5/1/2019 technology adoption in Singapore Yu.pdf · perspectives of leapfrogging and technology...
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5/1/2019
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Mobile payment technology adoption in Singapore: Are Alipay’s strategies and leapfrogging phenomenon replicable? Master Project – YU Xinlu
Supervisor: Mr HARFOUCHE Antoine EDHEC BUSINESS SCHOOL
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Abstract
Purpose – The purpose of this paper is to analyse the mobile payment development from the
perspectives of leapfrogging and technology adoption in Singapore and China. It also aims to
evaluate Alipay’s strategies and competitive advantages.
Methodology – A five-month research is conducted based on research papers, books, databases,
company documents and published articles on the related topics. A survey of 53 samples and
interview of experts and experienced users of mobile payments are primary reference sources.
Findings – The paper illustrates that the leapfrogging to mobile payment in China is an
inevitable success because of the favourable environments and the competitive advantages of
Alipay as a leader. The other finding is that although Singapore fulfil the preconditions for
leapfrogging, governmental supports and Alipay’s adjusted strategies are still needed to allow
the leapfrogging and accelerate the mobile payment technology adoption in Singapore.
Research limitation/ implication – Although the research is limited to the case of Alipay, it
provides the in-depth insights of environmental, organizational and consumer factors that
contribute to the leapfrogging to mobile payment and international technology adoption.
What’s more, the paper combines different theories on leapfrogging, technology adoption,
environmental and organizational advantages to create a theoretical overview of the topic.
Practical implication – The implication is that consumers’ attitude, especially consumers’
need and perception of the technology, is the constraint or facilitator of the technology adoption
and leapfrogging. What’s more, for international technology adoption in leapfrogging situation,
the exporting company might encounter country-of-origin bias and cannot utilize its advantages
that have been developed in its original country. Company’s strategies should address to local
clientele and overcome the gaps between country of origin and the new market.
Keyword – leapfrogging, mobile payment, technology adoption, Alipay, international
expansion, Singapore
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Acknowledgement
I would first want to thank my thesis supervisor Associate Professor of Information Systems
and Data Analytics of Management and Strategy Department at EDHEC Business School. His
advice and insights are always helpful for me on my research. He allowed me to work on my
thesis by myself, but gave me the right direction whenever I needed it.
I would also thank Vicky Nie, instructor at MacEwan University, for giving me the inspiration
and initial support for my thesis topic. Also, I would like to thank Ziyuan Liu, a software
engineer at eBay, for providing me with technical and industrial insight on online payment.
What's more, thanks for all the support from my professors and classmates.
Finally, I must express my gratitude to my parents for supporting me no matter how throughout
my master program. This accomplishment cannot be achieved without them. Thank you!
YU Xinlu
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Mobile payment technology adoption in Singapore:
Are Alipay’s strategies and leapfrogging phenomenon replicable?
Table of Contents
Chapter 1 Introduction .................................................................................................... 4 1.1 Objective and Scope of Research ....................................................................................... 4 1.2 Organization of research .................................................................................................... 6 1.3 Research Methodology and Data Collection ....................................................................... 6
Chapter 2 Literature Review ........................................................................................... 8 2.1 Leapfrogging concepts and theories ................................................................................... 8
2.2.1 Leapfrogging in international level ....................................................................................... 9 2.2.2 Economic growth, leadership and capital flows: the leapfrogging effect ............................ 10
2.2 External and Internal analysis of the organization ........................................................... 11 2.2.1 The relational organization of entrepreneurial ecosystem ................................................... 11 2.2.2 Competitive Advantages...................................................................................................... 12
2.3 Technology Adoption Theories and Models ..................................................................... 13 2.3.1 Context Screening: Technology, Organization, and Environment Context (TOE) ............. 13 2.3.2 Adoption Process Evaluation: Roger’s Diffusion of Innovation(DIT) theory..................... 14 2.3.3 Technology Acceptance Model (TAM)............................................................................... 14
Chapter 3 Analysis of leapfrogging effect in Chinese mobile payment ........................... 16 3.1 Macro Environment: PESTEL Analysis .......................................................................... 16 3.2 Micro Environment analysis – Entrepreneurial Ecosystem.............................................. 19 3.3 Company analysis: VRIO analysis of Alipay .................................................................... 23
3.3.1 Introduction of Alipay ......................................................................................................... 23 3.3.2VRIO Analysis of Alipay ..................................................................................................... 23 3.3.3 The relationship of Alipay’s performance and competitive advantages .............................. 26
Chapter 4 Leapfrogging effect and Alipay’s technology adoption in Singapore ............. 28 4.1 Situation Analysis of Singapore ....................................................................................... 28
4.1.1 Micro and macro environment analysis ............................................................................... 28 4.1.2 Mobile Payment in Singapore ............................................................................................. 30
4.2 Theory application and assessment .................................................................................. 32 4.2.1 Mobile payment leapfrogging in Singapore ........................................................................ 32 4.2.2 Context screening for Alipay’s technology adaptation in Singapore .................................. 35 4.2.3 Factors affecting Alipay technology adoption ..................................................................... 39
4.3 Recommendations ............................................................................................................ 43
Conclusion ...................................................................................................................... 46
Bibliography .................................................................................................................. 47
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Chapter 1 Introduction
1.1 Objective and Scope of Research
This paper aims to investigate the replicability the leapfrogging phenomenon from cash
payment directly to mobile payment and to assess Alipay internationalisation strategies in
Singapore by reviewing the hypothesis that the leapfrogging theory can be applied to the mobile
payment development in Singapore.
