FinTech adoption gap between rural and urban MSMEs threatens digital financial sustainability

A widening divide in financial technology (fintech) adoption between rural and urban micro, small, and medium enterprises (MSMEs) is emerging as a critical challenge for digital financial sustainability, according to new research conducted in Indonesia. The study finds that while FinTech is transforming access to financial services and improving inclusion, adoption patterns differ sharply depending on location, infrastructure, and user capabilities, raising concerns about uneven economic development in the digital era.

Published in the journal Risks, the study titled “Understanding FinTech Adoption Drivers for Digital Financial Sustainability in Urban and Rural MSMEs” provides a comprehensive empirical analysis of 632 MSMEs in South Sumatra, offering one of the most detailed comparisons of rural and urban FinTech adoption to date.

Using an extended Unified Theory of Acceptance and Use of Technology framework, the researchers incorporate additional variables such as digital financial literacy, artificial intelligence literacy, green self-identity, and perceived green finance to explain how businesses adopt and continue using financial technologies.

Infrastructure and usability divide shapes rural and urban adoption patterns

The study reveals that the drivers of FinTech adoption differ significantly between rural and urban enterprises, reflecting deeper structural inequalities in digital ecosystems.

In rural areas, facilitating conditions emerge as the most critical factor influencing adoption. These include access to reliable internet connectivity, availability of digital infrastructure, institutional support, and the presence of enabling environments that allow businesses to engage with FinTech platforms. Without these foundational elements, even well-designed financial technologies struggle to gain traction.

The findings suggest that rural MSMEs are highly dependent on external support systems. Adoption is less about willingness and more about whether the necessary infrastructure exists to support usage. Limited connectivity, lower access to devices, and weaker institutional backing continue to constrain rural adoption, despite growing awareness of FinTech benefits.

On the other hand, urban MSMEs are driven primarily by effort expectancy, or the perceived ease of using FinTech systems. In more developed environments where infrastructure barriers are minimal, usability becomes the defining factor. Businesses are more likely to adopt technologies that are intuitive, efficient, and require minimal effort to integrate into existing workflows.

This divergence highlights a key insight: FinTech adoption is not governed by a single universal model. Instead, it is shaped by local conditions, where rural adoption depends on structural readiness and urban adoption depends on user experience.

The study also finds that performance expectancy remains an important factor across both contexts. Businesses are more likely to adopt FinTech when they perceive clear benefits, such as improved transaction efficiency, better financial management, and expanded access to financial services.

Literacy and technological awareness drive sustained FinTech usage

Apart from initial adoption, the study identifies digital financial literacy and artificial intelligence literacy as critical enablers of continued FinTech use. These factors determine not only whether businesses adopt technology but also whether they continue to use it effectively over time.

Digital financial literacy plays a key role in helping MSMEs understand how FinTech platforms operate, manage digital transactions, and assess financial risks. Enterprises with higher literacy levels are better equipped to navigate digital ecosystems, leading to stronger engagement and more sustained usage.

AI literacy further enhances this effect by enabling users to interact with more advanced financial tools, such as automated recommendations, predictive analytics, and intelligent financial management systems. As FinTech platforms increasingly integrate AI capabilities, understanding these technologies becomes essential for maximizing their benefits.

The study shows that both forms of literacy significantly influence continuance intention, meaning that businesses are more likely to keep using FinTech when they feel confident in their ability to understand and manage digital tools.

Importantly, these literacy factors are not evenly distributed. Urban MSMEs generally exhibit higher levels of digital and AI literacy, giving them an advantage in adopting and sustaining FinTech usage. Rural enterprises, on the other hand, often face knowledge gaps that limit their ability to fully leverage available technologies.

This disparity underscores the need for targeted education and training programs. Without addressing literacy gaps, the expansion of FinTech could reinforce existing inequalities rather than reduce them.

FinTech adoption strengthens financial inclusion but exposes new inequalities

The study confirms that FinTech adoption has a strong positive impact on financial inclusion across both rural and urban contexts. By enabling access to digital payment systems, credit platforms, and financial management tools, FinTech reduces traditional barriers to financial services.

For MSMEs, this translates into greater access to capital, improved cash flow management, and enhanced participation in the formal financial system. These benefits are particularly significant for small businesses that have historically been excluded from traditional banking services.

The research also highlights the role of perceived green finance and green self-identity in shaping adoption behavior. Businesses that are more aware of environmental sustainability and green financial practices are more likely to adopt FinTech solutions that align with these values. This suggests that FinTech is not only a financial tool but also a platform for promoting sustainable business practices.

However, the study warns that these benefits are not evenly distributed. The same factors that enable FinTech adoption in urban areas can create barriers in rural contexts. Differences in infrastructure, literacy, and institutional support lead to uneven outcomes, with urban enterprises gaining greater advantages from digital transformation.

This creates a risk of digital financial inequality, where some businesses benefit disproportionately from technological advancements while others are left behind. The study emphasizes that addressing this imbalance is essential for achieving inclusive and sustainable economic growth.

Continuance intention becomes key to long-term digital transformation

The study focuses on continuance intention, which refers to the willingness of businesses to continue using FinTech over time. While initial adoption is important, long-term sustainability depends on whether users remain engaged with digital platforms.

The findings show that continuance intention is strongly influenced by perceived usefulness, ease of use, and literacy factors. Businesses that experience tangible benefits and find systems easy to use are more likely to integrate FinTech into their daily operations.

This has significant implications for FinTech providers. Designing user-friendly platforms is not enough; ensuring that users continue to derive value from these systems is equally important. Continuous engagement requires ongoing support, updates, and alignment with user needs.

The study also highlights the role of trust and confidence in sustaining usage. Businesses are more likely to continue using FinTech when they trust the security and reliability of digital systems. This is particularly important in regions where concerns about fraud and data privacy remain high.

Policy and industry implications for closing the digital divide

The research points to several policy and industry priorities for addressing the challenges identified.

• Improving infrastructure in rural areas is essential for enabling adoption. Investments in connectivity, digital access, and institutional support can create the conditions necessary for FinTech to thrive.
• Enhancing digital and AI literacy is critical for ensuring that businesses can effectively use and benefit from financial technologies. Training programs, educational initiatives, and capacity-building efforts can help bridge knowledge gaps and promote inclusive adoption.
• FinTech providers must tailor their solutions to different user contexts. Rural users may require simpler interfaces and stronger support systems, while urban users may prioritize advanced features and seamless integration.

The study also calls for greater alignment between financial technology and sustainability goals. By integrating green finance principles into FinTech platforms, policymakers and industry stakeholders can promote environmentally responsible business practices alongside financial inclusion.