Mobile Payment Adoption: An Empirical Investigation of 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 that 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 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 off-line 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 off-line channel, and this supports the key underlying mechanism of the reduced transaction cost. However, a certain complementary effect exists between personal computer and mobile payments, likely driven by the coadoption 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. History: Yong Tan, Senior Editor; Tianshu Sun, Associate Editor. Funding: This work was supported by National Natural Science Foundation of China [Grants U1811462, 72071102]. Supplemental Material: The online appendix is available at https://doi.org/10.1287/isre.2021.0156 .

Mobile App Adoption and Its Differential Impact on Consumer Shopping Behavior

“…Son et al (2016) find that the least engaged users purchase relatively more discounted (vs. full-price) products after adopting a reward app, and customers who purchased more often engage less in "cherry-picking" behavior; in other words, they hunt less for discounted deals. Xu et al (2019) find a nonlinear relationship between the treatment effect of adopting a payment app and a customer's income level, proxied by one's credit limit. The empirical results show that median income customers' transaction increased the most after app adoption.…”

“…Research has shown that app adoption and continued app use increase reward points accrual in loyalty programs (Kim et al 2015), that the adoption of mobile shopping (through tablets and smartphones) increases order frequency (Wang et al 2015), and that the adoption of a reward app increases several performance measures including cash purchase frequency, cash expenditure, point redemption frequency, and point redemption amount (Son et al 2016). The adoption of mobile wallets also leads to an increase in a user's total credit card transaction amount and frequency (Xu et al 2019). Similar results have been found in business-to-business (B2B) apps: Gill et al (2017) study a dataset that involves a manufacturer's B2B mobile app whose aim is to promote buyer engagement.…”

“…The adoption of mobile wallets also leads to an increase in a user's total credit card transaction amount and frequency (Xu et al. 2019). Similar results have been found in business‐to‐business (B2B) apps: Gill et al.…”

“…Xu et al. (2019) find a nonlinear relationship between the treatment effect of adopting a payment app and a customer's income level, proxied by one's credit limit. The empirical results show that median income customers’ transaction increased the most after app adoption.…”

Сan citizen Internet banking in China become a champion in the digital transformation era?

“…This includes online shopping, paying at restaurants, purchasing public transportation tickets and paying government fees. Alipay has been widely accepted in China for its ease and convenience in mobile payments (Xu et al, 2023).…”