China has become the world leader in mobile payment with the full usage of WeChat pay or
Alipay in almost every transaction in both online shopping and physical store shopping by
simply scanning the QR code. “According to the research firm eMarketer, 76% of Chinese
smartphone users made a mobile point-of-sale purchase in 2017, compared with 25% of
American users. In total, 61.8% of all such transactions globally are Chinese (Engen, 2018).”
It is no doubt that China has seen great success in the mobile payment business.
In this context compels the questions: What are the factors contribute to the success of mobile
payment development in China? Is the success inevitable or occasional?
This thesis discovers both external and internal factors of the achievement of mobile payment:
the ecosystem in China and Alipay’s competitive advantages. China leapfrogged developed
countries where a mature credit card system exists. The payment method swift directly from
cash payment to mobile payment, skipping the stage of credit card payment. What’s more,
compared to other developing countries, China has a great popularity in mobile payment. This
thesis also discusses how the leapfrogging phenomenon applied to Chinese mobile payment
development through the literature review of the leapfrogging theory in the field of international
competition (Brezis, Krugman, & Tsiddo, 1993). What’s more, the thesis also analyses the
factors that contributed to Alipay’s leader position in mobile payment.
Chinese mobile payment companies such as Alipay and WeChat are so successful that they
start expanding their business oversea recently. As the leading country in Southeast Asia,
Singapore become one of the most important market in their internationalization strategies.
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“Though Singapore has an advanced payment card environment, the card usage remains low
(GlobalData Financial Services, 2017).” As a country where cash payment is still the major
payment method, Singapore might see the same leapfrogging phenomenon after the mobile
payment has entered the market. This thesis discusses the replicability of the leapfrogging
phenomenon by researching and analysing the Singaporean market and its environment from
the perspective of leapfrogging process and capital flow.
Alipay, the mobile system of Alibaba’s financial affiliate Ant Financial enter the Singaporean
market as part of its international expansion strategy. With the increasing Chinese tourists
travelling oversea, Alipay also sees the growth in its oversea market (Brennan, 2019). Among
the top 10 Alipay oversea spending markets, “Singapore was ranked seventh, with the average
spending per Alipay user amounting to SG$352.35. The number represents a 32% average jump
in spending per Alipay user and a 320% total increase in spending (Tan J. , 2018).” However,
the target customer should not only be the Chinese tourists but also the Singaporeans so that
Alipay can increase its brand awareness and market share. To achieve sustainable growth,
Alipay might need to revolutionize the Singaporean payment industry by taking advantages of
the leapfrogging phenomenon and its experience to scale up the mobile payment business in a
cash-oriented country. The thesis discusses how Alipay can take advantages of the Singaporean
cash-oriented situation and lead the leapfrogging swift to mobile payment. The paper also
suggests recommendation to better adopt mobile payment technology in Singapore from the
perspectives of cross-country technology adaptation and consumers’ attitude toward
technological adaptation.
There are seven types of mobile payments: SMS payments, direct mobile billing, mobile web
payments, QR code payment, contactless near field communication, cloud based mobile
payment and audio signal mobile payments (ICEMD, 2014).This paper focuses on mobile web
payment and QR code payment since these two categories better applied to leapfrogging
concepts and are Alipay and its competitors’ main services.
