Promoting Mobile Payment with Price Incentives

Chun-Yu Ho, Nayoung Kim (), Ying Rong () and Xin Tian ()
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Nayoung Kim: Department of Economics, University at Albany, State University of New York, Albany, New York 12222
Ying Rong: Antai College of Economics and Management, Shanghai Jiao Tong University, Shanghai 200030, China
Xin Tian: School of Economics and Management, University of Chinese Academy of Sciences, Beijing 100190, China; Research Center on Fictitious Economy and Data Science, Chinese Academy of Sciences, Beijing 100190, China

Management Science, 2022, vol. 68, issue 10, 7614-7630

Abstract: Using a proprietary data set containing more than 10 million transactions over 14 months from hundreds of grocery stores, we examine consumer payment choices at point of sale (POS) between cash and mobile, where the use of other methods (including cards) is minimal. We find that cash is the dominant method of payment. Nonetheless, the share of mobile payments has increased at the expense of cash payments over time. Importantly, we exploit price incentives for consumers using mobile payment to examine the price substitution between cash and mobile payments. Our results show that consumers are more likely to use mobile payment when they receive price incentives for doing so, and such an effect persists for a few days, even after the price incentive expires. Nonetheless, the price incentives are unlikely financed by additional transactions paid via mobile but subsidized by mobile payment providers. Interestingly, we find several factors that enhance and supplement the steering effect of price incentives. First, a larger monetary reward seems to induce a stronger impact of price incentive on mobile payment. Second, the steering effect of price incentive is stronger for stores that serve consumers who have frequently been using mobile payment and for price-sensitive consumers. Third, the additional mobile payments come from transactions that would not have occurred with price incentive and those that switch from cash transactions.

Keywords: payment choice; price incentive; retail payment system; consumer behavior; mobile payment (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (3)

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