Fintech Failure: Examining B2B and B2C Solutions for Two-Sided Platform Adoption

Abstract

Across emerging economies, physical cash is the ubiquitous means of transaction for retailers and their consumers. Despite the widespread availability, affordability and benefits of Fintech solutions for digital payments in these regions, there is an observed failure by the vast majority of retail firms to accept digital payments. Our paper examines this puzzle to uncover causes and solutions for such two-sided platform adoption failure in offline retail contexts. Using evidence from a random audit of a nationwide ‘Fintech-drop’ public program in Mexico, we propose that two critical frictions constrain the adoption (i.e., initial take-up and usage) of two-sided Fintech platforms: (i) on the supply-side, platform onboarding is highly complex; and (ii) on the demand-side, retailers do not perceive enough consumer demand to justify adoption. We design two novel interventions in the business-to-business (B2B) and business-to-consumer (B2C) channels targeting the respective frictions and test their efficacy through a randomized controlled field experiment with 479 retailers in Guadalajara, Mexico.

The B2B intervention increases successful Fintech solution adoption by 21.4 percentage points versus the control group, while the B2C intervention has an additional positive impact in increasing adoption rates by 13.4 percentage points versus the B2B group. The B2B intervention effect is driven by overcoming critical onboarding challenges to promote initial take-up of Fintech, while the B2C intervention effect is driven by growing local consumer demand to use digital payments when shopping. These results have implications for managers and policymakers promoting two-sided platform adoption and driving payment digitization in emerging economies.

Keywords: Fintech, two-sided platforms, retail, technology adoption, B2B channel, B2C channel marketing

JEL Classification: O12