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1.2 Organization of research
To better address to questions of replicability of the leapfrogging phenomenon and assess the
Alipay’s strategies of international technology adaptation in Singapore, a thorough study of
theory explication, strategic analysis, model application and environment analysis is presented
in four chapters.
After the introduction, the paper starts from the literature review of the theories related to the
research aim. These theories, concept and models are covered in the field of leapfrogging
process, market and countries analysis, and technology adaptation.
In the following chapters, the development of Chinese mobile payment is analyzed on macro
and micron environment level. Based on the PESTEL analysis and the Relational Organization
of Entrepreneurial Ecosystems (Spigel,2015).
Given the context presentation of Chapter 3, the last chapter addresses to the main questions of
the paper with a presentation of the current situation in Singaporean mobile payment market,
examines the possibility of leapfrogging to mobile payment in Singapore, evaluates Alipay’s
strategies in technological adaptation. At the end of this chapter, strategic recommendations for
Alipay’s international expansion in Singapore are given.
1.3 Research Methodology and Data Collection
The paper is mainly based on Alipay case. Interview of experts and experienced users, and
customer insight survey in the industry as primary literature. Other sources are regarded as
secondary literature as they only discuss the related topics and theoretical models, and provides
a deeper overview of the mobile payment industry. These additional sources include research
papers, books, databases, company documents and published articles on leapfrogging concepts,
Chinese and Singaporean environment and entrepreneurial ecosystem, the technology adoption
strategies of Alipay in Singapore, case study of mobile payment development and consumer
insight of the mobile payment industry.
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A survey is conducted to examine the Singaporean consumers’ insight by combining the
theories related to the topic. The survey is performed through Google Surveys with a randomly
selected sample size of 53, targeting all the Singaporean residents over 18 years old on websites,
and in the Google Survey Publisher Network. The method is convenience sampling, meaning
the respondents are conveniently available to participate the survey. The survey also used
weighting methodology. The age, gender, and religious distributions of the respondents are
matched with those of the population in Singapore.
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Chapter 2 Literature Review
Since the purpose of this master project is to evaluate the precondition of leapfrogging effect,
and how can Alipay duplicate the leapfrogging effect through successful technology adoption
strategies in Singapore. Researches on leapfrogging, external environment, internal competitive
advantages, and technology adoption are used to support the purpose of the project. The theories
and models in these researches will be applied to identify the successful factors of Alipay and
Chinese leapfrogging in mobile payment, to evaluate Alipay’s strategies in Singapore from both
internal and external perspectives, and purpose the recommendation for mobile payment
technology transfer and adoption in Singapore.
2.1 Leapfrogging concepts and theories
The concept of leapfrogging was first introduced in the field of industrial organization and
economic growth. The concept is used in many different aspect of business and economics since
its first introduction. The main idea of the leapfrogging concept is that developing countries
and small business firm step ahead the developed countries and mature corporate through
incremental or radical innovations.
Research on leapfrogging concept in different areas, especially the earliest ones, will be the
theoretical basis of this paper. In 1983, Fudenberg, Drew, Gilbert, Richard J., Stiglitz, Joseph
and Tirole, Jean discussed the condition under which a new entrant can leapfrog established
companies and become leader in the industry in their paper Preemption, Leapfrogging, and
Competition in Patent Races. They also analyzed the R&D process that enable technological
leapfrogging. A decade later, Brezis, E., P. Krugman, and D. Tsiddon explained the
leapfrogging concept in the national level and suggested “a mechanism that explains this pattern
of ‘leapfrogging’ as a response to occasional major change in technology” (Brezis, Krugman,
& Tsiddo, 1993). Brezis extended his research on leapfrogging after his first article on
leapfrogging. This paper will mainly be mainly based on Brezis’ researches on leapfrogging.
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2.2.1 Leapfrogging in international level
In contrast to the endogenous-growth theories that incremental innovations reinforce the
position of countries with leading technologies, Brezis introduced a mechanism of leapfrogging
to explain the occasional technological innovations in lagged nations. Previous research on
leapfrogging in the Industrial Organization(IO) level argued that an established monopolist can
be leapfrogged due to the lack of motivation to innovate and the need to exploit its old
technology (FUDENBERG & GILBERT, 1983), but Brezis presented a different opinion that
enterprises fail to adopt a new technology that is inferior to the existed technology in the nation.
