International Journal of Business and Economy

eISSN: 2682-8359 | Vol. 4, No. 3, 170-182, 2022

http://myjms.mohe.gov.my/index.php/ijbec

International Journal of Business and Economy (IJBEC)

eISSN: 2682-8359 | Vol. 4 No. 3 [September 2022]
Journal website: http://myjms.mohe.gov.my/index.php/ijbec

THE IMPORTANCE OF DIGITAL FINANCIAL LITERACY

TO ANTICIPAYE IMPULSIVE BUYING BEHAVIOR IN
BUY-NOW-PAY-LATER MODE

Rahmatika Tri Wulandari1* and Sylviana Maya Damayanti2

12
School of Business and Management, Institute of Technology Bandung, Bandung, INDONESIA

*Corresponding author: rahmatika_tri@sbm-itb.ac.id

Abstract: The growth of financial technology (fintech)

Article Information: in Indonesia is increasing in line with technological
Article history: advances in this digital era, even expanding the form of
financial services to adopting the Buy Now Payment
Received date : 4 August 2022 Later (BNPL) method which is currently the third
Revised date : 25 August 2022 favourite payment service. The convenience offered by
Accepted date : 1 September 2022
Published date : 10 September 2022 this BNPL payment method attracts the attention of
many online platform users, but behind the benefits
To cite this document: received, impulsive buying behavior may appear
followed by low levels of financial literacy and digital
Wulandari, R. T., & Damayanti, S. M.
(2022). THE IMPORTANCE OF
financial literacy which actually leads to a slump in
DIGITAL FINANCIAL LITERACY paying off unnoticed interest. The purpose of this
TO ANTICIPAYE IMPULSIVE research is to identify whether digital financial literacy
BUYING BEHAVIOR IN and its closely related financial literacy and the factors
BUY-NOW-PAY-LATER MODE. that underlie the use of paylater effectively influence
International Journal of Business and
Economy, 4(3), 170-182.
impulsive buying behavior using the buy now pay later
payment method in the younger generation whose
financial literacy is lower than adults. This research
uses a quantitative approach to collect data through a
survey of 385 respondents who have used paylater
throughout Indonesia. Data analysis technique using
multiple linear regression to analyze the relationship
between variables. The results show that financial
literacy and behavior, digital financial literacy, and
factors that underlie the use of paylater have a positive
influence on impulsive buying behavior using the buy
now pay later payment method by 28.90%.

Keywords: Financial Literacy, Digital Financial

Literacy, Impulsive Buying Behavior, Buy Now Pay
Later Payment Method.

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1. Introduction
Technological advances in this digital era have brought forth the latest technology-based
innovations, one of which is in the realm of financial services which is marked by the presence
of financial technology (fintech). Fintech is a combination of information technology and
financial services that can make transactions done quickly without worrying about distance
(Bank Indonesia, 2020). The growth of fintech in Indonesia, which has increased during this
pandemic by 91% according to Bedjo Santoso at the Digital Talkshow and book review of the
Fintech Ecosystem in Indonesia, goes hand in hand with increasing internet penetration in 2021
which is also increasing by 15,5% from the previous year, from 175.4 million to 202.6 million
users (Wearesocial & Hootsuite, 2021).

The initial entry of fintech in Indonesia was in the field of digital payments and peer to peer
(P2P) lending. Currently, fintech is expanding the forms of services provided to electronic
money, crowdfunding, and investment. Also, fintech adopts the Buy Now Payment Later
method (BNPL) and cooperates with several digital platforms that are widely used by
Indonesian people in online transactions, such as Traveloka, Shopee, Gojek, etc. BNPL's
unique payment method attracts the attention of many online platform users because of the loan
approval and easy process compared to using credit or other payments and is in demand with
various tempting promos.

Reinforced by an independent research institute, the Research Institute of Socio-Economic

Development (RISED) in February 2021, that out of 2,000 respondents, 77.2% agreed that
access to paylaters is easier than access to credit cards, 60.5% even agree that the ease of
applying for credit is the main advantage. Meanwhile, another advantage that is felt by 37.15%
of respondents is related to a small minimum transaction. Another advantage that is felt and
agreed upon by the respondents is that there is no admin fee if it is not used (31.65%) and can
stop at any time (30.45%). The number of users of each paylater application is 52% use
shopeepaylater, while 31.28% use gopay paylater, and the rest use paylater in other applications
(RISED, 2020).

