DOES MOBILE PAYMENT MATTER?

DOES MOBILE PAYMENT MATTER? Yurong Yao, Department of Information Systems and Operations Management, Suffolk University, Boston, MA, USA, yyao@suffolk.edu Peng Xu, Department of Management Science and Information Systems, University of Massachusetts Boston, Boston, MA, USA, Peng.Xu@umb.edu Abstract Mobile payment has grown significantly worldwide in recent years. It is considered one of the future trends in consumer market. Adoption of mobile payment by their intended users has drawn attentions from both academic and industry. It is important to ask why users will use or not use a mobile payment method. In this study, we compare three mobile payment methods, NFC-based mobile payment, website-based mobile payment, and mobile app-based payment, and study their adoption in China. We plan to use the mean-end chain approach to collect qualitative data. The objective of this research is to explore how various factors interact with situational factors to affect users decision of a mobile payment method usage. Keywords: Mobile payment, NFC-based mobile payment, Website-based mobile payment, Mobile appbased payment, Technology adoption.

1 INTRODUCTION With the development of mobile network and smartphones, mobile based transactions have accelerated in the recent years. In 2014, mobile commerce revenue reached about $230 billion globally (McDermott 2014). There are about 7 billion mobile subscriptions worldwide, among which more than a half are in Asia. Meanwhile, mobile commerce revenue is also forecasted to top $500 billion in 2017. As a major mechanism to enable the mobile commerce, mobile-based payment has drawn a great attention from both consumers and providers worldwide. Various mobile payment methods are available, such as NFC-based mobile payment, website-based mobile payment, and mobile app-based payment. Mobile payment is forecasted to be accepted by more people at faster speed. Particularly, Asian countries are taking the leading role in advancing mobile payment methods. With about 130 million mobile payment users, the revenue of mobile payment transaction in Asia is about 37% of the global market (McDermott 2014). North America only has 18.7% of market share, although its phone penetration rate is over 90% (McDermott 2014). Many smartphone vendors, software vendors and service providers, such as Apple, Google and Samsung have provided various channels for mobile payment in North America, but majority of users have not adopt these payment methods yet. How to increaese the adoption of mobile payment is a strategic challenge for the mobile payment business. The proliferation of smartphone technology makes it attractive to deploy this platform in order to increase mobile commerce and other mobile activities. It is important to ask the question why people use or not use mobile payments (Mallat 2007). What can we do to convert the non-users or potential users into real users? Especially, companies may not want to offer all the possible payment methods at the same time. Which payment method is the widely preferred and relatively more effective one is also the strategic decision to many business. Efforts have been made to explore these questions using Technology Adoption Theory (TAM) and its extended models (Kim et al. 2010; Shaw 2014; Shin 2009). However, they may not catch the complicated contextual factors that are important to explain users behavior and attitude toward mobile payment. Further, these studies only focus on mobile payment adoption in general, but not on the decision to choose one mobile payment over the other. In this study we will employ a qualitative approach to explore how various factors interact with situational factors to affect users decision on using a certain mobile payment method. We will compare three mobile payment methods, NFC-based mobile payment, website-based mobile payment, and mobile app-based payment, and investigate the determinants of their usage. China is a leader in establishing mobile communication infrasturcute and implementing national wide mobile payment schemes (Miao 2016). China also has the larges phone subscriber bases. It represents a various adoption environemnt and provides a variety of mobile payment applications for exploration. Hence, we focus on China market to conduct this study. 2 LITERATURE REVIEW In this section, we summarize three different mobile payment methods, Chinese mobile payment market, and current studies on mobile payment adoption. 2.1 Mobile Payment With the development of high speed mobile network, the mobile payment started emerging about 15 years ago. Initially, mobiel payment was just a sim card-based, touch and pay method in Japan. Within recent years, 3G and 4G technology significantly boosted the growth of this market. In general, the mobile payment procedure contains the formal payment initiation, authorization, clearing/settlement, confirmation and money transfer, and delivery of the service or good (Zhong 2009). Au and

