The microeconomics of mobile payments

Abstract

In this paper, a Kranzberg [32] - Lancaster [34] approach is employed to investigate the microeconomics of mobile payment methods. The adoption of these technical innovations depends, among others, on the acceptance by consumers that can be analyzed with a Lancaster characteristics demand. With a Kranzberg technology matrix, the technical and institutional details of payments can be transformed into salient characteristics of payment instruments that are relevant for Lancaster demand of payment methods. While cash and card-based payments are mostly Kranzberg-complete technologies, novel forms and means of mobile payments lack certain features, i.e., they are Kranzberg-incomplete innovations. Mobile payments are incomplete concerning technical, institutional and regulatory details. As a consequence, this incompleteness may result in a lack of acceptance on the side of consumers since certain salient characteristics of payment methods are not fully developed. In particular, mobile payments are neither widely accepted by merchants, nor are consumers’ data and privacy protected. Kranzberg-completion of novel mobile payments is required to make them universally successful.