Brezis’ article is based on the verification of a two-country assumption model with three
equilibrium: equal food production and wages in both nations, relative wages determined by
demand, and relative wages determined by relative productivity in manufactures. Then the
article discussed the model’s dynamics in incremental innovation, and “lock-in” effect in
leading country, the how a new technology can leapfrog, and the relationship between the
model and IO literature on leapfrogging. Finally, the author concluded the conditions in which
leapfrogging could present: 1) The difference in wage cost between leading country and the
potential challenger must be large; 2) The new technology appear initially unproductive
compared with the old one; 3) Experience of old technology cannot be applied on the new one;
4) The new technology has potential substantial productivity over the old one.
This research will be used to identify the occasional and inevitable factor to success of Chinese
mobile payment, and the replicability of leapfrogging phenomenon of leapfrogging in
Singapore.
The latter studies on leapfrogging are also applied for company situation analysis and strategic
recommendations, such as the study on made-in-effect and country-of-origin bias (Diodato,
Maleraba, & Morrison, 2017), and Meyer’s study on firm-specific advantages (FSAs) of
emerging economy (EE) multinational enterprises (MNEs).
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2.2.2 Economic growth, leadership and capital flows: the leapfrogging effect
In the research on leapfrogging mentioned in 2.2.1, Brezis didn’t include the influence of capital
flow on leapfrogging and technology adaptation. In Brezis’ extended research, she illustrated
the relationship between capital flow, economic growth, and transmission of leadership, and
the correlation between leapfrogging effect and the direction of capital flow (Brezis & Tsiddon,
2006).
Based on a two-country overlapping generations model with endogenous growth, this paper
verified the assumption based on rigid conditions by ignoring other factors. For example, the
paper only discussed the adoption choice of young entrepreneurs, and the choice of investors
of old technology was not included. The author analyzed the nature of externalities during the
adoption of new technologies, and conclude that the capital flow is essential in leadership
transmission and leapfrogging. The first country with strong learning-by-doing country-specific
externalities that first adapt the new technology could become a new leader. However, the
absence of capital mobility might impede the timing of leapfrogging effect. The second finding
is that a country can see a faster technological progress if capital inflow overpass outflow. When
the leading nation lends capital to the following nation, the latter might leapfrog the former and
become the new leader since the leader has more capital outflow and the follower has more
capital inflow. However, in some cases, leading country still maintain its position despite the
capital outflow.
This research will be used to further analysis the possibility that leapfrogging of mobile
payment will occur in Singapore, and that Singapore will leapfrog China and become the leader
in mobile payment because of the capital flow.
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2.2 External and Internal analysis of the organization
2.2.1 The relational organization of entrepreneurial ecosystem
Ben Spigel’s entrepreneurial ecosystem theory discussed how the cultural, social and material
attributes and the interplay between these attributes contribute to the success of startups by
identifying ten characteristics of an entrepreneurial ecosystem. Although the related concepts
of the entrepreneurial system had been discussed in clusters theory, regional innovation, and
geographical factor in the ecosystem before, the theory of entrepreneurial ecosystem was still
underdeveloped. Spigel’s research unified the localization economies and agglomeration
economies, while these two economies are separated in the cluster theory (Spigel,2015). What’s
more, the publication also addressed the interaction of different factors in the ecosystem while
other related theories only illustrated the factors individually.
There are three parts in this research: ten attributes in the ecosystem, the interaction between
these attributes, and the case study of Calgary and Ottawa cities. The first part discussed cultural
attributes, which are the culture and history of entrepreneurship, the social attributes, which are
the workforce, network, and capital in the ecosystem, and finally the material attributes,
including political, institutional and physical factors. The second part illustrated two types of
interaction among these attributes: support and reinforce. The last part used the case studies to
conclude that different ecosystems have different presented attributes and interactions,
inversely shaping and strengthening different atmospheres in the ecosystems. However,
according to Spigel, the research was just a board research agenda since it didn’t research on
process, structure, influence of entrepreneurial ecosystem and metric of evaluation.
This research will be used to analyze external factors of Alipay's success in China and predict
the potential competitors in the Singaporean entrepreneurial ecosystem.
