Effect of Mobile Payment Service Innovation on Overall Customer Satisfaction, Consequential Customer Behavioral Intentions and Performance in Retail Banking
Sijmen Aurelius van Groningen (10858334)
MSc. Business Administration - Innovation and Entrepreneurship 29/06/2015
University of Amsterdam Professor W. van der Aa Word Count: 13.380
Statement of originality
This document is written by student Sijmen Aurelius van Groningen who declares to take full responsibility for the contents of this document. I declare that the text and the work presented in this document is original and that no sources other than those mentioned in the text and its references have been used in creating it. The Faculty of Economics and Business is responsible solely for the supervision of completion of the work, not for the contents.
Table of Content . . . 3
Abstract . . . .4
Introduction . . . 5
Literature Review . . . 7
Retail Banking and Payments . . . 7
Financial Technology Innovation . . . 9
Technology Acceptance . . . .11
Bank Customer Perception and Satisfaction . . . 14
Customer Switching Behavior . . . 19
Customer Loyalty . . . .19
Summary . . . 22
Conceptual Model . . . .25
Data and Method Design . . . 31
Analysis . . . 35
Use of Mobile Payments . . . .37
Bank Customer Perception of Retail Payments . . . 38
Perceived Satisfaction with Payment Services . . . .39
Switching Behavior and Loyalty . . . 41
Performance . . . .43
Discussion . . . . . . .. . . 45
Strength and Limitation . . . 45
Future Research . . . .46
Relevance . . . .47
Conclusion . . . . . . .. . . .. . . .. . . .. . . .. . . .. . . .. . .48
Use of Mobile Payments . . . 48
Bank Customer Perception of Retail Payments . . . .49
Perceived Satisfaction with Payment Services . . . 50
Switching Behavior and Loyalty . . . 51
Performance . . . .52
References . . . .54
Literature . . . 54
Abstract
This investigation theoretically defines a model for mobile payment innovation and its implications on bank customer perceptions of payment services, customer satisfaction, consequential implications of behavioral intentions of customers, and performance. The reviewing of over seventeen different empirical investigations pertaining to mobile payment innovation determined that mobile payment use influences bank customer perception of retail banks due to heterogeneity improvements and use of mobile payment technology opposed to traditional payment technology. Contributing to customer satisfaction with payment services provided by banks. However, a statistical relationship is not determined between satisfaction with payment services and loyalty expressed by customers. Yet a relationship is determined between satisfaction with payment services and firm performance. The investigation contributes to a general stream of literature stipulating that mobile payment innovation is becoming a growing source of revenue and disruption in the payments industry, and that banks payment service revenue will become increasingly volatile if not taken seriously in the wake of new innovation.
Introduction
Customer satisfaction and loyalty are the premise of customer-centric approaches to banking, where customer satisfaction acts as a main performance metric for customer-centricity (Denish et al., 2006). Increasing customer interaction and awareness through internet usage, lack of personalization, and increasing distrust in banks has led retail banks towards customer-centricity as a source of revenue generation (McKinsey&Co., 2012). Implying that customer satisfaction has become central to retail banking strategies in the midst of increased customer switching behavior and service provision volatility. Contemporary retail banks face increasing volatility with the revenue generation of the services they provide. Payment services being the least volatile of financial services provided; expressing up to 40% of bank revenues, yet is most prone to disruption (Iftekhar et al., 2012).
The adoption of new technology is associated with the superior satisfaction provided by new technology versus traditional technology. Mobile payment growth is indicative of the superior satisfaction experienced through its use (Schierz et al., 2010; Wixom & Todd, 2005). Retail banks have been slow to capitalize mobile payment innovation, leading to major mobile payment players external to the banking sector. As customers that are unable to obtain the satisfaction related to mobile payment use from the payment services provided by their retail banks will search for this service externally.
Mobile payment innovation plays a key role in the value that customers attribute to the payment services provided by retail banks. The attributed value that customers perceive enhances their
perception of bank payment services, consequently improving customer satisfaction. The satisfaction obtained from mobile payment use not only contributes to the value of mobile payment services but also to the value attributed to the use of mobile payments. Mobile payment innovation can play an essential role in both the satisfaction obtained from retail bank payment services in developed economies, either directly through satisfaction provision with the use of new technology, or through the enhancement of satisfaction with the aggregate of payment service provided. This is the premise of the investigation, the main research question being:
What effect does mobile payment innovation have on customer satisfaction with payment services, consequential behavioral intentions, and performance for retail banks in developed economies?
As retail banks increasingly focus on improving customer satisfaction and loyalty as a means of performance generation, the implementation of new innovation could have considerable implications for the enhancement of customer satisfaction. This paper aims to investigate the effect of mobile payment innovation implementation, and the implications of neglecting to do so.
This investigation begins with the reviewing of relevant literature pertaining to retail banking and payments, financial technology innovation, technology acceptance, bank customer perception and satisfaction, customer switching behavior, and customer loyalty. Synthesizing these concepts into an established framework that places these concepts into the context of mobile payment innovation. After which the methodology with which this investigation will be
conducted is introduced. Data acquired by relevant reports pertaining to mobile payment innovation will be placed into the context of the conceptual model. If the data gathered corresponds to the theoretical concepts delineated in the literature review and conveyed in the conceptual model, the theoretically constructed relationships and placement of the model into a mobile payment context will be supported. Ergo, the research question will be answered first theoretically, then empirically.
Literature Review
Retail Banking and Payments
Contemporary retail banks provide financial services to customers, namely holding current accounts, providing personal loans, asset management, investment banking, and payment services. The latter account for upwards of 30% to 50% of bank revenues in developed economies due to steady growth, relatively low capital needs, and increasing uncertainty and regulation pertaining to other services (Iftekhar et al., 2012).
Iftekhar et al. (2012) examine the relationship between bank performance and the retail payment business. Their empirical investigation of the European banking industry establish several relationships that delineate the significance of the payment services on retail bank performance and customer retention, emphasizing that payment innovation is not just a source of income but also has implications for customer perceptions towards retail banks.
