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Technology Adoption and Leapfrogging: Racing for Mobile Payments

Author

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  • Pengfei Han
  • Zhu Wang

Abstract

Paying with a mobile phone is a cutting-edge innovation transforming the global payments industry. However, some advanced economies like the U.S. are lagging behind in mobile payment adoption. We construct a dynamic model with sequential payment innovations to explain this puzzle, which uncovers how advanced economies' past success in adopting card-payment technology holds them back in the mobile-payment race. Our calibrated model matches the cross-country adoption patterns of card and mobile payments and also explains why advanced and developing countries favor different mobile payment solutions. Based on the model, we conduct several quantitative exercises for welfare and policy analyses.

Suggested Citation

  • Pengfei Han & Zhu Wang, 2021. "Technology Adoption and Leapfrogging: Racing for Mobile Payments," Working Paper 21-05, Federal Reserve Bank of Richmond.
    • Handle: RePEc:fip:fedrwp:90445
    DOI: 10.21144/wp21-05
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    References listed on IDEAS

    as
    1. Karthik Muralidharan & Paul Niehaus & Sandip Sukhtankar, 2016. "Building State Capacity: Evidence from Biometric Smartcards in India," American Economic Review, American Economic Association, vol. 106(10), pages 2895-2929, October.
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    4. A. Drăgulescu & V.M. Yakovenko, 2001. "Evidence for the exponential distribution of income in the USA," The European Physical Journal B: Condensed Matter and Complex Systems, Springer;EDP Sciences, vol. 20(4), pages 585-589, April.
    5. William Jack & Tavneet Suri, 2014. "Risk Sharing and Transactions Costs: Evidence from Kenya's Mobile Money Revolution," American Economic Review, American Economic Association, vol. 104(1), pages 183-223, January.
    6. Marc Rysman & Marianne Crowe & Joanna Stavins, 2010. "Mobile Payments in the United States at Retail Point of Sale: Current Market and Future Prospects," Boston University - Department of Economics - Working Papers Series WP2010-055, Boston University - Department of Economics.
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Technology adoption; Sunk cost; Payment system;
    All these keywords.

    JEL classification:

    • E4 - Macroeconomics and Monetary Economics - - Money and Interest Rates
    • G2 - Financial Economics - - Financial Institutions and Services
    • O3 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights

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