Diffusion of innovation and financial technology adoption among small and medium enterprises in South Africa

Orientation: The adoption of financial technology (FinTech) among small and medium-sized enterprises (SMEs) has garnered significant attention because of its potential to improve business performance. However, adoption rates remain slow, particularly in emerging markets. Research purpose: This study aimed to investigate the determinants of FinTech adoption by SMEs in South Africa using the diffusion of innovation theory as the theoretical framework. Motivation for the study: Despite the growing availability of FinTech solutions, limited empirical evidence exists on the factors influencing their adoption by SMEs in emerging economies such as South Africa. Understanding these determinants is essential to inform policy, guide FinTech providers and support SMEs in leveraging digital financial innovations to enhance competitiveness and sustainability. Research design, approach and method: A quantitative research approach was employed, and structural equation modelling was used to analyse the relationships between relative advantage, trialability, observability, compatibility, complexity and financial technology (FinTech) adoption. Main findings: The findings revealed that trialability, compatibility and complexity significantly and positively influence adoption of FinTech. Relative advantage demonstrated a statistically significant but negative relationship with adoption of FinTech, while the relationship between observability and adoption of FinTech was statistically insignificant. Practical/managerial implications: Practical implications include the need for FinTech providers to offer pilot programmes and design tailored solutions for SMEs. Contribution/value-add: Ultimately, this study’s findings contribute to the diffusion of innovation theory by highlighting the nuanced role of adoption factors in an emerging market context.