Their findings stipulate that payment technologies facilitate retail banking innovation and add value to retail payment services. This is reflected in the positive implications of providing heterogenous payment services by retail banks, especially in developed markets. Furthermore, electronic payment services are found to improve banking performance. Reinforcing the importance of product and service diversity in payment services by applying the Herfihndal index (HI) of payment instruments among others. The Herfindahl index being a measure of the size of a firm in relation to the industry. The consistent growth and stability of the payments industry, shows that retail payments offer a more attractive risk to return combination and more stable revenue than other more volatile banking services. The authors argue that effective payment innovation and service provision are important in establishing long-term relationships with customers. This satisfaction is dependent on other banking services, as customers prefer to obtain financial services in a system which they can obtain efficient payment services. Payment innovation therefore has considerable implications towards bank performance, especially considering the stability of payment service returns. Increased competition implies that retail banks should provide heterogenous payment services in order to keep customers satisfied. As switching costs to other financial providers are relatively small, it is prudent to provide desired services to customers.
Evidence
The authors discover that a 10% decrease in paper-based retail payments implies a 0.31% increase in return of assets as well as a 0.11% increase in cost-efficiency and profit efficiency. Their findings also define that 10% increase in the Herfindahl index for payment instruments
translates into a 0.18% decline in return of assets, a 1.17% decline in return on equity, and 0.06% decrease in profit efficiency. This implies that increased adoption of payment technology results in increased competition that diminishes returns for firms that do not also diversify their payment services. This establishes an associative relationship between mobile payment innovation integration and performance, as mobile payment innovation directly contributes to the heterogeneity of payment services provided and a decrease in paper-based retail payments. Ergo, mobile payments innovation could have positive implications for retail banks performance, yet the extent to which this is the case is not made clear.
Financial Technology Innovation
Yoris and Kauffman (2006) developed a robust evaluative framework that identifies relevant stakeholders through the application of theory concerning consumer choice and demand, network externalities, switching costs, complementary goods, IT value, and the economics of technology adoption and diffusion. The framework is applied to investigate the economic aspects of mobile payments from a managerial perspective. Yet, the framework itself was developed to investigate stakeholder and economic issues concerning the application of financial technology and disruptive technology.
The theory developed is pinned in relation to key stakeholders. Specifically, the relationship that economic theoretical concepts have to relevant stakeholders on different levels concerning disruptive technology. Essentially studying the assimilation and provision of technology, and consumption and reason that such technology is utilized by end-users. (1) Theory of consumer
choice and demand centers the role of consumers seeking to choose the best option from a set of feasible options based on preference. Implying that consumers are constantly seeking to maximize utility, therefore the satisfaction derived from the consumption of a given good or service at a given budget. Consumers seek to utilize products and services that benefit them most, implying that they will seek to adopt technology from institutions that provide maximum utility. Here the authors introduce the concept of multi-homing, occurring when customers carry more than one payment method with them, choosing a payment method that is most feasible and convenient in a certain context. (2)Theory of Network Externalities is used to describe value creation in the network economy. Where the utility derived from the use of a product or service increases with the number of people using the relevant product of service. finding it difficult to switch to competitors once they have purchased from one supplier incur (3) Switching Costs. These costs can be divided into three categories namely, transaction costs (e.g. opening bank account at new bank), learning costs (e.g. adjusting to new procedures), and contractual costs (e.g. losing long-term loyalty benefits). Switching costs could lead to network externalities which in turn could lead to locking in adopters and users. (4) Complementary Goods delineates that an increase in demand for one product results in increased demand for another and vice-versa. The successful implementation of technology is referred to as (5) IT Value. Where potential value represents the maximum value opportunity available to investors and the realized value refers to the measured value that can be measured that can be identified after implementation. Lastly, the (6) economics of technology adoption and diffusion is a concept introduced by the authors supported by direct empirical evidence imply a positive relationship
between IT investment and performance. Resulting in long-term gains when frequently used and implemented (Yoris & Kauffman, 2006).
Yoris and Kauffman applied their financial technology framework to the context of mobile payments. The concepts that they introduce provide a supporting theoretical basis for the behavior intentions of consumers and the economic consequences for retail banks concerning mobile payment acceptance. The concept of multi-homing is relevant we considering the role that mobile payment innovation can have on improving the value of payment services that retail banks provide.
Technology Acceptance
The technology acceptance model (TAM) developed by Fred Davis (1989) is widely used to understand the factors that lead to the acceptance and adoption of technology. Scherzo et al. (2010) empirically applied the TAM in the context of mobile payments. This is relevant considering that the TAM is a model that describes overall satisfaction with a new technology. On the other hand, Wixom and Todd (2005) theoretically synthesize the TAM with the user- satisfaction model. Applying these two papers develops a theoretical relationship between technology acceptance and customer satisfaction.
Schierz et al. (2010) applied the traditional Technology Acceptance Model (TAM) to the context of mobile payments. The TAM was originally developed to predict IT systems use, yet has been applied to several other contexts to explain behavioral intentions of users. The authors apply the
TAM to the context of mobile payment services, defined as ‘all payments for goods, services and bills authorized, initiated, or realized with a mobile device’ (Schierz et al., 2010).
The dependent variable of the TAM is the intention to use, being the likelihood that an individual will accept mobile payment technology. Whereas the variable attitudes towards using a technology being the main antecedent and mediating variable; referring to the extent that mobile payments is perceived either positively or negatively. Perceived usefulness being the main antecedent to attitudes towards using a technology, refers to willingness of users to adopt a new innovation, given a provided unique advantage compared to existing solutions. The authors find that several factors influence perceived usefulness, namely, perceived ease of use (also correlating to attitudes toward use), perceived compatibility being the reconcilability of an innovation with existing values, and individual mobility being the degree to which an individual leads a mobile lifestyle. perceived compatibility and individual mobility are also found to have direct implications on the intention to use mobile payment services. Lastly, subjective norms being the degree to which the social environment perceived mobile payments as desirable, and perceived security, synonymous with perceived risk, are found to have a direct relationship with attitudes towards the use of mobile payment services (Schierz et al., 2010). Their findings show that perceived compatibility followed by individual mobility and subjective norms have the strongest implication on the effective intention to use mobile payment services.
Applying the TAM model to the context of mobile payment innovation gives insight into the factors that result in mobile payment acceptance. The TAM model, being a model that conveys
satisfaction with a specific innovation implies that people accept new technology because it brings them satisfaction. Banks that are able to facilitate an increasing demand in mobile payment use are able to capitalize on the respective innovation by providing customers with services that are demanded and provide satisfaction.
Wixom and Todd (2005) integrate the TAM model, which is representative of behavioral beliefs and attitudes towards technology, with the user-satisfaction model, being representative of object-based beliefs and attitudes. Defining the TAM being a model of technology acceptance, in terms of customer or user satisfaction.
