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How does the adoption of digital payment technologies influence unorganized retailers’ performance? An investigation in an emerging market

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Abstract

Unorganized retail dominates the retail landscape across emerging markets (EMs) and is undergoing rapid digitalization. However, the extant literature has not explored the impact of digital payment system adoption on unorganized retailer (UR) performance. By conducting three related studies and relying on the tenets of the resource-based view of firms, we show that digital payment technologies’ adoption increases economic performance (i.e., revenue) for a sample of 403 EM URs. This effect is enhanced by such retailers’ prioritization of technological investments and attenuated by their credit facilities. We find that card-based and app-based technologies positively impact UR performance. URs can maximize their performance by adopting two technologies, and there is a synergistic effect between card-based and account-based technologies. On average, adoption increases a UR’s economic performance by 9.6%. We present a nuanced understanding of whether, how much, and which digital payment technologies should be adopted by EM URs.

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Notes

  1. https://worldpaymentsreport.com/wp-content/uploads/sites/5/2018/10/World-Payments-Report-2018.pdf

  2. Unorganized retailing is the conventional format of low-cost retailing. It includes local Kirana shops and restaurants, general and provision stores, and even hand carts and pavement vendors (https://retail.economictimes.indiatimes.com/news/industry/an-ode-to-the-unorganized-retailer/56064312).

  3. https://www.prnewswire.com/news-releases/emerging-economies-are-expected-to-drive-the-digital-payment-utilization-819069323.html

  4. https://bfsi.economictimes.indiatimes.com/news/fintech/google-pay-set-to-tap-into-12 mn-kirana-stores-in-india/70887071

  5. https://www.bloombergquint.com/business/the-dangers-of-aadhaar-based-payments-that-no-one-is-talking-about

  6. https://www.financialexpress.com/economy/debit-card-shines-in-era-of-upi-mastercard-tells-why-you-should-carry-card-to-shop-in-digital-india/1903060/

  7. https://data.gov.in/keywords/monthly-capita-expenditure

  8. When we went into the field for data collection, 11.6% of the URs who had adopted the technology had done so between October 2015 and January 2016, and the rest adopted between January and May 2016. Because the retailers did not all adopt at the same time, this could cause discrepancies in the results; however, the risk is low, given that only 11.6% had an imprecise adoption time. To mitigate these concerns, we tested our results on a subsample (202 retailers) who adopted in January or February 2016. We find directionally consistent results (see WA-Tables 20 and 21).

  9. https://www.pwc.com/gx/en/financial-services/publications/assets/pwc-emerging-markets-12-July.pdf

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Acknowledgments

Some parts of this work are conducted in Digital Innovation Lab, Indian Institute of Management Bangalore, as a part of its ongoing funded research projects. The data used in this paper has not been used in whole or in parts in any other published academic work. Digital Innovation Lab, Indian Institute of Management Bangalore retains the rights to use the data in the future. We thank the external agency that has helped us in data collection. The authors would like to thank the review team of the Journal of the Academy of Marketing Science, participants of 2020 AMA Winter Marketing Conference and Aditya Moses for their valuable feedback in an earlier version of the manuscript. Finally, we thank the retailers who participated in this study.

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Correspondence to Amalesh Sharma.

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Adhikary, A., Diatha, K.S., Borah, S.B. et al. How does the adoption of digital payment technologies influence unorganized retailers’ performance? An investigation in an emerging market. J. of the Acad. Mark. Sci. 49, 882–902 (2021). https://doi.org/10.1007/s11747-021-00778-y

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