Kauffman (2008) define mobile payment as any payment in which a mobile device is used to initiate, authorize and confirm a commercial transaction. There are three different types of mobile payment methods: Near Field Communication (NFC)-based mobile payment, website-based mobile payment, and mobile app-based payment. Table 1 compares these mobile payment methods. They are different regarding credit/bank card storage, contact methods, usage scope, and hosting party. Card storage Contact method Service scope Hosting party Example NFC-based mobile payment Website-based mobile payment Store credit card or bank No need to store credit account information in a card or bank account phone information in a phone Tap smartphone to card Remote payment Remote payment readers Partner retailing stores Any e-commerce websites Mobile applications with payment function Banks or phone service vendors Apple pay, Android pay, paywave, QuickPass E-commerce vendors Amazon.com, Macys.com, Alipay Mobile app-based payment Store credit card or bank account information in a phone Mobile application vendors Dianping, Uben A mobile payment application Third party services providers Tenpay, Alipay Table 1. Mobile Payment Summary NFC-based payement is a relatively traditional one. It asks users to tap phones on the special terminal to finish the payment transaction at the sales point. It is the most widely used method around the world. In most cases, it is initiated by mobile phone service providers, or banks directly. For example, phone providers Apple pay and Android pay belong to this category. Visa paywave and MasterCard PayPass both use NFC technique as well. Web-based mobile payment asks users to use smartphones as mini-computers and access the e-commerce websites to finish the transactions. Most e-commerce companies provide mobile friendly websites for smartphone users. The mobile app-based payment method differs from the other two methods. Using this payment method, customers do not need to be present at the store as the NFC-based payment method requires. Unlike web-based mobile payment, it does not require high speed mobile network to access the payment function at a website. The mobile app-based payment method can complete mobile transactions without taking too much bandwidth. High speed network for mobile devices is still a challenge in many areas and 57% of mobile users will abandon a website if it takes more than 3 seconds to download and 30% will stop shopping if the site is not mobile friendly 1. Hence, customers can enjoy more flexibility and faster service using the mobile app-based payment method. Such service can be hosted either by business itself or a third party. Though most of mobile payment transactions still only involve relatively small amount of money, they have become increasingly popular particularly in many Asian countries. In this study, we focus on the features associated with these three mobile payment methods and explore the particular reasons for adoption and non-adoption. 1 Mobile Payment in Asia Pacific Information, communications & entertainment, KPMG, 2007

2.2 Mobile payment situation in China In the past 20 years, China s smartphone and telecommunication industries have experienced numerous reconsolidation and exponential expansion, which results in robust and dynamic telecommunication network (Xia 2012). In China, technology penetration, economic development, avaiable number of mobile payment services vary between the rural area - western provinces and the urban area - east coast provinces, which results in different acceptance behaviors among the users in these provinces. Considering the large number of mobile phone subscribers in western provinces, Chinese government considers mobile payment as a strategic tool to close the gap between these areas. With over 92% of mobile phone penetration rate, it is expected that mobile commerce will grow to 24.2% of total commerce revenue in China in 2017 (McDermott 2014). This unique environment has help mobile payment usage grow exponentially in recent years (Miao et al. 2016). Therefore, we focus on Chinese market in this study. 2.2.1 NFC-based mobile payment Most NFC-based mobile payment is either attached with simcard or adapted SDcard. China credit card company, Unionpay, partnered with the mobile service provider, China mobile to initiate NFC-based mobile payment, QuickPass, in 2012 (Zhang, 2009). After that, the collaobrations among banks and smartphone manufactuers and mobile service providers become a prevalent form in industry to offer mobile payment. In addition to China local vendors, Apple enterred the China s mobile payment market in Feburary, 2016. It has sett up its Apple pay terminals nationally 2. With over 27% smartphone market share in China, ApplePay is expected to be accepted by many Chinese consumers quickly. Additionally, third party service providers also join this segment of market. Lakala introduced by an application provider, currently occupies about 6% of the NFC-based mobile payment market in China 3. 2.2.2 Website-based mobile payment For the website-based mobile payment method, users need to login the website through smartphones and make the payment either by linking his or her banking accounts or using credit cards directly. Most online stores accept various bank cards or bank accounts. Their mobile websites provide the same payment solutions to mobile users. For example, as an online payment solution, Alipay was first introduced for customers on its B2B e-commerce website, Alibaba.com. It was later used for C2C domestic market, Taobao.com. Alipay might be considered to be a mix package, including both mobile app function and website-based mobile payment solution. 2.2.3 Mobile app-based payment Mobile app-based payment allows users to use mobile apps to finish the payment transaction by using the cards or accounts prestored in the app. Among all the mobile-app payment, Alipay has about 62.5% market share; Lianlian payment has about 10.8%; and Tenpay has about 8.59% 2. In the third quarter of 2015, over 0.3 billion customers had tried mobile-based payment apps. Offered by Alibaba, 2 Huang, 2016, Apple pay will help China s mammoth state banks crush Alibaba offline, taken from: http://qz.com/618230/apple-pay-will-help-chinas-mammoth-state-banks-crush-alibabaoffline/ 3 Analysys, 2015, The third party mobile payment report in the third quarterly of 2015, taken from: http://www.analysys.cn/yjgd/14204.shtml