By synthesizing the two models, the authors distinguish that proposed IT usage, being the behavior of interest in their investigation, is driven by behavioral attitudes. In turn, behavioral attitudes are determined by attitudes towards ease of use and usefulness. Their findings propose that object-based attitudes introduced in the user-satisfaction model, namely information satisfaction and system satisfaction predict behavioral beliefs (use and usefulness) by influencing the way in which information is judged and perceived. These serve as theoretical factors that determine satisfaction with an object. Subsequent level of satisfaction will influence beliefs about the consequences of using that object.
The integrated model stipulates that user satisfaction is directly related to behavioral beliefs and attitudes towards new technology tested in the TAM. This implies that the TAM can be used as an accurate descriptor of customer satisfaction, as theory pertaining to user satisfaction and
technology acceptance can be synthesized and are now interconnected. Establishes a relationship between attitudes towards use of mobile payment services and customer satisfaction.
Bank Customer Perception and Satisfaction
Moutinho and Smith (2000) introduce a model that evaluates the relationship between bank customer attitudes towards both human tellers and automated banking in mediating the ease of banking versus perceived satisfaction. ‘Modeling bank customer satisfaction through mediation of attitudes towards human and automated banking’ postulates a positive relationship between ease of banking and overall customer satisfaction, switching and loyalty behavior. Essentially defining characteristics that customers respond to when choosing their respective banks. Understanding relevant factors that influence bank choice and customer satisfaction in banking is relevant when attempting to understand the implications that payment innovation has on improving customer satisfaction in commercial financial institutions. As factors that determine customer satisfaction also determine switching behavior and loyalty, in turn positively influencing performance.
The authors apply three elements of service processes to their work in order to understand the relationship between customer perceptions and behavior. Namely, the access and convenience a service provides to its customers, the human element involved, and lastly the tangibility of the service (Smith, 2000). Defining interactions with human tellers as human interaction amongst customers and bank employees, where automated tellers could be considered interaction with bank technology.
Empirically testing several hypothesis pertaining to customer perception and behavior regarding bank selection and satisfaction resulted in an explanatory model demonstrating customer behavior and its implications in banking. Their findings show a relationship between ease of banking and convenience, as well as customer satisfaction. Furthermore, a relationship between service delivery and customer satisfaction is distinguished. The testing of several hypothesis, resulted in a conceptual framework defining a positive relationship between bank customer perception (ease of banking), and bank customer perceived satisfaction. The bank customer perceived satisfaction was in turn directly related to bank switching behavior and customer loyalty. Proposing that financial institutions should find alternative strategic routes to improving service delivery, as well as proactively find effective ways to measure and manage customer sustainable satisfaction and retention. An association is defined between the provision of convenient, easy and fast banking services and human and technology based delivery processes (Moutinho & Smith, 2000).
Moutinho & Smith (2000) define a clear relationship between the perception of bank customers and customer satisfaction. Delineating that the ease of banking is the predominant factor influencing bank customer perception. Ease of use or banking being the availability or access of banking services. This implies that retail banks wishing to attain and retain customers, must improve accessibility of banking services in order to improve bank customer satisfaction, by first improving bank customer perception. The implementation of mobile payment innovation could have significant implication for improving bank payment services accessibility. This would in
turn improve customer satisfaction, reduce customer switching behavior, and increase customer loyalty, positively affecting performance both in the short term and the long run due to customer retention. Customers would then be less inclined to look for alternate service providers, either internal or external to the banking sector. Allowing banks to not only provide innovative payment services for customers, but also maintain customer information and provide accurate and profitable services (Levesque & McDougall, 1996).
Levesque and McDougall (1996) identify determinants of customer satisfaction in retail banking, delineating that customer satisfaction and retention are critical for retail bank performance. ‘Determinants of customer satisfaction in retail banking’ empirically established a relationship between service quality and customer satisfaction. Emphasizing that small increases in customer satisfaction and retention rates can have major implications on retail bank profitability (Levesque & McDougall, 1996). They stipulate that major gains in customer satisfaction can likely be attained through improvements in service quality, service features, and customer complaint handling. Defining service quality in terms of core or outcome dimensions of a service (concerning tangibles, responsiveness, assurance, and empathy), and the relational or process aspects of the service (concerning customer judgement of accuracy and dependability). Whereas service feature concern the competitiveness and convenience of the providers offerings, this is greatly influenced by location and perceived differences in ratings, which are often marginal. Competitive loans are accurately provided once banks have accurate information concerning their clients, emphasizing the importance of customer retention. Lastly, Customer Complaint Handling is a major factor that influences customer satisfaction. Customers are likely to switch
to other suppliers, voice concerns, or remain loyal to their suppliers when complaints are existent. Given that customer switching in retail banking is relatively high, it is of significance that retail banks address the concerns of their clients. The authors also emphasize that customer satisfaction could and should be viewed as an attitude. As customers that are satisfied with services are likely to remain with their suppliers. Therefore, higher customer retention, resulting in higher profitability (Levesque & McDougall, 1996).
Their findings show that customer satisfaction is directly based on service quality and aspects of service offerings such as convenience and service specific factors, namely core and relational performance, alongside competitive interest rates and skilled employees. Furthermore, employee-customer relationships and relevant features and benefits of the services provided. Retail banks should avoid customer issues and maximize service quality in order to improve customer satisfaction and customer retention (T. Levesque & G. McDougall, 1996).
Mobile payment innovation is essentially a means to enhance service quality, avoid customer dissatisfaction, improve service features, and provide competitive products to customers resulting in customer retention. It costs customers relatively little to switch to other financial service providers, whereas customer retention has considerable implications for bank profitability. It is therefore in the best interest of managers to implement innovative technologies that can facilitate these factors. Engaging in mobile payment innovation enhances customer satisfaction through the provision of enhanced service quality and service features, and the marginalizing of potential issues concerning customer complaints. Payments are a major source
of revenue for commercial institutions, neglecting providing innovation payment services can result in decreased satisfaction concerning the commercial bank.
Cronin et al. (2000) conceptualize the effects of service quality, satisfaction, and value, on customers behavioral intentions defining the interrelations amongst these variables. The authors defined service value as ‘the overall assessment of the utility of a product based on perceptions of what is given and received’. Satisfaction is defined as the extent that a service evokes positive feelings. On the other hand behavioral intentions have implication on customer retention and lower the rate of customer defection or switching behavior, therefore becoming key to the ability of service providers to generate profits (Cronin et al., 2000).
