Platform View of Mobile Proximity Payment Technologies

Abstract

Nowadays, the rising penetration of smartphones andthe important roles of them in people’sdaily life make the smartphones an ideal medium to conduct paymenttransactions. The smartphones are capable tostore everything that would normally be carried in a physical wallet andalso allows the users to make payments anytime and anywhere. The potentialadded-values of mobile payments, such as generating new revenues, obtaining newusers, increasing user stickiness attracted different players to expand theirbusinesses to the mobile payment services, including financial institutions,mobile network operators, mobile device manufacturers, trusted third partyproviders. To compete in the market, they explored differenttechnologies and business models which resulted in the complexity and dynamicsof the mobile payment market. Consequently, mobile payments have only become astandard practice in a few countries. In termsof proximity payments, NFC is widelyviewed as one of the most promising technologiesdue to its security features, compatibility with the existing financialinfrastructures, and ease of use. In the Chinese market, compared with QR code,NFC was first introduced and supported by various players. However, the Chinesemobile proximity payment market has become the largest and fastest-growingmobile proximity payment market in the world in few years by utilising QR code.The market is highly concentrated withAlipay and Tenpay which are QR code-based mobile payment platforms. In otherwords, QR code overtook NFC and became the most popular mobile proximitypayment technology in China.

Considering this phenomenon, the main researchquestion in this study is set as"why did QR code-based mobile payments overtake NFC and achieve a dominantposition in the Chinese market?". In orderto answer this question, the research work is conducted in three steps.Firstly, a historical review of the Chinese mobile proximity payments isperformed to identify the mainstream mobile proximity payment solutions basedon QR code and NFC technologies and corresponding business models adopted inthe Chinese market. Secondly, a desk research is conducted to determine thebarriers that mobile payment providers and users face towards to QR code andNFC-based mobile payment solutions using a multi-perspectiveframework. To obtain the situation in the Chinese market and also triangulatethe results of the desk research, in-depth interviews are conducted with technical experts and manager from the Chinesemobile payment industry. Lastly, a proposed research model is used to analysethe strategic actions of the mobile payment providers who support differenttechnological solutions, how they develop the mobile payment platforms andfacilitate users’ adoption of their mobile proximity payment services in theChinese market.

In this study, the research model is developed basedon relevant business model, platform andbusiness ecosystem theories. The final research model consists of three connectedperspectives which are platform technology, platform ecosystems and platformservices. It is applied to three Chinesemobile payment platforms, namely, He Wallet, Alipay and QuickPass which have implemented one or several technologicalsolutions based on NFC and QR code technologies. The data for the casestudies is collected from thesemi-structured interviews and the desk research. The results showed that althoughNFC technology was adopted first in the Chinese market, the enablingdevices of both consumers and merchants were not widely ready at that time forNFC technology, but good enough for QR code technology. However, the early NFCadopters (both MNOs and financial institutions) were reluctant to make a huge investment inthe enabling devices to realise the large-scale deployment in the early stagedue to the uncertainties on the technology level and the unclear roles andbenefits on the business aspect. Thereby, they missed the best time to captureuser and develop users' habit. In contrast, Alipay strategically adopted the independent service provider mode to leverage its obtained platformresources and capabilities whichsignificantly contributed the mass adoption of QR code in the Chinese market. DespiteQR code currently dominated the Chinese mobile payment market, it is believedthat NFC has its place in the Chinese mobile payment market as China UnionPayadopted an open platform strategy to incorporateall relevant players into its ecosystemto facilitate the development of NFC-based mobile payments.

The research results in this study are not onlybeneficial to the theoretical research in mobile payments but also useful forthe practical development of mobile payments. From the theoretical perspective,this research provides a comprehensive overview of the characteristics andpotential barriers of four technologicalsolutions based on NFC and QR code technologies. Besides, it developed aresearch model which can be used to interpret the status of a mobile paymentplatform. From practical perspective, itprovides some insights to the mobile payment providers in terms of the technology selection, the design of the businessmodel, the service development and the marketing strategies.