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| Can Mobile Payments Boost Small and Micro Business Operations？——Evidence from Self-employed Business Operations in China |
| GUO Rundong, YIN Zhichao
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School of Finance, Shanxi University of Finance and Economics;
School of Finance, Capital University of Economics and Business |
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Abstract As of June 2024, there were 125 million registered individual business households in China, accounting for 66.90% of the total number of business entities. The large-scale individual business households have played an irreplaceable role in economic prosperity, promoting entrepreneurship and innovation, and facilitating the lives of the masses, and their business development is related to the healthy development of the country's economy and society. However, self-employed businessmen have long faced problems such as low initial capital, difficulties in financing and lack of experience in development. Mobile payment based on the development of digital technology can make up for the shortcomings of traditional corporate financial services by improving consumption scenarios, increasing financial accessibility, and mining payment data, reconfiguring the links of corporate production, distribution, and consumption, and bringing new opportunities to the intelligent and digital transformation and high-quality development of small and micro enterprises (SMEs). In this context, an in-depth investigation of the net effect of mobile payment on the business performance of individual entrepreneurs and the potential channel is an important issue worthy of in-depth study.
This paper empirically investigates the impact of mobile payment on the business performance of self-employed business households using a two-way fixed effects model with data from three issues of the China Household Finance Survey in 2017, 2019, and 2021. To mitigate estimation bias due to reverse causation and omitted variable problems. First, this paper assesses the severity of estimation bias due to omitted variables using the Oster two-parameter method. Second, this paper uses the average mobile payment utilization rate of other individual business owners within a cohort with roughly the same characteristics as an instrumental variable for mobile payments for estimation purposes and tests the validity of the instrumental variable estimation after relaxing the instrumental variable exclusivity constraints. Third, this paper mitigates the potential sample self-selection problem using propensity score matching estimation.
This paper finds that mobile payment can improve the business performance of individual business households by 15.04%, and it has a greater impact on the business performance of individual business households with lower innovation ability, during the growth period and in the central and western regions. The mechanism test reveals that mobile payment can reduce transaction costs and increase credit availability, thus improving the business performance of individual business households. Further analysis shows that there is a synergistic effect between mobile payment and the National E-commerce Demonstration City program in improving the business performance of self-employed businesses.
Based on the findings of this paper, the following implications are proposed. First, strengthen the analysis and utilization of payment data. Second, promote the development of the deep integration of mobile payment and e-commerce. Third, strengthen the regulation of mobile payment and improve the digital regulatory system, so as to make every effort to protect the healthy and long-term development of small and micro enterprises (SMEs).
Compared with existing literature, the contribution of this paper is reflected in the following three aspects. First, the research object of this paper focuses on individual business households, examines the impact of mobile payment based on digital technology applications on the business performance of individual business households, and tests whether the use of mobile payment can play an inclusive effect from the three dimensions of innovation capacity, life cycle, and regional differences, which enriches and extends existing research. Second, unlike most existing studies that use the macro-level digital financial development index to examine the impact of digital technology applications on firms, this paper defines digital technology applications at the micro-level and provides insights into the possible mechanisms of mobile payments in affecting the business performance of individual entrepreneurs from the perspectives of transaction costs and credit availability. Thirdly, this paper examines the role of mobile payment in improving the business performance of individual business households from the perspective of e-commerce development, providing direct evidence for the in-depth promotion of e-commerce and mobile payment.
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Received: 30 June 2023
Published: 02 January 2025
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