Digital Payment Adoption and Monetary Transmission in Local Consumer Markets

Abstract

This integrative review examines the following Indonesia-focused question: How does wider use of digital payments alter the channels through which monetary policy reaches household spending and local merchant activity? The analysis treats digital payments as a conditional economic mechanism rather than a stand-alone headline indicator and evaluates how it interacts with monetary transmission. For digital payments, peer-reviewed research is read together with current official statistical and policy material, with Indonesia-specific evidence given priority and international studies used to clarify mechanisms. Across the reviewed material, the effect of digital payments varies with exposure, timing, market structure, institutional arrangements, and the capacity of decision makers to adjust. The article therefore develops a mechanism-based interpretation that distinguishes first-round transmission, behavioral response, and boundary conditions for monetary transmission. No primary survey, interview, firm observation, or regression estimate is manufactured for this digital payments conceptual review; empirical claims remain attributed to their original sources. The resulting digital payments framework supports differentiated measurement and identifies an Indonesia-specific research agenda for testing the proposed channels with more granular data.