Mobile Payment Adoption: An Empirical Investigation on Alipay

Abstract

The rapid growth in the adoption of mobile payments has already begun to reshape bank payment practices. Utilizing a unique data set from a leading bank in Asia, which records credit card transactions of its customers before and after the launch of Alipay mobile payment, the largest mobile payment platform in the world, this study aims to understand the impact of mobile payment adoption on bank customer credit card activities and the change of this impact after the mobile payment expansion. To do so, we employ the difference-in-differences (DID) method coupled with matching to estimate the effects. We find that mobile payment adoption not only increases customer credit card activities at the focal bank through both offline and online channels but also enhances customer loyalty to the bank by reducing churn. Specifically, the total credit card transaction amount and frequency of our focal bank increased by 9.4\% and 10.7\%, respectively. Moreover, we examine the change in the treatment effect after the mobile payment expansion and find an increase in adopters' credit card activities and a reduction in their churn after the expansion. Next, we discuss the underlying mechanisms and show that mobile payment acts as a substitute for physical-card payment in the offline channel, which supports the key underlying mechanism of the reduced transaction cost. However, a certain complementary effect exists between personal computer (PC) and mobile payments, likely driven by the co-adoption of the two.
Finally, we provide empirical evidence on conditions that facilitate the use of mobile payments, following the unified theory of acceptance and use of technology (UTAUT).

Keywords: mobile payment, adoption, expansion, offline, online, channel, credit card.