Expectancy and the SMEs Financial Performance
Effort Expectancy refers to the perceived ease of using a particular system or technology. In the retail industry,
user-friendly FinTech applications that require minimal training or technical knowledge can encourage adoption
among business owners. Alalwan, Dwivedi, and Rana (2017) emphasized the role of EE in influencing user
adoption of mobile banking, while Yuen, Yeow, and Lim (2022) reported that ease of use significantly affects
the intention to adopt e-wallets among Malaysian micro-retailers.
H3: There is a relationship between Social Influence and the SMEs Financial Performance
Social Influence represents the extent to which individuals perceive that important others—such as peers,
customers, or business partners—believe they should use the new technology. In the retail context, merchants
are more likely to adopt FinTech if competitors, suppliers, or customers are already doing so. According to
Venkatesh et al. (2003), SI plays a crucial role, especially in voluntary technology adoption environments. Lai
(2020) found that social influence significantly affects the intention to adopt e-wallets in Malaysia, while Zarifis,
Cheng, and Efthymiou (2022) highlighted that peer and customer pressure drives digital transformation in retail
businesses.
H4: There is a relationship between Facilitating Conditions and the SMEs Financial Performance
Facilitating Conditions refer to the perception that organizational and technical support is available to facilitate
the use of technology. In the context of FinTech, this includes internet access, technical support, digital literacy,
and government incentives. Venkatesh et al. (2003) identified FC as a direct determinant of actual technology
usage. Teoh, Chong, and Lin (2022) observed that Malaysian small retailers with stronger digital infrastructure
and government support were more likely to implement FinTech tools in their operations, leading to improved
performance outcomes.
METHOD
This study employs a quantitative research design to investigate the factors influencing FinTech adoption among
retail business owners in Malaysia. A cross-sectional survey was used to collect primary data at a single point in
time, allowing for both descriptive and explanatory analysis (Creswell, 2014). The choice of a quantitative
approach was guided by the need to test hypotheses derived from the Unified Theory of Acceptance and Use of
Technology (UTAUT) framework, focusing on constructs such as trust, perceived benefits, knowledge, and user
attitudes. A structured questionnaire was developed and distributed to retail business owners with prior
experience or familiarity with FinTech applications, ensuring consistency and comparability across responses
(Sekaran & Bougie, 2016).
Primary data will be collected through a self-administered online questionnaire using a 5-point Likert scale,
covering three sections: demographic profiles of SMEs, UTAUT constructs (performance expectancy, effort
ICTMT 2025 | International Journal of Research and Innovation in Social Science (IJRISS)
ISSN: 2454-6186 | DOI: 10.47772/IJRISS
Special Issue | Volume IX Issue XXVIII November 2025
Page 449
www.rsisinternational.org
expectancy, social influence, and facilitating conditions), and financial performance measures (DeVellis, 2016).
A purposive sampling method was adopted, targeting business owners in Malaysia’s retail sector who actively
use or are familiar with FinTech tools (Etikan, Musa & Alkassim, 2016). Based on Krejcie and Morgan’s (1970)
sample size determination table, a minimum of 384 respondents was set to ensure statistical validity. The
questionnaire was piloted with 20–30 participants to refine clarity and assess reliability (Saunders, Lewis &
Thornhill, 2019).
The data will be analyze using SPSS software, which is widely applied in business and social science research
(Pallant, 2020). Descriptive statistics (frequencies, means, standard deviations) provided insights into respondent
profiles, while inferential analyses such as Pearson correlation and linear regression tested hypotheses and
identified predictors of FinTech adoption (Field, 2018). Reliability was measured using Cronbach’s Alpha to
ensure internal consistency of constructs while validity was addressed through careful alignment of questionnaire
items with established scales from prior studies (Hair et al., 2019). Together, these measures strengthened the
accuracy, reliability, and generalizability of the findings.
ACKNOWLEDGEMENT
Special thanks to the Faculty of Technology Management and Technopreneurship (FPTT), UTeM, for their
continuous support and for facilitating the process related to the 4th International Conference On Technology
Management & Technopreneur ship 2025.
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Page 450
www.rsisinternational.org
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