With the ease of buying a product with financial support and easy application requirements for
the paylater feature, it is possible to create consumptive behavior. Consumptive behavior is an
individual's behavior by buying a product in excess without any basic needs but only based on
pleasure and desire (Lina & Rosyid, 1997). In addition, the digital finance industry in Indonesia
is still overshadowed by the low level of financial literacy and inclusion, especially among
people who do not have a bank account. Seeing these benefits, many people take advantage of
it, but some are unable to pay it off because of the high interest rate. In fact, Indonesia's digital
financial literacy rate has only reached 35.5% according to Teten Masduki, Minister of
Cooperatives and SMEs (MenkopUKM) in 2020. OJK conducted a national survey in 2019,
the result is the level of financial literacy of the young generation is lower than the adult
generation.

The author wants to conduct research to find out the relevance of the importance of having
good digital financial literacy, especially for the youth in anticipating BNPL mode. This
research uses financial literacy, digital financial literacy, and paylater usage factors as
independent variables that are expected to be improved so that it can influence the use of digital
financial innovations, especially buy now pay later more wisely to avoid various existing
digital financial problems and the negative impact by using the buy now pay later method.

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Based on the description above, the author takes the title "The Importance of Digital Financial
Literacy to Anticipate Impulsive Buying Behavior in Buy-Now-Pay-Later Mode".

2. Literature Review
2.1 Financial Literacy and Behavior
The definition of financial literacy is interpreted very diversely by various studies and
institutions, there is no universal standard regarding the definition of financial literacy.
According to Vitt et al. (2000), financial literacy is defined as the ability to read, analyze,
manage, and communicate about personal financial conditions that affect material well-being
to take action resulting from processes to thrive in a complex financial world. This includes the
ability to discern financial choices, discuss money and financial matters without (or despite)
inconvenience, plan for the future, and respond competently to life events that affect financial
decisions on a daily basis, including events in the economy in general (Vitt et al., 2000).

Financial literacy affects individual financial behavior and plays an important role in the
formation of wealth equity, where having good financial knowledge helps individuals make
wise decisions and can manage finances better, on the other hand, people who are less literate
rarely make efficient choices that lead to better outcomes, have a lot of debt, save little, and are
prone to fraud (Andarsari & Ningtyas, 2019). Research conducted by Chen and Volpe (1998)
shows that one's financial knowledge can influence one's opinions and decisions. Low levels
of financial literacy can affect people in managing finances and ineffectiveness in managing
money can make countries more vulnerable to severe financial crises (Braunstein & Welch,
2002). Thus, having financial literacy is very important so that financial problems that arise
due to low financial literacy can be minimized.

2.2 Digital Financial Literacy

Digital financial literacy is a limited payment or financial system service activity that is carried
out not through a physical office, but by using technological means, including mobile-based
and web-based and activity-party services (agents), with the target of serving the unbanked and
underbanked communities (Bank Indonesia). Digital financial literacy is a development of
financial literacy that is adapted to developments in the financial industry towards
digitalization, which is felt necessary for today's conditions (Sapulette et al., 2022).

Digital financial literacy directly connects or provides knowledge about online purchases,
online payments through various means, and online banking systems (Prasad and Meghwal,
2017). Financial literacy is a problem in the digital age. People need to have a high level of
financial sophistication to use financial technology (fintech) products and services effectively,
and avoid fraud and major losses. Digital financial literacy is important because it will affect
the way people save and spend their money (OECD, 2018). From the OECD (2018), it was
found that digital financial literacy can influence financial behavior because digital financial
services can improve several aspects such as convenience and length of time for transactions,
provider variants, service variants, and other useful transactions between financial providers
and consumers.

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2.3 Financial Technology

Financial technology (fintech) is a financial intermediary institution whose function is to act as
an intermediary for financial transaction actors who do not want to cooperate with banks
because they feel burdened (Kotarba, 2016). Economic transactions carried out through fintech
then create several marketing methods while creating new payment schemes that are more
practical and modern, with the aim of providing convenience and attracting consumers. The
services provided include payment channel systems, digital banking, online digital insurance,
Peer to Peer (P2P) lending, as well as crowdfunding services (Chrismastianto, 2017).

