The Cardless and Cashless Future: The Rise of Mobile Payment
37 Pages Posted: 19 Mar 2020 Last revised: 31 Dec 2022
Date Written: February 23, 2020
Abstract
This study aims to investigate, with real-world transaction data, how con- sumers migrate from existing payment channels and adopt Mobile Payment under a multichannel payment system. Mobile Payment, fast becoming a competi- tive alternative to existing payment channels, raises opportunities and challenges for public policies and corporate decisions. Although prior survey-based studies have examined the technology and consumer adoption of Mobile Payment, less is known about consumers’ migration behavior across payment channels and consumers’ adoption behavior under different consumption patterns and con- sumer characteristics with real-world transaction data. The core of our research is 269.3 million records of an entire city’s five-year transactions in public transportation across five different payment channels. We first use a Difference-in-Differences design to explore the impact of Mobile Payment on incumbent payment channels. However, the results from our DID analysis cannot distinguish the unique impact of Mobile Payment from that of the benchmark, Bank Card. To estimate the unique impact of Mobile Payment, we utilize aggregate demand estimation mod- els and explore how the distinct impacts of Mobile Payment vary with consumption purposes and consumer characteristics. Our results indicate that the introduction of Mobile Payment draws consumers away from incumbent channels and that promotion magnifies this migration flow. Moreover, compared to Bank Card, consumers are more responsive to Mobile Payment promotion and are less likely to leave after the promotion ends. Hence with each round of promotion, Mobile Payment can steadily increase its market share by attracting customers from incumbent channels. Tracing the transactions with unique consumer IDs, we find that Mobile Payment is more attrac- tive to essential consumption users and new adopters. Our research offers merchants and regulators insights on consumer response to Mobile Payment. We offer practical suggestions regarding managing payment channel portfolios and designing the optimal promotion degree for Mobile Payment.
Keywords: Mobile Payment, Payment Channel, Channel Adoption and Migration, Transaction Record
Suggested Citation: Suggested Citation