Academy of Strategic Management Journal Volume 19, Issue 5, 2020

FINTECH AS A CATALYST FOR GROWTH OF MICRO,

SMALL AND MEDIUM ENTERPRISES IN INDONESIA
Suryanto, Universitas Padjadjaran
Rusdin, Universitas Padjadjaran
R. Meisa Dai, Universitas Padjadjaran
ABSTRACT

This study aims to analyze the role of the financial technology industry (fintech) in the
growth of micro, small, and medium enterprises (MSMEs) in Indonesia. The study adopted
descriptive research using a qualitative approach. Sources of data were obtained through
literature studies, including published research results and expert opinions. The study results
found that the presence of the fintech industry would easily overcome some of the problems that
MSMEs often face. MSMEs were fast-growing and developing because they could optimize the
fintech platform according to their needs. This study illustrates the services provided by fintech
companies as being able to be a catalyst in the growth of their businesses. Services that
specifically catalyze MSME growth in Indonesia include the Peer to Peer (P2P) Lending
platform, equity crowdfunding (ECF), e-wallet, and personal finance. This research's
implications include that MSME actors experience several benefits, such as effectiveness in
finding sources of funds, ease of transaction processing, expanding market access, and faster
preparation of financial reports.

Keywords: Fintech, MSMEs, P2P Lending, e-wallet, Crowdfunding, Personal Finance.

INTRODUCTION

Financial technology (fintech) is an industry engaged in finance by utilizing technology.

Fintech aims to make it easier for the public to access financial products, carry out financial
transactions, and increase understanding of literacy in finance (Ozili, 2018). Indonesian fintech
companies have many types. The types of fintech companies in Indonesia are generally
dominated by startup companies, such as lending, crowdfunding, payment, financial planning,
remittances, and financial research. So far, the presence of fintech companies has been able to
make startup companies become more developed. The development of the company's business
also tends to be faster and more consistent (Muzdalifa et al., 2018). This certainly shows that
Indonesia also has competence in this field.
The fintech industry's presence is expected to be able to provide impetus to the
development of micro, small, and medium enterprises (MSMEs) in Indonesia. The MSMEs have
often faced several problems, such as capital problems (Ardiansyah & Sawitri, 2019), marketing
aspects (Chrismardani, 2014), preparation of financial statements Suryanto & Muhyi (2017), and
inefficiency in the transaction process (Sutarmin & Susanto, 2017).
Limited capital problems are a classic problem that is often encountered. The MSMEs
may have many business ideas to develop their business but must be stopped because there is no
additional capital (Ariani & Utomo, 2017). In retrospect, many MSMEs actors find it difficult to
obtain additional capital from banks due to their inability to meet statutory requirements for the
1 1939-6104-19-5-599
Academy of Strategic Management Journal Volume 19, Issue 5, 2020

loan. This is in line with the results of a survey conducted by PricewaterhouseCoopers in 2019,
which Annur (2019) disclosed that 74% of Indonesian MSMEs have not received access to
finance.
The problem with MSMEs marketing is the limited ability to access a broader market.
Even though needs (household) with business needs. The money coming from the sale the
production is good enough; the business continuity will not last long if the market is limited.
Therefore we need creative steps in marketing their products. Even though some MSMEs have
marketed their products online through social media, marketplace sites, and so on, but in
practice, it is still not optimal. Actually, MSMEs can use the internet to be an effective marketing
medium. Google, Facebook, and Instagram become online marketing media that are often used
by many people. The problem is that MSMEs have difficulty doing so, considering that
advertising requires creativity and big money.
The problems of financial statements that have not been resolved can be seen from the
still mixing of money for personal of the business is in the same account as the money used for
personal needs. Every time they want to pay home electricity bills, telephone bills, buy personal
credit, and the like, the owner pays directly from the account that is also used for business. The
simplest risk is that a company cannot measure with certainty the performance of its business.
The company's performance is not known whether profit or loss, whether the company has a
surplus or deficit cash flow. The most severe risk is when it turns out more business debt is used
for personal needs so that they cannot afford capital expenditure anymore or cannot afford to pay
for business operations.
Another problem often faced by MSMEs is inefficient cash transactions and payments
through traditional banks. Cash transactions are still very dominant among MSMEs. As
explained by Sutarmin & Susanto (2017), this can be seen from Indonesia's relatively low non-
cash transactions, which are 0.6% of total non-cash retail transactions, while Thailand has
reached 2.8%, Malaysia 7.7%, and Singapore which reached 44.5%.
The presence of the fintech industry will easily overcome these problems. Fintech is
considered more innovative because it can easily connect all business lines into one platform.
The MSMEs can grow and develop faster if they are able to optimize the existence of fintech
companies. Because fintech helps MSMEs to get ease and efficiency in the financial area
(Winarto, 2020). The presence of a fintech company that will help the problems of MSMEs is
expected to be realized soon. So that MSMEs are still able to contribute to gross national income
as has happened so far (Lu & Beamish, 2001).
Several previous studies relating to the role of fintech on MSME have been carried out
several times with different study focuses. (Abdullah et al., 2018) said that fintech peer-to-peer
(P2P) lending is able to be a liaison between parties who need loans (borrowers) and lenders.
Nurcahya & Dewi (2019) stated that fintech is an innovation that is considered to increase the
MSMEs market share. Meanwhile, according to Amalia (2016), fintech can overcome problems
faced by MSMEs, such as cash flow and opportunities for expansion. Another researcher, Hally
(2016), states that the existence of digital payment type fintech is able to provide more benefits
to consumers so that through smoother transactions, they will share their experiences with other
consumers.
Based on the results of previous studies, the researchers only focused on the partial role
of the existence of fintech companies. Therefore, this study describes a more comprehensive
range of fintech services that can accelerate MSMEs' growth and development in Indonesia.