2.4 Buy Now Pay Later Payment Method

Payment acceleration is also impacted by technological developments, as evidenced by the
continuous improvement in payment systems around the world. Based on Law no. 23 of 1999
Article 1 (6) concerning Bank Indonesia, currently known payment instruments other than cash
payments are paper-based payments (Cek/BilyetGiro), card-based (Credit Cards and Debit
Cards) and digital-based. Currently, people in Indonesia are starting to be introduced to the
digital payment system. According to Tarantang et. al (2019), digital payments are payments
using technology. The money is stored and then processed and received in the form of
information in digital payments, the money transfer process is carried out using electronic
payment tools (Tarantang et. al, 2019).

In the middle of 2018, the fintech company introduced a payment technology with the concept
of installments without a credit card, called Paylater. Paylater is an alternative payment method
that adopts an online installment system without the need for a credit card and in the form of a
credit limit. Currently, paylaters are widely adopted by e-commerce in Indonesia, ranging from
entertainment companies, ticket and hotel reservations, market places, to online transportation
service providers (Eka, 2020). Several paylaters that have been integrated in Indonesia are
GoPayLater, ShopeePayLater, OVO PayLater, Traveloka Paylater, as well as those offered by
Akulaku, Kredivo.

2.5 Paylater Usage Facto

2.5.1 Perception of Ease of Use
Perception of ease of use is the act of an individual who believes that the use of a particular
technology can reduce his efforts to do something (Davis, 1989). In this research, this
dimension refers to the extent to which users feel that paylater technology is easy to use and
simple.

2.5.2 Benefits Perception

Perception of benefits is the level of belief of an individual that using the technology will
increase his job performance (Davis, 1989). An individual will use a technology if he already
knows the benefits that may be felt when using the technology (Thompson, 1991). In the
research conducted, this perceived usefulness refers to the extent to which paylater users
believe that the use of this technology has benefits in online transactions.

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2.5.3 Attitude Toward Actual Usage Intensity

According to Davis (1989), the intensity of the use of a technology is the desire of an individual
to continue to use the technology. An individual's attitude and attention to a technology can
reflect the level of technology use of the individual such as the desire to add additional devices
to the technology, the desire to invite others to use the technology, etc. (Hanggono et al., 2015).
When a technology is easy to use, has benefits in its use, users will continue to use the
technology based on the benefits they feel, this can then lead to user satisfaction (Tangke,
2004). Technology's usability and convenience of use contribute to shopping pleasure, which
enables to explain the factors that lead to impulsive purchases (Fataron, 2020).

2.6 Impulsive Buying Behavior

Impulse buying is a consumer's tendency to buy a product spontaneously and immediately
(Rook and Fisher, 1995). Meanwhile, according to Baumeister (2002) impulsive buying is a
sudden urge to buy a product, this purchase is not planned or there is no initial intention to buy,
where consumers will buy products on the basis of encouragement without considering the
long-term consequences of the purchase. Impulsive buying behavior occurs suddenly and the
individual cannot resist the desire to buy an item even though the item is not a need or purpose.
In essence, impulse buying is a behavior when an individual feels a spontaneous urge to buy a
product without prior planning, this behavior can be caused by two factors that come from the
individual himself and from the market (Harmon and Novia, 2016).

2.7 Problem Statement

From the previous explanation, in addition to the convenience offered by the new payment
method feature, which is already in great demand or often called a paylater, it can also cause
other adverse effects. This research is used to anticipate impulse buying behavior in the buy
now paylater method which can encourage problems related to digital financial literacy levels
by investigating the relationship between digital financial literacy and impulsive buying
behavior on the buy now pay later payment method. Based on the previous study, digital
financial literacy had a positive effect on spending behavior, saving behavior, and investment
behavior (Rahayu et al, 2022). Digital financial literacy is a development of financial literacy
that is adapted to digitalization; therefore, it is necessary to find out the relationship between
financial literacy and impulsive buying behavior in buy now pay later payment method. Based
on Anifah (2020), financial literacy has a positive and significant effect on consumptive
behavior. This is also supported by previous research of Fauzia and Nurdin in 2019. However,
there is a contradictory study that financial literacy affects consumptive buying with a negative
relationship (Nurita et al, 2017). With the ease of using paylater technology has an influence
on the impulsive buying behavior of e-commerce users in Indonesia (Sari, 2021). Therefore,
based on the explanation, this study proposed the following hypotheses:

