The impact of mobile payment on payment choice
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The impact of mobile payment on payment choice Tobias Trütsch1
Published online: 19 July 2016 © The Author(s) 2016. This article is published with open access at Springerlink.com
Abstract This paper investigates the effect of mobile payment on the adoption and use of traditional payment instruments such as cash, checks, and credit, debit and prepaid cards at the point of sale (POS). Data are from a 2012 representative survey on consumer payment choice in the United States. Using discrete-choice random utility models to simulate consumer behavior, the estimation provides two major findings. First, mobile payment does not replace physical payment cards, but is likely to substitute for paper-based payment methods such as cash and checks at the adoption stage. Second, mobile payment does not statistically significantly influence the choice of payment means at the POS in terms of usage. However, there is suggestive evidence that it is complementary to card payments and a substitute for paper-based payment instruments. The findings highlight the potential social welfare gains of mobile payment and provide key insights into challenging issues for the private industry sector. This paper furthermore offers novel evidence on the impact of mobile payment on the use and adoption of existing payment instruments and contributes to the literature on consumer payment choice. Keywords Mobile payment · Payment behavior · Payment innovation · Retail payments · Payment cards JEL Classification D12 · G21 · O33
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Tobias Trütsch [email protected] Executive School of Management, Technology and Law, University of St. Gallen, Holzstrasse 15, 9010 St. Gallen, Switzerland
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T. Trütsch
1 Introduction The availability of an increasing number of different payment instruments and of new online payment opportunities offers individuals various payment alternatives from which to choose. For instance, these days, consumers can select from among at least nine payment instruments in the United States that—apart from cash—either authorize the transfer of money or can access funds in checking and other deposit accounts to initiate payments (Schuh and Stavins 2014). Traditional banking payment services are facing increasingly fierce competition from novel and established nonfinancial companies such as Paypal, Google, Apple and Square, to mention just a few. These companies are attempting to gain market share in the retail payment markets with innovative products such as mobile payment that offers technological advances in payment processing and more convenience.1 Therefore, the effects on consumer payment choice of mobile payment systems have been attracting increasing attention from researchers. This paper studies the effect of mobile payment on the adoption and usage patterns of traditional payment instruments used at the point of sale (POS) and provides empirical evidence of actual changes in the composition of payment instrument portfolios as well as the instruments’ deployment. Mobile payment can be used to make purchases and, t
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