2 1939-6104-19-5-599
Academy of Strategic Management Journal Volume 19, Issue 5, 2020

LITERATURE REVIEW

Financial Technology

The concept of financial technology (fintech) in the broadest sense is the use of
technology to provide financial solutions (Arner et al., 2015). Whereas specifically, fintech is
defined as the application of digital technology to problems of financial intermediation (Aaron et
al., 2017). While Romanova & Kudinska (2016), define fintech as one of the software and
modern technology-based businesses that provide financial services.
Fintech is a fast-moving and dynamic industry where there are many different business
models. Fintech is a new financial service business model developed through information
technology innovation (Dorfleitner et al., 2017; Hsueh & Kuo, 2017). Fintech is able to provide
financial services that are integrated with technology to produce facilities without intermediaries,
change the company's method of providing services and products, can handle privacy, regulatory
and legal challenges, and provides opportunities for inclusive growth (Dhar & Stein, 2017).
Fintech also promises a new ecosystem for the financial industry at a low cost, improves the
quality of financial services, and creates a more diverse and stable financial landscape (Lee et al.,
2019).

Fintech Business Model

The fintech service model can be grouped into several types. According to Hsueh & Kuo
(2017), there are three types of fintech, including: (1) Third-party payment systems, such as EC
crossborder, online-to-offline (O2O), mobile payment systems, and payment platforms that
provide services such as bank payments and transfers; (2) Peer-to-Peer (P2P) Lending is the
platform that helps lenders and borrowers meet their individual needs and generate efficient use
of money; (3) Crowdfunding is a type of fintech where a concept or product such as design,
program, content, and creative work is publicized publicly and for people who are interested in
and want to support the concept or product can provide financial support.
While the fintech business model, according to Rumondang et al. ( 2019) namely: (1)
Digital Payment. The fintech digital payment company provides online transaction payment
services so that the process becomes more practical, faster, and cheaper. These service provider
companies generally take the form of virtual wallets that are equipped with various features to
facilitate online transactions between consumers and business owners or between business
operators (B2B); (2) Account Aggregator. This Fintech Account Aggregator will offer services
that can accommodate all transactions through one platform. Users of this platform are given the
convenience of verifying transactions because the process is quick and short. The mechanism,
consumers who have many banking accounts can register their accounts into this platform, which
can then be used to monitor all banking transactions through one platform; (3) Personal Finance.
The fintech personal finance company, through its platform, can help consumers from making
good financial reports to wise fundraising choices. The usual mechanism is starting from
announcing consumer financial information through the Fintech company platform. Then the
Fintech company will process and assess the information and provide advice as an output of the
company's services; (4) Financing and Investment. Fintech financing and investment companies
include fintech companies that provide peer-to-peer lending (P2P Lending) and crowdfunding
services. Typically, fintech companies in this category can be P2P Lending, crowdfunding, or a
combination of both; and (5) Information and Feeder Site. This type of Fintech Company
3 1939-6104-19-5-599
Academy of Strategic Management Journal Volume 19, Issue 5, 2020

provides services regarding the information needed by potential consumers who want to use a
financial service sector product and service. Some of the information provided can be credit
cards, interest rates, mutual funds, insurance premiums, etc. Information regarding these matters
is obtained from information provided by PUJK in banking, capital market, insurance, financial
institutions, and so on.