H1: Financial literacy has a negative relationship and significant influences on impulsive
buying behavior
H2: Digital financial literacy has a positive relationship and significant influences on impulsive
buying behavior
H3: Paylater usage factor has a positive relationship and significant influences on impulsive
buying behavior

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Financial Literacy
H1
H2
Digital Financial Literacy Impulsive Buying Behavior

Paylater Usage Factor H3

Figure 1: Conceptual Framework

3. Method
3.1 Data Collection Method
This research applied Quantitative approach and collected two types of data, which are primary
and secondary data which refers to information obtained from the previous study by researchers
relating to the variable of interest for the specific purpose of the research. To obtain primary
data, this research used questionnaire that was designed accordingly to answer the research
question and fulfill the research objectives. The population and sample used in this study were
conducted with a judgment sampling approach in which sampling was based on characteristics
set against the target population elements that were adjusted to the objectives or research
problem. The criteria for the respondents used are youth aged 15-24 years who have used
paylater in Indonesia.

3.2 Data Analysis Method

This method used two or more explanatory variables to predict the outcome of a response
variable with the goal of explaining the relationship between multiple independent variables
against one dependent variable. The independent variables in this research are financial
literacy, digital financial literacy, and paylater usage factors and the dependent variable is
impulsive buying behavior on using paylater payment method.

A total of 385 respondents were collected through questionnaire. The data collected were
analyzed statistically using MLR method by using SPSS. The validity and reliability of the
questionnaire data were tested using SPSS. After the questionnaire is proven valid & reliable,
the classical assumption test was conducted. Afterwards, the multiple linear regression analysis
was conducted to test the hypothesis.

4. Results and Discussion

4.1 Characteristics of Respondents
This research was conducted to 385 respondents that are identified as paylater users in
Indonesia. The demographic characteristics of the respondents obtained were 25.2% aged 15-
18 years old (young youth) and 74.8% aged 19-24 years old (old youth), then 72.7% were
female and 27.3% were male, and occupational status was dominated by students or college
students, but few of those respondents had side jobs, such as freelancer, entrepreneur, and
employee. The respondents domicile status mostly in Java island, especially in East Java
(17.40%), followed by West Java (13.77%), DKI Jakarta (13.51%), DI Yogyakarta (7.27%)
and Banten (7.27%), and Central Java (3.64%). The second rank domiciled in Kalimantan
island (15.32%), then followed by Nusa Tenggara and Bali island (13.51%). Meanwhile,

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respondents from Sulawesi island and Maluku and Papua island were still very few compared
to others, showing that there are still very few paylater users in that area.

Out of 385 respondents who have experience using paylater financial services, some of them
only used one application, such as ShopeePayLater, GoPayLater, OVO PayLater, Link Aja,
Akulaku PayLater or Akucicil, Lazada PayLater, Traveloka PayLater, but there were also
respondents using more than one application paylater. There were other paylater service
providers that are used, such as Dana Paylater, Kredivo PayLater, Bukalapak BayarNanti, and
Tiketcom Paylater. The most paylater users are ShopeePayLater (82.86%), GoPayLater
(20.26%), OVO Paylater (9.35%), Akucicil (4.16%), and the rest use other paylater
applications.

4.2 Data Analysis

In this research, data were analyzed by utilizing MLR SPSS with three steps. The first one is
the validity and reliability test to ensure that the instruments used in this study were valid and
reliable. The second step is classical assumption test and the last step is the multiple linear
regression. There were four classical assumption tests conducted in this research, which are
normality test, multicollinearity test, heteroscedasticity test, and auto correlation test.

