Mobile Payment Adoption: An Empirical Investigation on Alipay

Yuqian Xu, University of Illinois at Urbana-Champaign, Anindya Ghose, New York University, and Binqing Xiao, Nanjing University, 2019, 19-131

Mobile payment is changing consumers' purchasing behaviors, yet there is limited research on channel adoption and the interdependencies related to PC and offline (physical card) payment channels.

Yuqian Xu, Anindya Ghose, and Binqing Xiao investigate the determinants and outcomes of mobile channel adoption on consumer consumption behaviors, using a data set from one of the largest banks in China. In 2010, this focal bank was the first in China to collaborate with Alipay, the world’s largest mobile payment platform, to start a new service called “fast payment of credit card.”  

Using econometric methods, the authors estimated the changes in consumption from the PC channel and physical credit card channel before and after the Alipay mobile payment adoption. Overall, they find that mobile channel adoption is associated with increased credit card transaction activity and profitability.

Among their findings:

  • Both higher service demand and higher local penetration are associated with earlier mobile channel adoption.
  • Total transaction amount increases by around 2.4% after the Alipay adoption, and total transaction frequency increases by around 23.5%. The relationship is even stronger for medium income consumers.
  • The Alipay channel acts as a substitute for the offline channel and as a complement for the PC payment channel, and both effects increase over time.
  • Finally, the increased credit card transaction activity and profitability are likely to be driven by hedonic shopping behavior with low value items. In particular, mobile channel adoption has the largest effect on the groceries category, followed by entertainment, travel, and service categories.

This work -- among the first to explore the determinants and outcomes of mobile payment adoption on other payment channels -- has important implications for bank and retail managers as they respond to changes in consumer payment consumption behavior.

Yuqian Xu is Assistant Professor of Business Administration, Gies College of Business, University of Illinois at Urbana-Champaign. Anindya Ghose is Heinz Riehl Chair Professor of Business  Stern Business School, New York University. Binqing Xiao is Professor, Industrial Engineering Department, Nanjing University.


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