Micro, Small, and Medium Enterprises

Micro, Small, and Medium Enterprises (MSMEs) have become an important issue as a
driving force for economic growth and improvement in many countries in the world
(Matambalya, 2000). Specifically, Berry & Mazumdar (1991) stated that MSMEs in countries in
the East and Southeast Asia region has a central role in each country's national economic
development. The central role of MSMEs in Indonesia include: encouraging people's economic
growth (Suryanto & Muhyi, 2017), solutions to poverty reduction in Indonesia (Supriyanto,
2006), and being able to contribute significantly to GDP (Handayani et al., 2010).
The definition of Micro, Small, and Medium Enterprises has been described in detail in
Law No. 20 of 2008, which was followed by (Tambunan, 2014). A micro business is a
productive business owned by an individual and/or an individual business entity that meets the
criteria of having net assets of not more than Rp.50,000,000.00 excluding land and buildings for
business premises; or have annual sales of no more than Rp.300,000,000.00.
A small business is a productive economic business that stands alone, which is carried
out by individuals or business entities that are not subsidiaries or not a branch of an owned,
controlled, or part, either directly or indirectly, of a Medium or Large Business. Small businesses
have the criteria of having a net worth of more than Rp.50,000,000.00 - Rp.500,000,000.00
excluding land and buildings for business premises; or have annual sales of more than IDR
300,000,000.00-IDR 2,500,000,000.00.
Medium-sized enterprises are productive economic enterprises that are independent,
carried out by individuals or business entities that are not subsidiaries or branches of owned,
controlled, or part of, either directly or indirectly, with Small or Large Enterprises. The criteria
for a medium-sized business include: having a net worth of more than IDR 500,000,000.00 - IDR
10,000,000,000.00 excluding land and buildings for business premises or have annual sales
revenue of more than IDR 2,500,000,000.00 - 50,000,000,000.00.

METHOD

This research adopted of descriptive analysis using a qualitative approach. Descriptive

research is used to describe fintech companies in accelerating the growth of MSMEs in
Indonesia, while the qualitative approach is used to analyze the conditions of MSMEs facing
various problems that can be overcome by the presence of fintech companies. Sources of data
obtained through literature studies in the form of research results and statements from various
experts published. Research results that are used as references are those that have been published
in indexed journals or proceedings.
The data analysis technique is done by first triangulating the data source to obtain truly
credible data. Data that is considered credible are then synthesized to build inferences to draw
conclusions so that a holistic understanding is reached.

4 1939-6104-19-5-599
Academy of Strategic Management Journal Volume 19, Issue 5, 2020

RESULTS AND DISCUSSION

Fintech has developed fairly evenly in various sectors in Indonesia. Fintech makes it easy
for MSMEs to access financing sources, digital payments, expand market share, and overcome
financial reporting problems. This business model, as in the research of Milian et al. (2019) and
Rizvi et al. (2018), promises flexibility, security, efficiency, and opportunities than traditional
financial services. The ease of service provided by fintech enables MSMEs to focus more on
carrying out their business operations. So that MSMEs will be able to compete and grow in the
global economy. This is consistent with the results of research Suryanto (2019a), which states
that MSMEs will grow if they are in a supportive environment or ecosystem.
The problems faced by MSMEs so far have made them disturbed to develop. The
presence of a fintech company brings fresh angina to the MSMEs. The Indonesian government is
also very responsive to the fintech industry's presence, which will accelerate the growth of these
MSMEs. This can be seen from the issuance of various regulations by the Financial Services
Authority (OJK) and by Bank Indonesia. OJK has issued several regulations, including

(1). OJK Regulation No. 1 of 2013 concerning Consumer Protection in the Financial Services Sector.
(2). OJK Regulation No. 77 of 2016 concerning Information Technology-Based Money Lending and
Borrowing Services.
(3). OJK Regulation No. 13 of 2018 concerning Digital Financial Innovations in the Financial Services
Sector.

While Bank Indonesia also issued several regulations, including

(1). Bank Indonesia Regulation (PBI) No. 18/40/PBI/2016 concerning the Implementation of Payment
Transaction Processing.
(2). Bank Indonesia Circular No. 18/22/DKSP/2016 concerning the Implementation of Digital Financial
Services.
(3). Bank Indonesia Regulation No.19/12/PBI/2017 concerning Implementation of Financial Technology.
(4). Bank Indonesia Regulation No. 20/6/PBI/2018 concerning Electronic Money.
Table 1
UTILIZATION OF STARTUP FINANCIAL TECHNOLOGY FOR MSME GROWTH
Fintech Company
No Problems Fitur
Recommendation
Capital loans to MSMEs that must be returned in
accordance with OJK Regulation Number
1 Lack of Capital Startup P2P Lending
77/POJK.01/2016. About Information Technology-
Based Lending and Borrowing Services
Fundraising from investors will be converted with
several shares under OJK Regulation Number 37 of
2 Lack of Capital Startup Crowdfunding
2018 regarding Funding Services through Equity
Crowdfunding
Increase the flow of payments and access-free
Financial access
3 Startup Payments transactions that are wider, faster, effective, and
activities
efficient.
4 Marketing Access Dompet Digital Increase market share
Separation of personal
and business assets, Startup Personal Develop financial literacy and education related to
5
financial planning and Finance financial planning and reporting (financial planning)
preparation
Source: Asosiasi Financial Technology Indonesia, 2020

