Digital Payment Transformation: Customer Satisfaction and Loyalty in Retail Businesses in Mataram

Abstract

Objective: This study examines how digital payment transformation influences customer satisfaction and customer loyalty among retail consumers in Mataram City. Grounded in Diffusion of Innovation (DOI) Theory, digital payment transformation is operationalized through three innovation attributes: relative advantage, compatibility, and complexity (operationalized through ease-of-use indicators). The study also explores practical challenges encountered by retail businesses in implementing digital payment systems. Research Design & Methods: The study employed a sequential explanatory mixed-methods design. The study collected quantitative data from 172 retail consumers and analyzed them using Partial Least Squares Structural Equation Modeling (PLS-SEM). Qualitative data were obtained through semi-structured interviews with two purposively selected informants representing the retail business and payment-system perspectives and analyzed thematically. Findings: All six hypothesized relationships were positive and statistically significant. Compatibility and complexity showed stronger effects on customer satisfaction and loyalty than relative advantage, while relative advantage remained a significant predictor of both outcomes. The qualitative findings indicate that digital payments improve transaction efficiency, convenience, and business competitiveness. In contrast, unstable internet connectivity, power interruptions, application errors, limited technical support, and transaction fees remain important implementation challenges. Implications & Recommendations: Policymakers, financial institutions, payment providers, and retailers should strengthen digital payment infrastructure and reliability, improve technical support and digital literacy, and develop transparent, affordable transaction-fee policies. Contribution & Value Added: This study extends the application of DOI Theory by linking innovation attributes to post-adoption outcomes—customer satisfaction and customer loyalty—while integrating consumer-level quantitative evidence with business-level qualitative insights in the retail context of Mataram City.