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2.2.2 Competitive Advantages
Jay B. Barney introduced the VRIO framework in his publication "Looking Inside for
Competitive Advantage." Companies have been using the SWOT matrix for a long time to
analyze their competitive position. However, the limitation of the SWOT matrix is that SWOT
includes both internal and external factors, and the framework development of internal analysis
lags significantly that of external analysis. The VRIO framework is an easy-to-apply framework
for internal analysis. In my opinion, the other two limitations of the SWOT matrix are the lack
of the priority of competitive advantages, and that the matrix doesn't suggest any solutions to
the internal weakness.
The VRIO matrix perfectly overcomes these three limitations by listing value, rareness,
easiness to imitate, and the organization's ability to exploit the capabilities (Barney, 1995).
Firstly, the VRIO framework only analysis the inherent competitive advantages of the
organization. Secondly, as shown in Appendix 1, competitive advantages can be categorized as
sustained competitive advantages, unused competitive advantages, temporary competitive
advantages, competitive parity, and competitive disadvantages. The classification can prioritize
the resources or capabilities from competitive advantages to disadvantages. Finally, the
classification already qualifies each resource or capability. Thus, the company can adjust their
strategies based on the classification. In my opinion, an organization should position and
promote themselves as the sustained competitive advantages, increase the barrier of temporary
competitive advantage to avoid limitation from competitors, ensure the performance of
competitive parity, evaluate the exploitability and value of unused competitive advantages, and
forgo the competitive disadvantages.
The VRIO matrix will be used to analyze the internal factors of Alipay's success, evaluate
Alipay's competitive position in Singapore, and suggest recommendations.
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Besides, the role of the competitive advantages and resources in the strategy-performance
relationship (Chatzoglou, Chatzoudes, Sarigiannidis, & Theriou, 2018) will also be discussed.
The revisit of the VRIO framework discussed the relationship between strategic orientation,
companies’ competitive advantages, organizational structure, and firm performance. The
organizational structure is a complementary competitive advantage, and influence the firm
performance. The strategic orientation mediates the impact of competitive advantages on firm
performance. The utilization of Alipay’s competitive advantages will be analyzed based on this
revisit of VRIO framework.
2.3 Technology Adoption Theories and Models
Many technology adaptation theories have been developed in the past. In this paper, the
strategies of Alipay’s mobile payment technology adaptation will be evaluated from the
perspectives of technology transfer, organizational practices, environment context, and
consumers’ acceptance by using Roger’s Diffusion of Innovation(DIT) theory (Rogers, 2003),
and Technology, Organization, Environment Context (TOE) framework (Tornatzky &
Fleischer, 1990), and the Technology Acceptance Model (TAM) (Davis F. D., 1989).
2.3.1 Context Screening: Technology, Organization, and Environment Context (TOE)
In the book The Process of Technological Innovation, the authors, Tornatzky and Fleischer,
introduced TOE framework to describe the precondition that influences the technology
adoption and implementation based on the three elements: organizational context, technological
context, and environmental context. Although the contexts do not determine the adoption
process that will be discussed later in this chapter, they construct the barriers or provide ease to
the adaptation process, understanding the context helps predict the outcome of the technology
adoption, and provide guideline of strategic decision.
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The model concludes both internal and external environment screening of the organization
during the technology transfer, and it is frequently used in the IT adoption studies. The paper
will use this model the analyze the fit of Singaporean environment and Alipay’s strategies.
Updated study on TOE framework are also used in the paper, such as the revisit of TOE theory
with added hypothesis (Awa, Ukoha, & Igwe, 2017), and the TOE application of mobile
payment technology adoption by combining the environment context and Hofstede’s cultural
taxonomy (Pal, De, Herath, & Rao, 2019).
2.3.2 Adoption Process Evaluation: Roger’s Diffusion of Innovation(DIT) theory
The diffusion of an innovation is the spread of a new idea from its originate source of creation
to its end users or adopter (Rogers, 2003). The initial researches of DIT were performed in other
academic fields such as anthropology, sociology and education, etc. Roger’s DIT theory is
based on some of these researches, especially the S-shaped adopter distribution model
(Appendix 2). What’s more, Roger summarized the similarities, compared the outcomes of the
previous work, and furthered the research on DIT in his book Diffusion of Innovations.
In this book, Roger posed the five attributes of innovations that influence technology adoption:
relative advantages, compatibility, complexity, trialability, and observability. He also
categorized the adopters into five groups: innovators, early adopters, early majority, late
majority, and laggards. The paper will use the four elements to evaluate the readiness of mobile
payment adoption, the adaptation process to analyse the current of Alipay expansion, and the
adopter categories to perform user profile in Singapore.