5 1939-6104-19-5-599
Academy of Strategic Management Journal Volume 19, Issue 5, 2020

Fintech is here to answer various problems that have been faced by the MSMEs. Each
fintech provides specific services so that MSMEs can access multiple fintech at the same time.
The following are some fintech startup features that can be utilized to accelerate the growth of
MSMEs.
Based on Table 1, it can be seen that almost all the problems that have been faced by
MSME entrepreneurs have provided solutions from their fintech companies.

Fintech Capital Loan Service Provider

The fintech company that specifically provides capital loan services to debtors is P2P
Lending. P2P Lending provides capital access to businesses with competitive interest rates and
flexibility in loan tenure and payment models. Besides, P2P Lending is able to reach all corners
of the region and community groups. In contrast to traditional banking, as in the study of Chen &
Sergi (2018), which only serves certain segments of society.
Fintech's P2P Lending platform has changed the perception of MSME entrepreneurs in
Indonesia when it comes to borrowing money. Previously, MSMEs only knew banking
institutions if they were going to apply for a capital loan and had to go through a complicated
and tiring process. In contrast to P2P Lending fintech, as described by Pinochet et al. (2019)
which is able to provide borrowers with very fast, easy, and cheap access. The presence of P2P
Lending fintech is considered capable of creating social justice for MSMEs that are unbankable
(or have not been touched by a bank), or who do not get conventional funding.
MSMEs who will use P2P Lending fintech services must submit an online loan
application. All required document requirements must be uploaded to the company's web, which
is already based on an online platform. All processes are carried out digitally so that the
objectivity of prospective loan recipients is more transparent. This business model is in
accordance with the current government policy to reduce physical distancing due to the Covid-19
pandemic virus.
Loans through fintech P2P Lending do not require collateral in the form of assets.
Developing MSMEs can greatly help carry out their business operations to become a powerful
entity. Application files that have been submitted by prospective borrowers will be carried out a
feasibility analysis process. The credit analysis process is seen from various aspects, not just
relying on the credit score and the business owner's background. But many other factors that can
be seen include the completeness of the required documents. Unlike traditional lenders, fintech
lenders such as in Kennedy (2017) and Jagtiani & John (2018) research utilize big data and
complex alternative data to make quick credit decisions.
OJK, as the regulator in the financial services sector, continues to encourage the growth
of the P2P Lending industry in order to increase the expansion of MSME capital access. To fully
support MSME funding, OJK has two choices, namely to encourage P2P Lending to increase
productive funding capacity or to encourage the registration of massive productive fintech
lending. The penetration of fintech P2P Lending that is able to reach people in various places is
believed to accelerate the growth of MSMEs throughout Indonesia further. Because P2P Lending
is one of the alternative financings for MSMEs (Bruton et al., 2015).
Four factors enable P2P Lending fintech to be able to reach MSMEs in various regions.
First, fintech P2P Lending utilizes digital footprint as a substitute for physical documents for
verification or using third party data such as e-commerce. That way, the registration process
becomes easier. Second, fintech P2P Lending collects a lot of data related to prospective
borrowers, so it does not require collateral. Third, fintech P2P Lending needs to provide a
6 1939-6104-19-5-599
Academy of Strategic Management Journal Volume 19, Issue 5, 2020

display application (user experience/UX) that makes it easy for users when applying for loans.
Fourth, fintech P2P Lending assesses the creditworthiness of borrowers using algorithms on their
platforms. Fintech P2P Lending players combine different business models, technologies, and
innovative approaches, enabling them to reach more widely to remote areas and solve
infrastructure and risk management challenges.

