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Analysis of electronic micro-payment market

Research output: Contribution to Journal/MagazineJournal articlepeer-review

  • Eric W. K. See-To
  • Jeevan Jaisingh
  • Kar Yan Tam
<mark>Journal publication date</mark>2007
<mark>Journal</mark>Journal of Electronic Commerce Research
Issue number1
Number of pages21
Pages (from-to)63-83
Publication StatusPublished
<mark>Original language</mark>English


Despite the potential of micro-payment systems very few systems have been successful. Little is known about the reasons behind the successful few and the failures of the majority. Micro-payment markets exhibit two-sided network effects and the underlying dynamics of these markets are not very well understood. Based on a stylized model of a two-sided market, we find that a 'survival mass' of merchants and consumers is required for a micro-payment system to exist and a 'critical mass' for the acceptance levels to take off and remain stable. We also find the non-intuitive result that lowering the consumer-side adoption cost will actually reduce the chances for the micro-payment market to develop. Thus, subsidization alone cannot create a micro-payment market. Anecdotal evidence supports this finding. When subsidization is needed, the consumer side will normally be subsidized. The two-sided market structure makes comparative analysis complex and non-trivial, rendering the implementation of micro-payment systems very difficult as indicated by the mixed results of a number of initiatives worldwide.