2.3.3 Technology Acceptance Model (TAM)
In 1989, Davis introduced the initial Technology Acceptance Model (see Appendix 3) to better
predict the user acceptance of information technology. He stated two determinant factors in
user acceptance: perceived usefulness and perceived ease of use. The perceived usefulness
refers to the extent that a technology can improve one’s job performance. The ease of use refers
to the freedom of efforts and difficulties that a technology can contribute (Davis F. D., 1989).
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Davis later formed the final version of TAM with Venkatesh by indicating the direct link
between the behavioral intention and the two determinants (Davis & Venkatesh, 1996). The
TAM2 (Venkatesh and Davis, 2000) and TAM3 (Venkatesh and Bala, 2008) were introduced
with more details and explanation.
The paper will use the TAM to analyze the general acceptance of mobile payment in Singapore
based on primary or secondary data.
A study that combine TAM and DIT theories on digital innovation adoption use also be applied
(Jahanmir & Lages, 2015).
In overall, the assessment of Alipay’s strategies follow a hierarchical analysis from external
environment, internal environment, and adoption process to consumers’ acceptance.
In conclusion, the above-mentioned works and researches are the theoretical basis of this paper
and this literature review is the guideline of the following research. However, the current state
of literature is insufficient to predict the possibility of leapfrogging effect and to evaluate
Alipay’s strategies on technology transfer of the mobile payment in Singapore, because key
gaps are identified in the literature review, such as other variables that can influence the
outcome, and the priority of variables. What’s more, the implementation side of these models
is still missing. Further references of related researches will be added to support the purpose of
the master project.
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Chapter 3 Analysis of leapfrogging effect in Chinese mobile payment
Understanding the successful elements of Chinese mobile payment can explains the occasional
and inevitable factors that contribute to the leapfrogging effect. The elements can be national,
regional and organizational. This chapter analyses the macro environment and micro
environment of the appearance and the development of Chinese mobile payment, and the
competitive advantages of Alipay. The PESTEL model, Spigel’s entrepreneurial ecosystem
theory and Barney’s VRIO framework are used to perform the analysis. Since the mobile
payment is the complementary innovation of E-commerce, this chapter also analyses the E-
commerce development in China.
3.1 Macro Environment: PESTEL Analysis
Mobile payment had been introduced in many countries, but China is the only one that has
fulfilled throughout commercialization of mobile payment. The macro environment factor
could provide resources and opportunities for this success. The macro environment analysis is
based on the PESTEL model. () The timeframe of this analysis from late 1990s to early 2010s,
when Internet and mobile payment appeared and became popular in the Chinese society.
Politics
People Republic of China is a unitary one-party socialist republic. The country is ruled by the
Communist Party, and the disruption of the socialist system by any organization or individual
is prohibited (The National People's Congress of the People's Republic of China, 2004). This
political mechanism provides a stable political environment and increase the efficiency of the
implementation of policies and regulations. Besides, during the decade from 1995 to 2005, the
number of science and technology policies that are enforced in China increased from 34 to 84
(LIU, SIMON, & SUN, 2011), compared to the last decade. The political and policy support in
this decade facilitated the birth and popularity of mobile payment and information technology.
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Economics
The Gross Domestic Product(GDP) of China has been increasing since the Chinese economic
reform in 1978. The country sustained economic growth at the average rate of 10% during
1990s and 2000s. (See Appendix 4) The GDP per capita of China was quadrupled between
1990s and 2010s (increased from 2000 USD in 1990 to 8000 USD in 2010). (See Appendix 5).
In this booming economics, the consumer need was increasing while the infrastructure was
insufficient to fulfilled the increased purchasing demand. For example, the product categories
and shopping facilities such as shopping malls are still in sufficient to fulfill the demand in
underdeveloped area, such as towns, and rural area. Consequently, online shopping has become
a new distribution channel, accompanying the appearance of online payment.
Social
Firstly, the total population of China during 1990s and 2000s was 1.3 billion (Worldometers,
n.d.), which provided a much larger user base for the adoption of mobile payment technology
than the other countries.
Secondly, In the early 2000s, Chinese customers and sellers are experiencing the issue of trust
toward credit card payment. Buyers refused to pay ahead or give the confidential information
during online shopping, while seller needed to wait for a cash delivery company to obtain the
amount of product sold (Guillemaud, 2017). Alipay mitigated the risk for both sides by acting
as a third-party platform to secure the transaction of online shopping.