Their findings propose that service quality has considerable implications towards service value, satisfaction and behavioral intentions of customers. The value of a service correlates positively to the satisfaction attained and the behavioral intention of customers. Lastly, satisfaction only directly influences behavioral intentions of consumers. When applying this to the context of mobile payments, it can be implied that enhancing the value and quality of service payments has considerable implications for the satisfaction attained and behavioral intentions of customers. Furthermore, the enhancement of payment service quality and value has direct implications on customer retention and switching costs in retail banking. It is therefore, in the interest of retail bank managers to improve payment service value and quality to improve customer satisfaction and behavioral intentions.
Customer Switching Behavior in Banking
Athanassopoulos et al. (2000) investigated the behavioral consequences of customer satisfaction in the banking sector. Focusing predominantly on the behavioral responses of customers when customer satisfaction is low. Their investigation delineates several antecedent variables that illicit a behavioral response by customers. The two behavioral responses they discovered overlap with the findings of Moutinho and Smith (2000), namely that customers are likely to engage in switching behavior if they are dissatisfied, or engage in positive word-of-mouth communication when remaining loyal.
The authors define several antecedent variables that elicit a behavioral response. These factors are defined in terms of service quality enhancement, which in turn has considerable implication on customer satisfaction and financial performance. Specifically they found that bank reliability, physical evidence, employee competence, price, convenience, and product innovation significantly influence the behavioral intention of customers. In this case, products innovation is most applicable when measuring the implications of mobile payment innovation integration in retail banking. Establishing that banks depend on product variations and innovation in order to enhance service quality and customer satisfaction, in turn improving financial performance.
Customer Loyalty in Banking
Roger Hallowell (1996) develops a relationship between customer satisfaction and loyalty, consequently a relationship between customer satisfaction and profitability. He Measures customer loyalty in term of bank retention rates, and relationship tenure. Where a measure of
satisfaction was dependent on the responses of customers on a likert scale. Lastly, profitability was measured by investigating changes in return on assets (ROA) and the differences demonstrated between banks that conveyed high customer satisfaction and retention and those that did not.
Hallowell (1996) assumes that there is no reason to assume that higher satisfaction requires net increases in costs over the long term that would reduce projected profit. Conveying that increases in customer satisfaction result higher customer loyalty, but also that increases in customer loyalty directly convey higher bank profitability. Ergo, improving antecedent conditions to customer satisfaction would improve customer satisfaction, in turn loyalty and performance. This corresponds to the aforementioned findings from investigating literature, and implies that if mobile payment services can enhance customer satisfaction, they will also directly enhance firm performance.
Lewis and Soureli (2006) investigate relevant antecedents of customer loyalty in retail banking. Defining customer loyalty in financial services in relation to the length of time a customer has been with a service provider, number of services used and the frequency of service use. They define nearly a dozen antecedent variables to customer loyalty.
Variables relevant to the context of mobile payment service provision and consequential satisfaction and loyalty gains are firstly, customer satisfaction. Defined as satisfaction of
customers with personnel, the core services of the organization, and the accumulated experience of a customers experience. Perceived service quality, being the ability to provide the promised service, and perceived value, being the customer trade-off between perceived benefits and sacrifices. Lastly, service attributes describes the attributes which characterize the bank. The findings show that many of these factors are interconnected, thus a change in one will influence a change in another. Perceived service quality and service attributes were interconnected variables and both improved customer satisfaction, in turn improving customer loyalty. Whereas perceived value directly influences customer loyalty.
Defining antecedent variables to customer loyalty delineates significant aspects that mobile payment services innovation must adhere to in order to improve customer satisfaction and loyalty. Ergo, if data indicates a correspondence with these variables, they can be said to attribute to customer loyalty.
Evidence
Hallowell’s (1996) findings define customer satisfaction as being responsible for upwards of 37% of customer loyalty levels amongst the divisions examined. Furthermore, low-satisfaction divisions were found to increase their ROA from 1.34% to 1.94% when customer satisfaction was increased, having considerable implications for retail bank performance. Therefore, if customer satisfaction can be improved through the integration of mobile payment innovation, it would imply that the enhancement of overall customer satisfaction with payment services would consequently improve loyalty, in turn performance through improved ROA.
Summary
Schierz et al. (2010) defined mobile payment services as being all payments for goods, services and bills authorized, initiated, or realized with a mobile device (Schierz et al., 2010). Iftekhar et al., (2012) Discovering that adoption of electronic payment services, as well as heterogenous payment methods add value to retail payment services, consequently improving retail bank performance and assisting in the establishment of long-term relationships with customers by creating value for customers through payment method integration (Iftekhar et al., 2012).
Yoris and Kauffman (2007) developed a robust evaluative framework that identifies relevant stakeholders through the application of economic theory. Introducing the concept of multi-homing, in which customers adopt payment services that are most contextually feasible and satisfying (Yoris & Kauffman, 2007). Corresponding with Iftekhar et al., (2012) empirical findings that define payment tool heterogeneity as a key contributor to payment service value for both customers and banks, resulting in improved performance. Mobile payment innovation adoption implies that customers are adopting new payment methods, integrating mobile payments would improve payment service heterogeneity and create value for banks and customers (Iftekhar et al., 2012; Yoris & Kauffman, 2007). Service feature provision is a determining factor of customer satisfaction in retail banking (Levesque & McDougall, 1996). Mobile payments, being a service feature in itself implies that its implementation would improves the service features provided by retail banks. Improving customer satisfaction directly through service feature improvement, and payment service heterogeneity with which customer
can engage in multi-homing (Iftekhar et al., 2012; Levesque & McDougall, 1996; Yoris & Kauffman, 2007).
Joseph Cronin et al. (2000) emphasize that enhancing the value and quality of service payments directly improves the satisfaction attained, consequently behavioral intentions of customers. The enhancement of payment service value has direct implications on customer loyalty and switching behavior in retail banking. Iftekhar et al. (2012) reinforces this view by implying that the provision of heterogenous payment services, in this case mobile payments, adds value to payment service provision in retail banking. Implying that integrating mobile payment services could enhance service value in retail banking, resulting in enhanced satisfaction and favorable behavioral intentions.