Indicators in this research were analyzed using df (degree of freedom) with the formula df = n-
2, where n = number of samples. So, the df used is 385-2 = 383 with an alpha of 5%, then the
result of the r table value is 0.100. If r count is greater than r table and r is positive, then the
questions are said to be valid. The value of the reliability test can be accepted if the value is
greater than 0.6 and if the value above 0.8 it can be said to be good (Sekaran and Bougie, 2013).
Based on the conducted test, all the r count is greater than r table and the value is positive. Also,
the all value of Cronbach’s Alpha is greater than 0.6. Therefore, all variables are valid and
reliable.

4.3 Classical Assumption Test

4.3.1 Normality Test
To determine the normality, this research is using a non-parametric test which is a 1-sample K-
S. The data is normally distributed if the result of test statistic > 0.05. Based on Table 1, the
Asymp. Sig is 0.149 and exceeds 0.05, so it can be concluded that the data is normally
distributed.

Table 1: Normality Test

Unstandardized Residual
Sig. (2-tailed) 0.149

4.3.2 Multicollinearity Test

This test is conducted to find out if there is a high correlation between two or more independent
variables in a multiple regression model (Adeboye et al., 2014). In this research, checking the
multicollinearity detected by looking at the tolerance value and variance inflation factor (VIF).
The tolerance must be greater than 0.1 and the VIF values must be less than 10. From Table 2,
it shows that the tolerance values of all independent variables are above 0.1 and the VIF of all
independent variables are below 10, meaning that there is no collinearity between the
independent variables.
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Table 2: Results of Multicollinearity Test

Collinearity Statistics
Model
Tolerance VIF
Financial Literacy 0.738 1.355
Digital Financial Literacy 0.635 1.576
Paylater Usage Factor 0.785 1.274

4.3.3 Heteroscedasticity Test

Heteroscedasticity test is conducted to check if there is an inequality of variance from residual
from all observed regression models. In this research, Rank Spearman method is carried out by
regressing the independent variable to the absolute value of the residual (Gujarat, 2012). This
method is divided into 3 interpreting ways: seeing the significance relationship, seeing the
relationship strength, and seeing the relationship direction. If sig. (2-tailed) < 0.05, it indicates
that the relationship is significant, if correlation coefficient value is positive then the
relationship is in the same direction, and here are the basis references of the relationship
strength:

0.00-0.25: weak relationship

0.26-0.50: moderate relationship
0.51-0.75: strong relationship
0.76-0.99: very strong relationship
1.00: perfect relationship

Table 3: Results of Heteroscedasticity Test

Independent Variables Correlation Coefficient
Financial Literacy 0.279
Digital Financial Literacy 0.349
Paylater Usage Factor 0.4881

Based on the conducted test, all of the sig. (2-tailed) is 0.00 < 0.05, so it can be concluded that
there is a significant relationship between Financial Literacy variable and Impulsive Buying
Behavior, Digital Financial Literacy and Impulsive Buying Behavior, and Factors Usage of
Paylater and Impulsive Buying Behavior. Based on the correlation coefficients, all show the
positive value which means that the relationship is in the same direction. Also, categorized as
moderate relationship because all are in the range of 0.26-0.50.

4.3.4 Autocorrelation Test

Autocorrelation test aims to find out if there is a correlation between variables in the same
prediction model with time series. To prove there is no auto correlation detected between the
variables, the Durbin Watson value must be dU ≤ DW ≤ 4-dU. dU and dL values for 385
samples were not found, but dU values for 380 and 390 were 1,821 and 1,824, while dL values
for 380 and 390 were 1,842 and 1,844. Based on the finding, the Durbin Watson score is 1.988,
so it fulfills the criteria that is higher than dU and lower than 4-dU. It means that there is no
auto correlation.

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4.4 Multiple Linear Regression

The findings of the analysis of multiple linear regression are displayed in Table 4.
Table 4: Results of Multiple Linear Regression
Model Estimate t Sig.
(Constant) 7.779 3.051 0.002
Financial Literacy 0.236 3.306 0.001
Digital Financial Literacy 0.119 2.183 0.030
Paylater Usage Factor 0.324 8.078 0.046

From the regression model obtained, it can be interpreted as follows:

The constant of 7.779 states that if the variables of financial literacy, digital financial literacy,
and paylater usage factor are considered constant. The regression coefficient X1 of 0.236 states
that each addition of one unit of financial literacy value will increase the value of financial
behavior by 0.236 with the assumption that other variables are considered constant. The
regression coefficient X2 of 0.119 states that each addition of one unit of digital financial
literacy value will increase the value of financial behavior by 0.119 with the assumption that
other variables are considered constant. The regression coefficient X3 of 0.324 states that for
every one category increase in the paylater usage factor, the value of financial behavior will
increase by 0.324 with the assumption that other variables are considered constant.