Finally, the penetration of Internet and smartphones in China also contribute to the mobile
payment success. From 2006 to 2017, the penetration rate of mobile Internet users in China
rose from 24% to 97.5%. (Appendix 6) The smartphone penetration rate in China is 43% in
2015, and it is estimated to increase to 61% in 2023. (Appendix 7)
Technology
The three main technological drivers of mobile payment development are Information and
Communication Technology (ICT), telecommunication technology.
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China has become the leader of information and communication technology in the world. China
held the biggest global market share of ICT market from 2013 to 2017, and sharing nearly 60%
of the ICT market with the US since 2013(Appendix 8). Chinese ICT companies, Huawei,
Lenovo, Haier, etc., have become the major suppliers in the global market with their advanced
technology. The progress in ICT provided a solid base for mobile payment implementation.
Together with the telecommunication market growth in China, the technologies and capabilities
of telecommunication also advanced and experienced leapfrogging. China leapfrogged from
electro-mechanical switches directly to digital automatic switch, skipping he development and
production of analogue electronic switches (Mu & Lee, 2005).
Environment (infrastructure, distribution channel)
The development of telecommunication technology cannot be achieved without the
infrastructure. The telecommunication infrastructure not also lead to the leapfrogging
development in the industry, but also contribute to the economic growth in China (Ding &
Haynes, 2006). Investment in telecommunication purchase also constructed the infrastructure,
the trade value of telecommunication equipment from Hong Kong to mainland China was 183,
795 million HKD in 2017(Appendix 9).
The transportation and logistics network development provided ease to deliver to E-commerce,
subsequently develop the mobile payment.
Legal
To build up users’ trust toward mobile payment, legal structure is needed to ensure
cybersecurity and payment security, considering the vulnerability of mobile payment in
wireless environment (Yan & Yang, 2015) that can lead to information theft and financial loss.
At the early stage, the Chinese government did not exert much legal restriction to allow the
disruption of mobile payment to serve the underbanked citizens and push the reform in
traditional banking system (Yue, 2018). However, the popularity of mobile payment did feed
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the information theft, mobile transfer fraud, and other illegal crimes. The government has
become stricter and stricter over the mobile payment application recently.
3.2 Micro Environment analysis – Entrepreneurial Ecosystem
One of the main reasons of leapfrogging in the perspective of Industrial Organization (IO) is
that the established monopolists have less incentive to invest and develop the new technology
(FUDENBERG & GILBERT, 1983). In this case, the leapfrogging is a more entrepreneurial
action. What’s more, Brezis stated that the decisions of adopt or refuse a new technology are
made by entrepreneurs, and young entrepreneurs are the main drive of the leapfrogging (Brezis
& Tsiddon, 2006). In this part, ten cultural, social and material attributes (Spigel, 2015) are
used to identify the attributes that form and develop the entrepreneurial ecosystem in Hangzhou,
the birthplace of Alipay.
Cultural attributes
“Cultural attributes are the underlying beliefs and outlooks about entrepreneurship within a
region.” (Spigel, 2015) The two main cultural attributes are entrepreneurial attitudes and
histories of entrepreneurship. Since Hangzhou has been approved as one of the Economic and
Technological Development Zones in China, the city has been working on forward thinking
and entrepreneurial culture (The Executive Centre, 2018). The successful story of Alibaba has
become the role model for young entrepreneurs in Hangzhou.
Social attributes
“Social attributes are the resources composed of or acquired through the social networks within
a region.” (Spigel, 2015) These resources are usually non-governmental, and the interplay of
them constructs the win-win situation for investors, big corporations, and start-ups. The four
main social attributes are worker talent, investment capital, networks, and mentors and role
models.
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Work Talent, as a social attribute, refers to the talents who are willing to work in start-ups. The
story of Alibaba’s “iron army”, the first group of sales representatives who built up the Alibaba
empire, has become the typical case study of talent management for start-ups in Hangzhou. The
members of the “iron army” later became the founder or CEO of Internet big name in China.
Such a success became a motivation that drives work talents to work in start-ups, and dream to
be one of the outstanding figures as the members of “iron army”.
The investment capital attribute is the easiness to raise funding from friends, family, angel
investors, and venture capitalist. As a sub-provincial city, Hangzhou faces competition from
major Chinese cities, such as Beijing, Shanghai, and Guangzhou, in investment funding.