Schierz et al. (2010) apply the technology acceptance model to the context of mobile payment services. Distinguishing ease of use and perceived usefulness as predominant factors that customers consider when accepting mobile payment innovation. (Schierz et al., 2010). Wixom and Todd (2005) synthesize theories of technology acceptance with theories of user-satisfaction. Implying that accepting mobile payments is a direct indication of satisfaction with this technology relative to existent technologies (Wixom & Todd, 2005). Moutinho and Smith (2000) developed a theoretical framework that postulates a relationship between the perception of bank customers and customer satisfaction. Customer satisfaction would in turn, marginalize switching behavior and enhance customer loyalty. Their framework will be used to determine the effect that
mobile payment services have on improving bank customer perceptions of payment services, its implications for customer satisfaction, and consequential loyalty (Moutinho & Smith, 2000).
Athanassopoulos et al. (2000) identifies product innovation and convenience as relevant antecedents to behavioral responses of customers, and that behavioral responses are dependent on the satisfaction of bank customers. Corresponding to Moutinho and Smith ’s (2000) framework, where the behavioral responses of poor customer satisfaction result in customer switching behavior and diminishing loyalty. Hallowell (1996) developed a relationship between customer satisfaction and loyalty, as well as a relationship between loyalty and profitability a retail banking context. Providing empirical evidence that enhancing customer satisfaction results in enhanced customer loyalty and firm profitability. This corresponds with the findings demonstrated by the aforementioned literature reviewed. The literature therefore defines several associative relationships, namely that mobile payments improves bank customer perceptions and customer satisfaction, eventually leading to increased loyalty, which has positive performance ramifications.
Conceptual Model
The literature review defined core concepts that coincide with Moutinho and Smith’s (2000) framework for bank customer satisfaction. Supporting evidence that mobile payment innovation adoption influences customer perceptions of banking payment services, and influences customer satisfaction with the payment services that banks provide, as well as the direct satisfaction attributed to mobile payment use in retail banks. Resulting in positive implications on customer switching behavior and loyalty concerning the payment services that their retail banks provide. Consequently, improving retail bank performance. Therefore, Moutinho & Smith’s (2000) ‘bank customer satisfaction model’ will be adjusted and placed into a mobile payment context.
Moutinho and Smith’s (2000) model of bank customer satisfaction establishes a relationship between ease of banking and customer satisfaction. Where customer satisfaction directly influences switching behavior and loyalty of bank customers.
Iftekhar et al. (2012) delineated that retail banks provide a number of financial services, where payment services play a major role in revenue generation. The adjusted model initially investigates the influence that mobile payment adoption has on a customers perception of retail bank payment services. The model must therefore be narrowed to the context of bank customer perceptions of banking payment services. The use of mobile payments is a determinant of bank customer perceptions towards payment services provided. The integration of heterogenous and electronic payment methods increases the value of a banks payment services, as customers utilize payment methods that are most convenient and feasible to them at the moment of payment (Iftekhar et al. 2012; Yoris & Kauffman, 2007). Moutinho and Smith (2000) define bank customer perception in term of ease of banking. The adjusted model replaces ease of banking with the use of mobile payments. Schierz et al. (2010) defined antecedent variables that lead to attitudes towards and intention to use mobile payment innovation. The two main variables defined in the TAM that defined whether or not mobile payment technology would be adopted is the intention to use it, and its perceived usefulness (Schierz et al., 2010). This overlaps with Moutinho and Smith’s (2000) ease of banking concept, which was based on technology acceptance literature. Therefore, the perceived ease of use and usefulness of mobile payments are used as antecedent variables to the actual use of mobile payments. As the adoption of mobile payments by customers is due to the customers perception of the relevant technology as contributing to their satisfaction and convenience (Moutinho & Smith 2000; Wixom & Todd, 2005; Yoris & Kauffman, 2007). This is done in order to investigate the influence that mobile payment innovation exerts on the perception of bank customers with regard to payment services.
Convenience and ease of use is the premise of the ease of banking function as defined by Moutinho and Smith (2000). Perceived usefulness and perceived ease of use are antecedents to mobile payment innovation adoption; demonstrating satisfaction with its use (Moutinho & Smith, 2000; Schierz et al., 2010 ;Wixom & Todd, 2005). Therefore, they replace the original ease of banking function, where the use of mobile payments replaces traditional payment methods, improving ease of banking (Moutinho & Smith, 2000; Schierz et al., 2010 ;Wixom & Todd, 2005). The use of mobile payments also improves convenience and value as customers have additional and innovative features with which they can engage in with multi-homing, contributing to their overall satisfaction (Iftekhar et al. 2012; Levesque & McDougall, 1996; Moutinho & Smith, 2000; Yoris & Kauffman, 2007).
Literature postulates that if customers choose to use mobile payment services, they will perceive their bank negatively if these services are not provided, as the service that brings them superior satisfaction is not provided. Directly influencing their overall perception of customer satisfaction (Iftekhar et al. 2012; Schierz et al., 2010 ;Wixom & Todd, 2005; Yoris & Kauffman, 2007). Additionally, the value of the payment services provided by their retail bank would be relatively lower (Iftekhar et al. 2012; Cronin et al., 2000). A lack of features demonstrates marginalized customer satisfaction (Levesque & McDougall, 1996). This view is supported by Cronin et al. (2000), as the value of services provided directly influences customer satisfaction, consequently the behavioral intentions of customers. If customers choose to adopt mobile payments, and these services are provided by their retail banks, they will perceive the payment services of their retail banks as valuable (Cronin et al., 2000; Iftekhar et al. 2012; Yoris & Kauffman).
The provision of technological innovation that provides satisfaction and the perception of bank payment services as valuable will lead to customer satisfaction regarding payment services provided (Cronin et al., 2000; Moutinho & Smith, 2000). The adjusted model assumes that mobile payment innovation creates value for customers that use mobile payment services, ergo enhancing customer satisfaction with payment services at their retail bank. The adoption of mobile payment innovation is due to the feasibility of the payment service contrary to other payment services, thus the adoption of mobile payments assumes customer satisfaction regarding its usage (Schierz et al., 2010 ;Wixom & Todd, 2005). This assumption is supported by Levesque and McDougall (1996), stipulating that providing service features enhances customer satisfaction, in this case the relevant service feature is mobile payment services.