Fintech Fundraising Service Provider

Fintech, which specifically conducts fundraising activities, is often called fintech

crowdfunding. This fintech platform specifically practices collecting funds from a large number
of people to capitalize on a project or business that is generally carried out through online
platforms. Unlike traditional financial services companies such as the capital market, fintech can
develop new and innovative financial products and services (Ryu, 2018). There are three parties
involved in the crowdfunding platform, namely the project owner, supporters (the public who
provide financial support), and platform providers. These three parties are in accordance with
what Fisk et al. (2011) have their respective roles in creating an ecosystem that can support each
party's needs.
Based on the form of rewards given to funders, Crowdfunding can be divided into several
types, namely: reward-based Crowdfunding, donation-based Crowdfunding, equity-based
Crowdfunding, and loan-based Crowdfunding (Zhao et al., 2019). In detail, each Crowdfunding
can be described as follows:

(1). Crowdfunding-based reward

Reward-based Crowdfunding is a form of Crowdfunding based on prizes or rewards. Reward-

based Crowdfunding will reward investors, usually in the form of a first or limited edition of a
funded product or service. The rewards given are generally adjusted to the number of funds
provided. The greater the funds, the more exclusive the reward the investor gets.

(2). Donation-based Crowdfunding

Donation-based Crowdfunding simply means Crowdfunding based on donations (voluntary

donations). The main idea of donation-based Crowdfunding is a voluntary joint venture without
compensation for humanitarian purposes such as funding for medical expenses or raising funds
to help victims of natural disasters. In return, supporters can receive token prizes that increase
prestige as the size of donations increases. However, for the smallest amount, funders may not
receive anything.

(3). Loan-based Crowdfunding

Loan-based Crowdfunding is a form of fundraising in the form of debt, so that the crowd gets
compensation in the form of repayment for loans, along with interest. Actually, this type of
Crowdfunding is the same as an ordinary loan. Prospective debtors will submit their proposals,
and donors or creditors will deposit capital, which is considered as a loan with a return in the
form of interest. Loan-Based Crowdfunding is now growing rapidly and has been classified into
its own category, better known as P2P Lending.

7 1939-6104-19-5-599
Academy of Strategic Management Journal Volume 19, Issue 5, 2020

(4). Equity-based Crowdfunding

Equity-based Crowdfunding is a form of Crowdfunding where fundraisers will provide rewards

in the form of shares to crowd investors. Shares sold to a number of investors will become the
equity or ownership interest of the company. The size of the shares varies depending on the offer
given by the fundraising company based on the valuation of the company. This model is often
used by startup companies (startups) or beginners (early-stage). Investors who deposit funds will
receive compensation in the form of dividends under the proportion of ownership in accordance
with the agreement. The type of Crowdfunding that can directly help accelerate the growth of
MSMEs in Indonesia in addition to loan-based Crowdfunding, better known as P2P Lending, is
equity-based Crowdfunding. Basically, equity-based Crowdfunding is almost the same as
investing in the capital market. There are publishers (companies that offer shares of the
company), providers of fundraising services, and financiers (investors). The difference is that a
stock offering with the Equity Crowdfunding (ECF) system is conducted by the issuer to sell
shares directly to investors through an online platform (Haniff et al., 2019). The issuer will offer
shares of the company through the organizer of the fund collection service. After that, investors
can buy shares of the company that was offered. The ECF platform is very helpful for MSMEs
that are not yet bankable to attract investors online. The rights and obligations of each party
involved in equity-based Crowdfunding have been regulated through OJK Regulation Number
37/POJK.04/2018 concerning Funding Services through Equity Crowdfunding.

Fintech Digital Payment Service Provider

Fintech, which specifically provides services in digital transactions, is fintech e-wallet.

This fintech platform specifically provides services in the field of payment. These service
provider companies generally take the form of virtual wallets that are equipped with various
features to facilitate online transactions between consumers and business owners or between
business operators (B2B). The payment process with fintech e-wallet is considered valid without
the need to use paper instruments (Junadi, 2015).
Fintech e-wallet provides services digitally in the form of payment transactions so that
the process becomes more practical, faster, and cheaper. This is under Tiwari et al. (2019)’s
research, which states that virtual wallets can provide benefits for consumers in saving time.
Through this effective and efficient way of working, fintech has changed the payment system in
the community. It has helped start-up companies to reduce capital costs and high operational
costs. Fintech is now able to replace the role of formal financial institutions such as banks
In the mechanism, the virtual wallet or so-called e-wallet will be filled by the consumer
(deposit) through his banking account with the desired nominal value. Then if the consumer
makes a transaction, the virtual wallet will be debited under the transaction amount. In making
deposits, this virtual wallet can be filled through several payment methods, namely through
credit cards, mobile banking, internet banking, ATMs, debit cards, corporate internet banking,
branchless banking agents, online virtual accounts, and Electronic Invoice Presentment &
Payment (EIPP).
E-wallet is an application that facilitates transactions in making payments. The E-wallet
can facilitate a variety of transactions such as food delivery services, top-up, online shopping,
electricity and other bills, public or online transportation, plane and train tickets, and much more.
Transactions using e-wallet provide many benefits such as discounts and other attractive
shopping offers, and the process can be done using a smartphone. This is consistent with the
8 1939-6104-19-5-599
Academy of Strategic Management Journal Volume 19, Issue 5, 2020

