The Impact of Digital Payment Systems on Financial Inclusion: Evidence from Small and Medium Enterprises in Developing Economies

Abstract

The rapid proliferation of digital payment systems has fundamentally altered the financial landscape of developing economies, offering novel pathways to financial inclusion for previously underserved populations. This study examines the relationship between digital payment adoption among small and medium enterprises (SMEs) and their access to formal financial services in India, Kenya, and Vietnam. Employing a mixed-methods research design, the study gathered quantitative data from 432 SME owners through structured questionnaires and qualitative insights from 24 in-depth interviews. Structural equation modeling (SEM) and thematic analysis were used to analyze the data. Findings reveal that digital payment adoption significantly improves SMEs' credit access (beta = 0.61, p < 0.001), banking relationships (beta = 0.47, p < 0.01), and overall financial resilience. Regulatory environment and digital literacy were found to be significant moderating variables. The study contributes to financial inclusion discourse by providing cross-country empirical evidence and practical recommendations for policymakers, fintech providers, and financial institutions.