Cronin et al. (2000) establish that customer satisfaction determines the behavioral intentions of customers. Moutinho and Smith’s (2000) model determines that the behavioral intentions of customers determines engagement in switching behavior or loyalty, and that customers who do not switch, express loyalty. Athanassopoulos et al. (2000) reinforce this view; providing service innovation and convenience of service provision as antecedent variables to loyalty and switching behavior in retail banking. In this case, mobile payment innovation adheres to the concepts of convenience and innovation services delineated. The aforementioned literature overlaps with Lewis and Sourly’s (2006) investigation of the antecedent variables of customer loyalty in retail banking. As integrating mobile payment innovation should enhance the service attributes and perceived value of services, improving customer satisfaction, consequently improving customer
satisfaction. Customer satisfaction is empirically shown to improve customer loyalty levels by 37% and improve a retail banks profitability by increasing ROAs (Hallowell, 1996).
The adjusted model starts by investigating the influence that mobile payment innovation has on improving the value of payment services. The provision of useful and easy to use mobile payment services enhance value of payment services by improving the heterogeneity of service features and convenient payment services (Schierz et al., 2010 ;Wixom & Todd, 2005 ;Iftekhar et al. 2012; Yoris & Kauffman, 2007), in turn improving the bank customer perception of the respective payment services, as value for both the retail bank and customer is created (Iftekhar et al. 2012; Yoris & Kauffman, 2007). The provision of mobile payment services provides superior satisfaction versus traditional payment methods, contributing directly to customer satisfaction (Schierz et al., 2010 ;Wixom & Todd, 2005). Whereas, improved payment service value improves customer satisfaction with the payment services of the retail bank (Cronin et al., 2000; Iftekhar et al. 2012; Moutinho & Smith, 2000). Resulting in favorable behavioral intentions of customers (Cronin et al., 2000). As customers will not engage in switching behavior in order to seek mobile payment services external of their retail banks, and will express satisfaction with the variety of payment services provided; improving convenience, (Athanassopoulos et al. 2000; Cronin et al., 2000; Moutinho & Smith, 2000) leading to improved loyalty (Athanassopoulos et al. 2000; Hallowell, 1996; Lewis & Sourly, 2006). Customers who engage in multi-homing will be satisfied with the diversity and provision of innovative services that enhance value, as customer are able to choose amongst payment services (Athanassopoulos et al. 2000; Levesque & McDougall, 1996; Lewis & Sourly, 2006; Yoris & Kauffman, 2007), translating into customer
satisfaction, thus loyalty and reduced switching behavior (Cronin et al., 2000). Consequently improving firms performance (Athanassopoulos et al. 2000; Iftekhar et al. 2012; Hallowell, 1996).
Data and Method Design
Developing a conceptual model that explains the effects of mobile payment services on payment innovation and customer satisfaction will be developed through the reviewing of literature. In turn, data collected from databases and empirical literature will be collected to empirically support the conceptual model and strengthen its practical relevance.
Defining a conceptual model allows for an explicit demonstration of relationships. This is done through reviewing literature and distinguishing relationships through the investigation of several core concepts, namely retail banking and payments, financial technology innovation, technology acceptance, bank customer perception and satisfaction, customer switching behavior, and customer loyalty. Identifying empirically established theoretical relationships allows for their translation into conceptual relationships, and its adaption to the context of this investigation. This will be translated into a conceptual model that will form the premise of this investigation. The conceptual model developed will build on Moutinho and Smith’s (2000) model of bank customer satisfaction. Which establishes a basis for the understanding of customer behavioral intentions pertaining to customer satisfaction and the perception of the relevant retail banks. The investigation of core concepts will allow for an adjustment of the model so as to place it in a mobile payment context. Where the effect of mobile payment innovation on perceived value of payment services, in turn satisfaction and consequential behavioral intentions of customers is investigated.
Adjusting Moutinho and Smith’s (2000) conceptual model through the reviewing of literature will be followed by empirical data collection. Data collection allows for empirically supported conceptual model, and its placement into a relevant and contemporary context. Although the theoretical relationships established in the conceptual model are empirically tested. Several have not been defined in a mobile payments context. Accumulating data allows for the placement of these relationships into this relevant context, and supports the validity of these relationships.
Several research institutions regularly publish empirical reports concerning mobile payment innovation. This investigation uses upwards of seventeen public reports pertaining to mobile payments which have been based on surveys and interviews of mobile payment users, non-users, financial and commercial institutions, as well as reports based on market research. These reports alongside empirical literature will provide the data necessary to empirically and contextually support the conceptual model. The following table summarizes the reports that will be utilized in the analysis, the data they provide, and the relevance of their data to the investigation.
Data, Source, and Relevance Overview
Source Data Relevance
Accenture (2014) Accenture (2014) Accenture (2013) Accenture (2013)
- Statistical (projected and historical) growth and decline of different payment methods - Surveys regarding changing
customer perceptions and needs concerning payments
Changing trends and growth of payment methods necessary to evaluate significance of mobile payment use to retail banks and satisfaction derived from diversified payment method use.
Bain & Company Inc. (2012) Bain & Company Inc. (2014) Bain & Company Inc. (2014)
- Behavioral Patterns of mobile payment users
- Statistical determinants of loyalty in retail bankings
- Distribution of bank priorities
Loyalty determinants corresponding with theory will support relationship between satisfaction and loyalty. Also defines value contributing factors of banking payment services by customers
Boston Consultancy Group (2013)
- Data concerning payment revenue growth
- Payment revenue statistics for retail banks
- Projected payment method revenue growth statistics
Important for delineating performance implications of customer satisfaction with payment services. Specifying importance of mobile payment innovation to potential retail bank revenue. Deloitte (2012) - Mobile payments user growth and
forecast growth Supporting evidence concerning customer satisfaction and growth of mobile payment services.
Ernst&Young (2010) - Survey results displaying trends, statistics, and reasons concerning bank customer loyalty
- Bank customer relationship concerning products and services
Data supporting importance of payment service diversification and determinants of loyalty. Conformity with literature will support this relationship.
The Federal Reserve (2014) The Federal Reserve (2015)
- Interviews of mobile payment users and non-users
- Define reasons for mobile payment use amongst consumers
If their data corresponds to the antecedent variables defined in literature pertaining to the use of mobile payments; a relationship can be established.
McKinsey (2012) - Trends concerning retail bank and customer orientation concerning payments
Supporting evidence concerning payment service value enhancement do to mobile payments integration. Ovum (2015) - Institutional research delineating
common demands customers have from institutions
Supporting evidence concerning payment service value enhancement do to mobile payments integration. Statista (2015)
Statista (2015) Statista (2015)
- Mobile payments user and volume growth and forecasted growth - Growth of mobile payment
providers (e.g. PayPal)
Supporting evidence for performance implications of not implementing mobile payment services into retail banking.