a giant e-commerce vendor in China, Alipay currently also has its own mobile app to offer mobile payment function, while it also works with partners to provide payment service through their mobile apps. Tenpay, a relatively new mobile payment service, is embeded in a social media application, wechat. Tenpay users can send and receive payments among wechat users, withdraw money from bank accounts, charge mobile account, deposit money on game accounts, and conduct transactions with wechat business partners. Tenpay currently partners with more than 80 financial institutions and over 1.1 million merchants spanning 20 industries, including retailing, insurance, utility, education, manufacturing, leisure and hospitality, and transportation. Facing the variety of mobile payment choices, Chinese mobile users have the advantages to explore them and form their usage decisions. By studying their opinions and experiences, we can gain great understandings on the determinants to their adoption behaviors. 2.3 Mobile Payment Adoption Several research models have been proposed to explain computer-usage adoption, such as Technology Acceptance Model (TAM) (Davis 1989) and Unified Theory of Acceptance and Use of Technology (UTAUT) (Venkatesh et al. 2003), and diffusion of innovation theory (Rogers 1995). The technology acceptance model (TAM) is a well-recognized model used to explain IS adoption behaviors (Davis 1989). It has been widely adopted by the IS community to explore various technology adoption challenges. The technology acceptance model proposes that the process of users intention to adopt a new technology mainly depends on perceived usefulness (PU) and perceived ease of use (PEU). The technology acceptance model 2 extends the TAM by adding social and organizational variables such as subjective norm, image, job relevance and output quality (Venkatesh et al. 2000). Unified Theory of Acceptance and Use of Technology (UTAUT) further extends TAM and TAM 2 (Venkatesh et al. 2003). Moderators, such as age, gender, experience, and voluntariness are also added to the model. Diffusion of innovation theory proposes that five innovation characteristics affect technology adoption and diffusion. The five innovation characteristics are relative advantage, complexity, compatibility, trialability, and observability that would affect users decision (Rogers 1995). Prior studies identify various user-centric or system-centric antecedents and use them to extend the TAM model or diffusion of innovation theory to explore the usage of various mobile payment technologies (Dai et al. 2009; Hoehle et al. 2015; Mallat et al. 2009). Shaw (2014) examined how perceived ease of use, perceived usefulness, and trust mediate the impact of users mobile wallet selfefficacy and informal learning on intention to use. The study finds that informal learning plays an important role. This study focuses on NFC-based mobile-payment technology. Kim et al. (2010) studied the antecedents of perceived ease of use and perceived usefulness, such as users innovativeness and knowledge, m-payment system s mobility, reachability, compatibility, and convenience. The definition of the mobile payment in this study is very broad. It includes any payment in which a mobile device is utilized to initiate, authorize, and confirm a commercial transaction, including payments made via premium rate SMS, WAP billing, mobile web, direct-tosubscribers bill and credit cards. The finding suggests that early adopter and late adopters are motivated by different factors. However, the measurement of adopter type in this study is questionable. Users are classified as either early adopter or late adopter based on their self-reported attitude toward risk and new technology. It does not really measure whether users adopt mobile payment at early stage or late stage. Similiarly, Liébana-Cabanillas et al. (2014) also adopted the TAM model and specifically investigated SMS mobile payment in Virtual Social Networks (VSN). In this study, it extends the TAM by adding the factors such as trust, social influence and user experience. Shin (2009)