research conducted by Anshari et al. (2019) that the use of smartphones can facilitate business
transactions both directly and indirectly.
Fintech payment gateway has proliferated in recent years. That is because the needs of
the community for payment gateways are quite high. The fintech e-wallet service allows users to
save their money in the application to be able to use transactions at the desired time and place.
This fintech platform is very helpful for the growth of MSMEs due to various facilities
and advantages. This is according to stated Anshari et al. (2019) that the fintech e-wallet
platform can provide convenient and user-friendly services for both producers and consumers.
MSMEs who take advantage of this application can improve the quality of their business. They
can provide a variety of choices in dealing with customers.

Fintech Marketplace Provider

Fintech is actually a company in the field of financial services that utilize technological
developments. However, fintech digital wallet platforms such as GoPay, Ovo, LinkAja, DANA,
and other digital wallets are able to increase the market share of MSMEs who have partnered.
This is consistent with Lestari et al. (2020) research conducted by MSMEs that have used
Payment Gateway (digital wallet) as a transaction tool to increase the number of sales
transactions.
Previously unknown MSMEs products, after the MSMEs partnered with digital wallet
fintech, became better know. The products of MSMEs will be displayed on the digital wallet
fintech application, which can be seen by potential customers at any time. Today's consumers are
more interested in companies that share innovations, both product innovation and payment
methods (Sasmiyarsi & Meliana, 2019). By partnering with this fintech, MSMEs will experience
the benefits of a simplified transaction chain, lower operational costs, and freeze the flow of
information.
In addition, consumer interest in MSMEs products that partner with fintech digital
wallets is also due to the fast delivery service and cashback promos provided by e-wallet
providers. The cashback promo is very beneficial for MSMEs because the digital platform
fintech bears the burden. Both of these factors positively impact the volume of transactions and
the business development of MSMEs (Lee et al., 2019).

Fintech Providers of Financial Report Services

The problem of mixing company financial affairs with personal financial matters has
been one of the most challenging problems experienced by most MSMEs in Indonesia. They are
less concerned that every business activity needs financial reports. By having a business standard
financial report, the company will find out how much money the company has used for personal
needs. Also, how much is the value of the company's assets when compared with the revenue
generated.
Their bookkeeping transaction activities are still done manually. According to the
Ministry of Communication and Information quoted by Ayuwuragil (2017), only 8% of 59.2
million MSMEs in Indonesia have gone online. In other words, they are still centered on the
conventional way in various sectors, including bookkeeping. Manual bookkeeping will slow
down the work process and tend to give birth to several mistakes. Also, according to Juhardi &
Khairullah (2019)'s research that the number of transactions that occur every day must also be

9 1939-6104-19-5-599
Academy of Strategic Management Journal Volume 19, Issue 5, 2020

recorded and made a report that will spend time. For this reason, digital bookkeeping is an
important matter for MSMEs in developing their businesses.
These problems can be overcome by the presence of fintech digital wallet platforms.
Digital wallet helps MSMEs in storing money because the money saved will go into the account.
After that, the incoming payment will be recorded automatically in the storage system so that
businesses can check it directly. The use of digital wallets is only able to make reports in and out
of it. Every incoming cash is considered income and every cash out is considered a fee. The
difference between incoming and outgoing money (the rest) is considered profit.
Companies need standard financial reports, such as a Balance Sheet, Income, and Cash
Flow. Each of the three financial statements has different information functions (Suryanto,
2019b). The need for a standard financial statement preparation cannot be met by digital wallet
fintech. However, there is fintech, which specifically helps in preparing financial reports and
corporate financial planning, namely fintech personal finance. The fintech personal finance
company, through its platform, can help consumers from making good financial reports to wise
fundraising choices.

CONCLUSION

Industry fintech can provide solutions that can accelerate the growth of MSMEs in
Indonesia. The fintech industry's presence easily overcomes all problems that have been an
obstacle for MSMEs. MSMEs become easier to develop because of the support of fintech
companies. In addition, fintech companies are also able to target all segments of business types
and remote company locations. Specific fintech companies that have become catalysts in the
growth of MSMEs include P2P Lending, Equity Crowdfunding, e-wallet, and Personal Finance.
As a catalyst in the growth of MSMEs, the role of fintech can be seen from several things,
including (1) effectiveness in finding sources of funds; (2) ease of transaction processing; (3)
expanding market access; and (4) faster preparation of financial reports.