This paper attempts to theoretically construct a conceptual model, in turn empirically supporting the theoretical relationships established. Supporting theoretical relationships with data from research institutions will test whether or not these theoretical relationships stand when placed in an empirical and contemporary context. The analysis of data will be done by structuring the investigation in order to provide supporting data to the relationships established in the conceptual model. Any deviations from the model developed previous to the analysis will be adjusted in the discussion of the results.
Analysis
There were an estimated 7.4 million mobile payment users in Europe and North America in 2009, this figure has grown to 129.6 million users by 2015, and is expected to grow by another 30 million by 2016, the majority of these users used mobile payment services for retail payments (Statista, 2015; Deloitte, 2012). Growing adoption of mobile payment innovation and its implications on bank customers perceptions and satisfaction, followed by consequential effects on customer behavioral intentions is the focus of this paper. Growing adoption of mobile payments implies that customers are finding these services increasingly feasible and satisfactory. The findings will be discussed throughout the analysis in terms of the theoretical variables defined in the conceptual model. The tables presented summarize the data acquired, its relevance, and the relationships they have with the theoretical variables established.
General Data
Year 2010 2014 (Projected) 2016
Mobile Payment Transaction Volume Growth (per Billion $)
52.9 325.2 563.4
US & EU Mobile Payment User Growth
(in Millions)
18.7 105.5 151.1
Paypal Annual Volume Growth (per Million $)
750 46.000
Relationship Data Relevance Source Use of Mobile
Payments
- Determinant of mobile payment use: US UK Ease of use 57% 34% Convenience - 25% Speed 53% 23%
- Survey data defining determining factors of mobile payment use. - Confirms EoU and
PU relationship to mobile payment use - Statistical relationship US Federal Reserve, 2014 US Federal Reserve, 2015 Bank Customer Perception of Payment Services - Decreased use of traditional payment methods by 2020 Cash -41% Checks -43% ATM -43% - Increase in alternative payment methods: 28.529% - 31% of retail banks
do not provide mobile payment services - 79% of institutional employees believe customers want variety in payment tools
- Survey and market research data defining increasing use of heterogenous payment methods and decreased use of traditional payment methods implying replacement - statistical and associative relationship Accenture, 2013 Bain&Co, 2014 Ovum, 2015 US Federal Reserve, 2014 US Federal Reserve, 2015 Perceived Satisfaction with Payment Services
- mobile payment use in retail relative to alternative payment methods: US: 2.1 GER: 1.5 UK: 2.4 FRA: 1.3 SPN: 1.6 (in terms of amount paid)
- 20% of users adopt mobile payments are replacement for traditional payment methods - Indicative of multi-homing practice. Supporting evidence of customer satisfaction with payment diversity. - statistical and associative relationship Bain&Co., 2014 Wixom & Todd, 2005 Yoris & Kauffman, 2007
Use of Mobile Payments
Research instigated by the US Federal Reserve delineates the main reasons for mobile payment use in both the UK and the USA. Their findings define that the three most-cited reasons related to the use of mobile payments in the UK were its ease of use (34%), overall convenience (25%), and speed (23%). Surveys from the US conveyed that 57% and 53% of US customers would adopt mobile payment services due to its ease of use, and speed respectively (US Federal Reserve, 2014, 2015). Thus perceived ease of use is a major factor in the adoption of mobile payment services. In this case the perceived usefulness, being the provided unique advantage compared to existing solutions, would be the speed and convenience of mobile payment services
Switching Behavior and Loyalty - 24% of European customer switching banks, 10% between 2008 and 2010 - Determinants of switching behavior: (lack of) service features: 9% innovation: 5-20% service delivery: 25% diversity: 25% - 65% of customers adopt 4 or less products at their main bank - Relevant empirical determinants corresponding with theoretical determinants of loyalty distinguished, implying switching when mobile payments not provided. Statistical extent to which is not deduced - Associative relationship Bain&Co, 2014 Ernst&Young, 2010 Performance - 40% of revenue generated from payments - mobile payment revenue forecasted growth at 6% p.a. - MP revenue growth forecast: 2012 - 2022: $460 Billion - 10% increase in
Herfindahl index for payment instruments translates to -0.18% ROA, -1.17% ROE - Implies a statistical relationship between heterogenous payment services and bank performance - growth of mobile payments indicates revenue generation - Statistical relationship between satisfaction with payment services and loyalty not distinguished
Accenture, 2014 BCG, 2013
Iftekhar et al., 2012 Statista, 2015
provides contrary to other products. Both perceived ease of use and perceived usefulness of mobile payment services are significant determinants of mobile payment use. Establishing that these two factors directly effect eventual mobile payment use as stipulated in the conceptual model.
Bank Customer Perception of Payment Services
Surveys directed at key payment service players namely retailers, billing organizations and financial institutions found that 79% of respondents believed that consumers want a broader choice of payment tools (Ovum, 2015). This is reinforced by consumer trends indicating that demand for mobile payment services alongside other contactless payment methods is estimated to grow by 28.529% by 2017, with an estimated seven billion transactions per annum. Whereas cash, checks, and ATM withdrawals are estimated to decline by 41%, 43% and 43% respectively (Accenture, 2013). Thus consumers are stepping away from traditional payment methods and adopting a multitude of different payment tools. Looking to adopt heterogenous payment methods to apply in different contexts depending on their relative ease of use and usefulness (Accenture, 2013; Ovum, 2015; US Federal Reserve, 2015). Considering that 59% of mobile payment users prefer to have their payment providers be their established retail banks (Accenture, 2015), and that heterogeneity of payment methods is increasingly valued; customers increasingly attribute value to the diversity of payment services that their retail banks provide (Accenture, 2013; Ovum, 2015). This is due to customer engagement in multi-homing practices, where the use of a payment method is dependent on its contextual feasibility. Increasing payment tool diversity increases value of payment services as customers can choose between payment
tools that are most feasible to them (Yoris & Kauffman, 2007). The speeding adoption of innovative retail payments implies that customers are seeking to adopt these payment methods, and prefer to do so from their retail banks. Despite this, 31% of retail banks are still waiting to invest in mobile payment innovation, while other retail banks are slow to implement these services (Bain&Co, 2014).