investigated mobile wallets by extending the UTAUT model. It focuses on the NFC-based mobile payment technology. The factors studied include attitude, perceived security, trust in virtual malls, self-efficacy, social influence, gender, age, and income. Other theories have also been applied in studying mobile-payment adoption. Lee at al. (2004) studied the moderating role of technology anxiety in the intention-adoption relationships in mobile payment. Mallat (2007) examined consumer willingness to use a mobile phone as a payment instrument from the perspective of diffusion of innovations. It analyzes qualitative data from the perspectives of relative advantage of mobile payment systems, complexity, costs, network externalities and critical mass, security and trust, and use situation and observability. Focused group interviews were conducted. The factors which affect mobile payment usage were identified. Lu et al. (2011) extended the valence framework and developed a trust-based customer decision-making model to study nonindependent, third-party mobile payment services in China. The factors studied include trust, cost, risk, relative advantage, compatibility and image. Prior research has also compared various payment methods. Dahlberg and Öörni (2007) investigated various payment habits, such as coins and notes, bank card, Internet bank, mobile phone in general, credit card, and visa electron. It combined several approaches (TPB, diffusion of innovation, and TAM) and studied factors including benefits, trust, security, compatibility, availability of payment transaction information, ease of use, convenience, and social norm. Peffersa and Tuunanenb (2005) explored effective methods to help develop mobile financial applications valued by users using information theory. The study develops an extended version of critical success chains (CSC) that supports information processing needs of mobile financial application users. Theory Factors Studied Research Method (Shaw 2014) TAM trust, self-efficacy and informal learning Survey (Kim et al. 2010) TAM users innovativeness and knowledge, m- payment system s mobility, reachability, Survey (Liébana- Cabanillas et al. 2014) compatibility, and convenience TAM trust, social influence and user experience Survey (Shin 2009) UTAUT attitude, perceived security, trust in virtual malls, self-efficacy, social influence, gender, age, and income (Lee et al. 2004) Intention-Adoption technology anxiety, maturity of M-payment technology infrastructure, and m-payment liquidity (Mallat 2007) Diffusion of Innovation relative advantage of mobile payment systems, complexity, costs, network externalities and critical mass, security and trust, and use situation and observability (Lu et al. 2011) Valence Framework trust, cost, risk, relative advantage, compatibility and image (Dahlberg et al. TPB, diffusion of 2007) innovation, and TAM Table 1. Literatures On Mobile Payment Adoption. benefits, trust, security, compatibility, availability of payment transaction information, ease of use, convenience, and social norm Survey Conceptual paper Focus group interviews Survey Survey Prior research on adoption of mobile payment provides a preliminary list of possible impacting factors. This list can help start collecting the opinions of the customers. However, prior research does not differentiate three different types of mobile payment methods as we proposed here. Little is known about how and why users prefer one mobile payment method over the other. Majority of prior studies

adopt the TAM model or its extensions and rely on the survey methodology, except Mallat (2007) s study. As the decisions of using or not using specific mobile payment technology are dynamic (Mallat 2007), this study attempts to fill in this gap and provide more insight on users behaviors towards these mobile payment methods. 3 RESEARCH METHOD In this study, we would like to adopt mean-end chain approach to collect qualitative data to understand consumers decisions regarding mobile payment methods. Mean-end chain approach is widely used in marketing research to study the consumers perceptions of products and product attributes, and their relationship with the value which could be achieved (Gutman 1982; Olson et al. 1983). It relies on relevant cognition organized in consumers minds as association links between these products (means) and their desired benefits (end). This approach is used under the context where the products are relatively new and its attributes are not widely known (Jung 2014). This approach has been widely used in consumer research to explore the consumers perference of the products (e.g. Klenosky 2002). It starts to be employed in IS field to understand the users perceptions regarding products or service design (e.g. Jung et al. 2010). We believe the mean-end chain method is suitable for this study. Mobile payment is a relatively new innovation technology. The variety of features of different mobile payment methods is still salient to many customers. While users and potential users are still exploring these functions, mobile payment service providers attempt to continuously add new functions and enlarge service scopes. China market also shows unbalanced development 4. The services coverage varies dramatically across different regions in China. Generally, western provinces have much less services coverage comparing with eastern provinces along the coasts. Users value different features. As the decisions of using or not using a specific mobile payment will also depend on situational factors (Mallat 2007), qualitative data can help capture rich contextual factors and dynamic interactions of various factors. Hence, mean-end chain approach is a proper method to facilitate the exploration of the casual relationship between variety of values that customers are pursing and the multiple functions of mobile payment. In this study, we plan to interview about 40 people to understand their perceptions on mobile payment methods and the benefits they try to achieve. We are in the process of contacting potential participants. We will conduct laddering interviews and code a hierarchical value map. Through the interviews, we will form an attribute-consequence-value chain to elaborate adoption behaviors. The laddering interview method investigates the cognitive of products attributes and values (Jung 2014). It can provide in-depth and step-by-step answers to understand how each participant relates the attributes of mobile payment to their values. Participants will be asked subsequent questions to provide deep understandings about their thoughts. This technique enables the researchers to track a certain topics and gain insight on respondents perceptions on products and their goals. We plan to start with openended questions, focusing on what motivate them to use mobile payments and what benefits they value most. The example questions are: 1) which mobile payment method do you use most? what functions/features do you use most? 2) why do you use these functions/features? what benefits do you get from using these functions/features? 3) why are these benefits valuable to you? which one is the most valuable to you? The questions will be tailored according to a participant s response. The interviews will be recorded if interviewees agree, otherwise researchers can take notes. 4 Mobile Payment in Asia Pacific Information, communications & entertainment, KPMG, 2007