REFERENCES
Aaron, M., Rivadeneyra, F., & Sohal, S. (2017). Fintech: Is this time different? A framework for assessing risks and
opportunities for Central Banks (No. 2017-10). Bank of Canada Staff Discussion Paper.
Abdullah, E.M.E., Rahman, A.A., & Rahim, R.A. (2008). Adoption of financial technology (Fintech) in mutual
fund/unit trust investment among Malaysians: Unified Theory of Acceptance and Use of Technology
(UTAUT). International Journal of Engineering and Technology, 7(2), 29.
Amalia, F. (2016). The fintech book: The financial technology handbook for investors, entrepreneurs and
visionaries. Journal of Indonesian Economy and Business, 31(3), 345-348.
Annur, C.M. (2019). Survei pwC: 74% UMKM belum dapat akses pembiayaan. Retrieved on 26 June, 2019 f m
https://katadata.co.id/berita/2019/06/28/survei-pwc-74-umkm-belum-dapat-akses-pembiayaan
Anshari, M., Almunawar, M. N., Masri, M., & Hamdan, M. (2019). Digital marketplace and FinTech to support
agriculture sustainability. Energy Procedia, 156, 234-238.
Ardiansyah, M., & Sawitri, P. (2019). Analysis of factors that influence the use of social media by small and
medium enterprises. IEEE-SEM, 7(11), 32–41.
Ariani, A., & Utomo, M.N. (2017). Study of the development strategy for micro, small and medium enterprises
(UMKM) in Tarakan city. Journal of Organization and Management, 13 (2), 99-118.
Arner, D.W., Barberis, J., & Buckley, R.P. (2015). The evolution of Fintech: A new post-crisis paradigm. Geo. J.
Int'l L., 47, 1271.
Ayuwuragil, K. (2017). Kemenkop UKM: 3.79 million MSME have go online. Retrieved from
https://www.cnnindonesia.com/ekonomi/20171115161037-78-255819/kemenkop-ukm-379-juta-umkm-
sudah-go-online?

10 1939-6104-19-5-599
Academy of Strategic Management Journal Volume 19, Issue 5, 2020

Berry, A., & Mazumdar, D. (1991). Small‐scale industry in the Asian‐Pacific region. Asian‐Pacific Economic
Literature, 5(2), 35-67.
Bruton, G., Khavul, S., Siegel, D., & Wright, M. (2015). New financial alternatives in seeding entrepreneurship:
Microfinance, crowdfunding, and peer–to–peer innovations. Entrepreneurship Theory and Practice, 39(1),
9-26.
Chen, K., & Sergi, B.S. (2018). How Can FinTech Impact Russia’s Development?. In Exploring the Future of
Russia’s Economy and Markets. Emerald Publishing Limited.
Chrismardani, Y. (2014). Integrated marketing communication: implementation for MSMEs. Neo-Bis, 8 (2), 179-
189.
Dhar, V., & Stein, R.M. (2017). FinTech platforms and strategy. Communications of the ACM, 60(10), 32-35.
Dorfleitner, G., Hornuf, L., Schmitt, M., & Weber, M. (2017). Definition of FinTech and description of the FinTech
industry. In FinTech in Germany. Springer, Cham.
Fisk, R.P., Patrício, L., Ordanini, A., Miceli, L., Pizzetti, M., & Parasuraman, A. (2011). Crowd‐funding:
transforming customers into investors through innovative service platforms. Journal of Service
Management.
Hally, L. (2016). Fintech solutions for small businesses. The fintech book: The financial technology handbook for
investors, entrepreneurs and visionaries, 123-124.
Handayani, PW, Saputro, JW, Hidayanto, AN, & Budi, I. (2010). Enterprise Resource Planning (ERP) research
roadmap with a research focus on Small and Medium Enterprises (SMEs) in Indonesia. Journal of
Information Systems, 6 (2), 140-145.
Haniff, W.A.A.W., Halim, A.H.A., & Ismail, R. (2019). Equity Crowdfunding in Malaysia: Legal and Sharia
Challenges. International Journal of Asian Social Science, 9(8), 450-460.
Hsueh, S.C., & Kuo, C.H. (2017). Effective Matching for P2P Lending by Mining Strong Association Rules.
In Proceedings of the 3rd International Conference on Industrial and Business Engineering.
Jagtiani, J., & John, K. (2018). Fintech: The impact on consumers and regulatory responses.
Junadi, S. (2015). A model of factors influencing consumer’s intention to use e-payment system in
Indonesia. Procedia Computer Science, 59, 214-220.
Kennedy, P.S.J. (2017). Analysis of the effect of indonesian defense budget policy on national economic growth.
Asia Pacific Fraud Journal, 2(1), 49-60.
Khairullah, K. (2019). Financial recording and processing system for android-based e-wallet financial management
applications. Journal of Technopreneurship and Information System, 2 (1), 24-29.
Lee, J., Li, T., & Shin, D. (2019). The wisdom of crowds in FinTech: Evidence from initial coin offerings. Available
at SSRN 3195877.
Lestari, D.A., Purnamasari, E.D., & Setiawan, B. (2020). Effect of Payment Gateway on MSME Financial
Performance. JASMARK: Journal of Human Resource Management, Marketing and Finance, 1 (1), 9-18.
Lu, J.W., & Beamish, P.W. (2001). The internationalization and performance of SMEs. Strategic Management
Journal, 22(6‐7), 565-586.
Matambalya, F.A.S.T. (2000). Profile of small and medium scale enterprises (SMEs) in the SADC economies center
for development research. Retrieved from https://www.wipo.int/export/sites/www/about-
ip/en/studies/pdf/study_f_matambalya.pdf
Milian, E.Z., Spinola, M.D.M., & de Carvalho, M.M. (2019). Fintechs: A literature review and research
agenda. Electronic Commerce Research and Applications, 34, 100833.
Muzdalifa, I., Rahma, I.A., & Novalia, B.G. (2018). The role of fintech in improving financial inclusion in MSMEs
in Indonesia (Islamic financial approach). Masharif al-Syariah Journal: Journal of Islamic Economics and
Banking, 3 (1).
Nurcahya, Y.A., & Dewi, R.P. (2019). Analysis of the effect of fintech and ecommerce development on the
economy of the community. In Proceedings of the National Seminar of the Faculty of Economics, Untidar.
Ozili, P.K. (2018). Impact of digital finance on financial inclusion and stability. Borsa Istanbul Review, 18(4), 329-
340.
Pinochet, L.H.C., Diogo, G.T., Lopes, E.L., Herrero, E., & Bueno, R.L.P. (2019). Propensity of contracting loans
services from FinTech’s in Brazil. International Journal of Bank Marketing.
Rizvi, S.K.A., Naqvi, B., & Tanveer, F. (2018). Is Pakistan Ready to Embrace Fintech Innovation?. The Lahore
Journal of Economics, 23(2), 151-182.
Romanova, I., & Kudinska, M. (2016). Contemporary issues in finance: Banking and FinTech: A challenge or
opportunity. Contemporary Studies in Economic and Financial Analysis, 98, 21-35.

