As mobile payments become increasingly popular, their ecosystem is also evolving. The participation of financial institutions in this ecosystem, although is rapidly improving, remains relatively low. This paper studies why some financial institutions choose to, or not to, participate in this nascent mobile payments ecosystem. We developed hypotheses for the influence of three factors as aspiration gaps, customer-facing IT capabilities, and institutional pressures based on three theoretical foundations including the threat rigidity thesis, capability-based view, and institutional theory. We then empirically tested our hypotheses by analyzing the diffusion of mobile payments among 3549 U.S. credit unions from 2013 to 2016. Results from our event history analyses provide support to the hypotheses that credit unions experiencing performance gaps, having superior customer-facing IT capabilities, and facing strong institutional pressures are more likely to start providing mobile payment services.
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These 19 services include (1) Member Application; (2) New Loan; (3) Account Balance Inquiry; (4) Share Draft Orders; (5) New Share Account; (6) Loan Payments; (7) View Account History; (8) Merchandise Purchase; (9) Share Account Transfers; (10) Bill Payment; (11) Download Account History; (12) Electronic Cash; (13) Account Aggregation; (14) Internet Access Services; (15) Electronic Signature Authentication/ Certification; (16) e-Statements; (17) External Account Transfers; (18) Merchant Processing Services; and (19) Remote Deposit Capture. The names of these services are from the original NCUA report form.
Our observations are also left censored, in that NCUA mandated the reporting of mobile payments from credit unions since 2013Q3. For the 261 credit unions who had provided mobile payment services at 2013Q3, we do not know whether their service was just launched in that quarter or before. However, as explained later in the model specification, because we require two quarters of time lag in our model, the events in 2013Q3 and 2013Q4 were dropped anyway because of the lack of precedent quarterly observations, and thus the left censoring of data does not affect our analyses.
It is worth noticing that, because credit unions mostly serve only a selected group of customers based on their “common bond,” different credit unions will have less overlap in their customer bases, and consequently the competition among credit unions are less direct than in other financial industry sections such as retail banks. Thus, as we discussed, peer credit unions’ decision creates more institutional pressure than direct competitive pressure on the focal credit union.
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Du, K. Complacency, capabilities, and institutional pressure: understanding financial institutions’ participation in the nascent mobile payments ecosystem. Electron Markets 28, 307–319 (2018). https://doi.org/10.1007/s12525-017-0267-0
- Mobile payment
- Credit union
- M15 IT Management