The qualitative data will be analyzed to propose a research model that describes the differences in adoptions of three mobile payment methods. We will start with open coding. Two researchers will first independently code the interviews. The codes and categories will emerge from the data itself. Then the notes will be compared and differences will be addressed. This process will be repeated until agreement is reached. Based on the coding results, the hierarchical value map will be developed to answer our research questions. 4 CONTRIUBTIONS AND CONCLUSION This study aims to explore consumers attitudes and behaviors towards mobile payment methods. This study can help explore how various factors interact with situational factors and affect users decision to use or not use a mobile payment method. The value map developed from this study can elaborate the factors that motivate the adoptions of various mobile payment technologies. It complements current research on mobile payment adoption, which emphasizes the general factors that motivate all mobile payment adoption, but ignore the differences among different payment approaches. The findings will also help service providers better understand users, invest on the suitable payment method and target the customers with the desired services and the right functions. References Au, Y. A., and Kauffman, R. J. (2008). The economics of mobile payments: Understanding stakeholder issues for an emerging financial technology application. Electronic Commerce Research and Applications, 7 (2), 141 164. Dahlberg, T., and Öörni, A. Year. (2007) Understanding Changes in Consumer Payment Habits - Do Mobile Payments and Electronic Invoices Attract Consumers? the 40th Hawaii International Conference on System Sciences, Hawaii. Dai, H., and Palvia, P. C. (2009). Mobile Commerce Adoption in China and the United States: A Cross-Cultural Study. The DATA BASE for Advances in Information Systems, 40 (4), 43-61. Davis, F. D. (1989). Perceived usefulness, perceived ease of use, and user acceptance of information technology. MIS Quarterly. 13 (3), 318 330. Gutman, J. (1982). A means-end model based on consumer categorization processes 46. Journal of Marketing. 46 (2), 60 72. Hoehle, H., and Venkatesh, V. (2015). Mobile application usability: conceptualization and instrument development. MIS Quarterly, 39 (2), 435-472. Jung, Y. (2014). What a smartphone is to me: understanding user values in using smartphones. Information Systems Journal, 24 (4), 299 321. Jung, Y., and Kang, H. (2010). User goals in social virtual worlds: a means-end chain approach. Computers in Human Behavior, 26 (2), 218-225. Kim, C., Mirusmonov, M., and Lee, I. (2010). An empirical examination of factors influencing the intention to use mobile payment. Computers in Human Behavior, 26 (3), 310 322. Klenosky, D. B. (2002). The pull of tourism destinations: a means-end investigation. Journal of Travel Research, 40 (4), 385 395. Lee, C.-P., Warkentin, M., and Choi, H. Year. (2004) The Role of Technological and Social Factors on the Adoption of Mobile Payment Technologies. Americas Conference on Information Systems, New York, NY, USA, Paper 333. Liébana-Cabanillas, F., Sánchez-Fernández, J., and Mu noz-leiva, F. (2014). The moderating effect of experience in the adoption of mobilepayment tools in Virtual Social Networks: The m- Payment AcceptanceModel in Virtual Social Networks (MPAM-VSN). International Journal of Information Management, 34 (2), 151 166.

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