11 1939-6104-19-5-599
Academy of Strategic Management Journal Volume 19, Issue 5, 2020

Rumondang, A., Sudirman, A., Effendy, F., Simarmata, J., & Agustin, T. (2019). Fintech: Financial system
innovation in the digital Age. Our Writing Foundation.
Ryu, H.S. (2018). What makes users willing or hesitant to use Fintech?: the moderating effect of user
type. Industrial Management & Data Systems.
Sasmiyarsi, W., & Meliana, V. (2019). The Influence of T-Cash Tap Process Innovation on Customer Satisfaction
and Its Impact on Telkomsel Customer Loyalty. Kalbisocio Journal of Business and Communication, 6 (1),
54-61.
Supriyanto, S. (2006). Empowerment of micro, small and medium enterprises (MSMEs) as an effort to reduce
poverty. Journal of Economics and Education, 3 (1), 17247.
Suryanto, M., & Muhyi, H.A. (2017). Profile and problem of micro, small and medium enterprises in Bandung.
In International Conference on Public Policy, Social Computing and Development 2017 (ICOPOSDev
2017). Atlantis Press.
Suryanto, (2019a). Analysis of entrepreneurship ecosystem at university. Journal of Entrepreneurship Education,
22(4), 1-10.
Suryanto. (2019b). Effect of internet financial reporting and company size on stock trading volume at LQ45
company in Indonesia stock exchange. Humanities and Social Sciences Reviews, 7(3), 527-533.
Sutarmin, S., & Susanto, A. (2017). Potential development of non-cash transactions in Indonesia. Sustainable
Competitive Advantage (SCA), 7 (1).
Tambunan, T. (2014). UMKM Indonesia. Usakti.
Tiwari, P., Garg, V., & Singhal, A. (2019). A study of consumer adoption of digital wallet special reference to NCR.
In 2019 9th International Conference on Cloud Computing, Data Science & Engineering (Confluence).
IEEE.
Winarto, W.W.A. (2020). The role of fintech in micro, small and medium enterprises (MSMEs). Jesya (Journal of
Sharia Economics & Economics), 3 (1), 61-73.
Zhao, Y., Harris, P., & Lam, W. (2019). Crowdfunding industry-History, development, policies, and potential
issues. Journal of Public Affairs, 19(1), e1921.

12 1939-6104-19-5-599