4.5 Partial Hypothesis Test (T-Test)

The t-test is conducted by looking at the significant value and the t-value. The significant value
has to be lower than alpha or 0.05 and the t-value has to be greater than the t-table value for a
hypothesis to be accepted. The t-table value in this research is 1.9684. The output from partial
hypothesis is displayed in Table 5.
Table 5: Results of Partial Hypothesis Test
Hypothesis Sig. Result
Financial literacy has a positive and significant effect on impulsive
0.001 Accepted
buying behavior using paylater payment method
Digital financial literacy has a positive and significant effect on
0.030 Accepted
impulsive buying behavior using paylater payment method
Income has a positive and significant effect on financial behavior 0.046 Accepted

4.6 Simultaneous Hypothesis Test (F-Test)

The F-test is done by looking at the significant value and the t-value. The significant value has
to be lower than alpha or 0.05 and the F-value has to be greater than the F-table value for a
hypothesis to be accepted. The research's F-table value is 2.6366.

Table 6: F-Test Result

Predictors Sig. Result
Financial literacy, digital financial literacy, paylater usage factor 0.000 Accepted

The Sig. value (P-value) in Table 6 is 0.000 which is less than alpha (α=5%). The sig. value
explains that financial literacy, digital financial literacy, and paylater usage factor
simultaneously have a significant effect on financial behavior.

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4.7 R-Square Analysis

Table 7: R-Square

Table 7 shows that the R-value, which measures the correlation between independent and
dependent variables, is 0.543 or 54.30%. The R-square value in this model is 0.295 or 29.50%,
which means that the model formed or the existing independent variables can explain 29.50%
of the variation of the dependent variable. The adjusted R-square value is 0.289 or 28.90%
which indicates that financial literacy and demographic variables have an effect of 28.90% on
financial behavior. The remaining 71.10% cannot be explained by the existing independent
variables or explained by other variables outside the model.

5. Conclusion
This research conducted to identify the effect between the importance of financial literacy,
digital financial literacy, and paylater usage factor toward the impulsive buying behavior of
using the buy now pay later method in youth. Based on the analysis results using Multiple
Linear Regression (MLR) of 385 qualified respondents, the regression formula data obtained
Y = 7.7779 + 0.236 (Financial Literacy) + 0.119 (Digital Financial Literacy) + 0.324 (Factors
Usage of Paylater). It can be seen from this formula that conducted by using the f test, the
constant value is positive, which means that it shows the positive influence of the independent
variables simultaneously. The formula also shows the positive coefficient, meaning that there
is a positive relationship between all independent variables and the dependent variable.

From the results of hypothesis testing, not all the proposed hypotheses can be accepted because
the positive coefficient of financial literacy result that was developed is negatively related.
Based on the R adjusted square value is 0.289, meaning that financial literacy, digital financial
literacy, and paylater usage factors contribute together to impulsive buying behavior on
paylater payment method by 28.90%, while the remaining 71.10% is influenced by other
factors not examined by this research.

In accordance with the results of this research which proves that financial literacy, digital
financial literacy, and paylater usage factor have a significant positive effect on impulsive
buying behavior, there are some recommendations for some parties that can be given to
anticipate impulsive buying behavior using paylater payment method. For individuals, to be
more pay attention to income and expenses by recording income and expenses to avoid over
budgeting in minimizing impulsive buying behaviour. For financial technology can provide
warnings and also educate users regarding the use of services that are easy and offered so that
consumers can always weigh the behavior that will be taken in the future. The government can
also synergize with financial technology to be able to provide financial education and train
more thorough behavior that can be given to all people who can come from elementary, middle,
high school, college education and also workers. Also, the government can determine elements
of legality that can refer to actions that mislead the public

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