Decreasing use of traditional payment methods, and increased adoption of heterogenous payment tools implies that customers attach more value to payment method variation with which they can engage in multi-homing practices. This establishes that heterogenous payment tool provision improves the value attributed by customers to the payment services provided by banks, consequently improving bank customer perceptions of payment services. Furthermore, the prospective and historic growth of mobile payment use indicates that customers do and will increasingly attribute value to mobile payment services as they become increasingly utilized. Although it is evident that a relationship exists between mobile payment use and bank customer perception as defined in the conceptual model, the extent to which mobile payments explicitly define bank customer perceptions of payment services is not determined, and may differ per customer and per bank.
Perceived Satisfaction with Payment Services
Customers that adopt mobile payments are likely to pay 2.1 and 2.4 times more money in retail than customers who do not use mobile payment services in the US and UK respectively. This trend is reflected to a marginally less extent in Germany, France and Spain with 1.5, 1.3, and 1.6
times more retail spending than non-mobile payment users respectively (Bain&Co., 2014). With up to 20% of users adopting mobile payment services as replacement for traditional payment services (Bain&Co., 2014). This is indicative of the concept of multi-homing, where customers adopt different payment methods in different contexts depending on its relative feasibility (Yoris & Kauffman, 2007). The application of mobile payments as an alternative payment method reflects this, indicating that the majority of mobile payment users apply mobile payments in retail contexts as replacement for traditional payment methods provided by retail banks. Adoption of new payment innovation is the distinguishing of services that provide more satisfaction opposed to existing payment mechanisms (Schierz et al., 2010; Wixom & Todd, 2005). Mobile payment use provides more satisfaction to customers then alternative payment methods as indicated by its application in multi-homing and use as a substitute for existing payment services. Specifically, customers that use mobile payments are more likely to spend more in retail, implying that mobile payment users use these services predominantly in retail (Bain&Co., 2014). Decreasing use of traditional payment methods and increasing use of new payment methods implies that customers attain more satisfaction with the utilization of new technology opposed to old technology (Wixom & Todd, 2005). This reflects the relationships developed in the conceptual model, where the use of mobile payments is directly responsible for improved customer satisfaction as customers adopting mobile payments do so due to superior satisfaction attained from its use opposed to using other payment methods. Improving bank customer perceptions also improves customer satisfaction with payment services as customers are able to choose amongst payment services that provide them the most satisfaction.
Switching Behavior and Loyalty
The 2008 economic downturn resulted in increased switching behavior amongst bank customers. Increasing demand for personalization and customizable products in retail banks has led to lower customer loyalty and increased switching behavior, with 24% of European customers changing banks, 10% between 2008 and 2010 alone (Ernst&Young; 2010). Several factors determine customer engagement in switching behavior, those corresponding to mobile payment acceptance are delineated in this section.
A correlation is evident among retail banks leading in customer loyalty and the provision of mobile and internet banking services in developed countries (Bain&Co., 2012). In the US, 9% of customers were likely to either recommend or dissuade other customers from choosing a certain bank based on product feature decisions, in this case the product or service feature of relevance are mobile payment services that enhance overall payment features. Where 5% of customer were more likely to dissuade others when product features were not provided (Bain&Co., 2012). The majority of Europeans bank at several retail banks, with 65% of customer adopting 4 or less products at their main bank; depending on other institutions for the provision of their products or services (Ernst&Young; 2010). 5% and 20% of leaving clients have chosen to leave their retail banks due to lack of innovation and service failings respectively. 25% stating a lack of service delivery and personalization, and 25% stating that diversity play a major role in their relationship with their bank (Ernst&Young; 2010). Data demonstrated in the table above delineates the growing rate of mobile payment innovation adoption and the value attributed to innovative payment methods opposed to the diminishing demand of traditional payment methods.
Multi-homing explicates that customers are able to personalize their payment methods based on contextual feasibility/ Mobile payment provision strengthens a customers ability to personalize their payment method on a contextual basis. Not providing mobile payment services will result in customers engaging in switching behavior, either to other banks or players external to the banking sector, with lack of innovative product provision and failing to provide demanded services playing a major role (Ernst&Young, 2010). Ergo, customers dissatisfaction with a lack of innovative, personalized and convenient services will engage in switching behavior, opposed to loyalty. This relationship is delineated through survey research, and corresponds to the theoretical antecedent variable defined for customer loyalty and switching behavior. On the other hand, banks that provide innovative, personalized, and convenient services will see customers express loyalty. This is reflected in the behavior of omnichannel customers, being customers that engage in multiple shopping channels. These customers demonstrate 16% more satisfaction with banks that provide heterogenous services (Bain&Co., 2014).
Research instigated by Bain & Company (2012) and Ernst & Young (2010) demonstrate that lack of convenient, personalized, innovative products and service features influence customer loyalty. Satisfaction with payment services conform to the determining factors of loyalty. Therefore, satisfaction with mobile payments and payment services in retail banks and expressed loyalty or switching behavior can be defined through association, as factors determining loyalty and switching behavior correspond with factors determining mobile payment use and satisfaction with payment services. This is supported by data defining the extent of switching behavior of bank customers due to service accessibility. A statistical relationship determining the extent to
which satisfaction with payment services influences customer switching behavior and loyalty cannot be determined, the data does however indicate that it is existent. This could not be determined as investigations pertaining to customer satisfaction focus predominantly on the determinants of loyalty and switching behavior opposed to the deconstruction of satisfaction inducing services that banks provide.
Performance
Transaction focussed retail banks generate upwards of 40% of their revenues from noncredit business through their diversified product mixes (BCG, 2013; H. Iftekhar et al., 2012). In 2010, 52.9$ billion went through mobile payment services, 2014 saw 324.2$ billion, and mobile payment volume is forecasted to grow to 721.4$ billion by 2017 alone (Statista, 2015). While forecasted transaction related mobile payment revenue is estimated to grow from 249$ billion in 2012 to 460$ billion in 2022; a 6% growth per annum (BCG, 2013). Yet, a great deal of mobile payment volume does not go through retail banks. Square, iZettle, SumUp, PayPal, etc. enable buyers to pay merchants via mobile payment mechanisms (Accenture, 2014). PayPal being the biggest has seen mobile payment volume growth from $25 million in 2008, to an estimated $46 billion in 2014 (Statista, 2015). Indicating that retail banks are slow to capitalize on mobile payment innovation. The largest players in mobile payments are external of the banking sector, despite the majority of customers seeking their payment services in retail banks (Bain&Co, 2014). Customer payment technology adoption increases competition, diminishing returns for firms that do not also diversify their payment services (Iftekhar et al., 2012). A 10% increase in the Herfindahl index for payment instruments translates into a 0.18% decline in return on assets,