However, Hangzhou is one of the important node in the networks of VC flow, and the Yangtze
River Delta Area, where Hangzhou is located, is one of the important cluster of VC flow.
(Appendix 10) Hangzhou even surpassed Shanghai and become the fourth VC recipient in
China. (Appendix 11)
Networks connect entrepreneurs, advisors, works, and investors, and allow the free flow of
knowledge and skills (Spigel, 2015). The national/international entrepreneurial summit,
entrepreneurial organization, and interpersonal network between entrepreneurial and
professionals. Several entrepreneurial organizations, such as Startup Weekend, Hangzhou
High-tech pioneering center, provide entrepreneurial support in financing, and training, and
organize events to strength the network between professionals and startups.
Mentors and role models are usually successful entrepreneurs and business professionals who
advise young entrepreneurs. The entrepreneurial organizations connect the mentors with
mentees, the venture capitalist also provides mentorship to start-ups.
Material attributes
The material attributes are the physical resources in the ecosystem. There are four types of
material attributes: policy and governance, universities, support services and physical
21
infrastructure, and open markets. Though policies and governance don’t have physical presence,
they can still be materialized through regulation and government rules.
For support from policy and governance, Hangzhou was approved as one of the Economic and
Technological Development Zones, special areas where the government support foreign
investment, and the ease of trading and exporting. Besides, the local government also
implemented the public landmark project to improve the urban entrepreneurialism (Zhu, 2011).
The government also shortened their process and time of business registration (Hangzhou
Municipal Development and Reform Commission, 2019) to boos entrepreneurialism.
The universities and other higher education institution near Hangzhou also import both trained
entrepreneurs and work force into the entrepreneurial ecosystem. Sixteen universities locate the
city, and some of them are top universities, such as Zhejiang University in national or even
international level. The universities near Hangzhou cities also reinforce the high-quality human
resources in the ecosystem. Some examples are Fudan University and Shanghai Jiao Tong
University, two of the top five universities in China.
The available support services and physical infrastructure is another significant physical
resource. On one hand, the incubators and accelerators provide necessary service for young
entrepreneurs. The Hangzhou High-tech Park, established in 1996, provides the venture service,
property management and operation management services to start-ups (Ni, 2006). On the other
hand, the transportation system also makes Hangzhou become one of the most connected
Chinese cities, with the rapid access to Shanghai in 45 minutes by high speed rail (The
Executive Centre, 2018).
Open markets, which are the presence of local market need and the access to global market,
guarantees the sustainable growth in the entrepreneurial system. According to PwC’s Chinese
Cities of Opportunities 2018 Report, Hangzhou ranked first among “Chinese Cities of
Opportunity”, in Entrepreneurial Environment, and Innovation Application (PwC & China
Development Research Foundation, 2018). What’s more, Hangzhou is an important point in
22
China (Zhejiang) Pilot Free Trade Zone, an area that mobilizes the product and service to global
market with ease and efficiency.
Interaction of the culture, social and material attributes in the entrepreneurial ecosystem
The cultural, social and material attributes support and reinforce each other.
The cultural attributes support and reinforce social attributes. The entrepreneurial spirit and
history in Hangzhou attract social resources to the ecosystem. More university graduates are
inspired by the successful entrepreneurial story and motivated to become entrepreneurs, bring
the work talent to the ecosystem. The entrepreneurial successes also appear profitable to the
investment capital, and the VCs are more willing to invest in the ecosystem. The start-ups that
have developed into big corporates pay back the ecosystems by offering networks, and
mentorship.
The cultural attributes support and reinforce the material attributes in the same way. The high
motivation and successful experiences in entrepreneurship construct the solid ground that
government will invest more to support the ecosystem by building infrastructure, and
introducing preferable policies. The increased production capacity in the ecosystem fulfills the
increasing need in open markets.
The social attributes and material attributes reinforce and support the entrepreneurial culture
through the increasing physical and intangible resources. By 2015, there are seven listed
Internet companies, 18 unicorn companies, and 51 start-ups that are worth noticing (Yang, 2015)
have grown in Hangzhou with the help of sufficient resources and support.
In conclusion, the powerful interaction of the attributes of the entrepreneurial ecosystem in
Hangzhou provides incentives to adopt new technology and leapfrogging possibility in
Hangzhou.
23
3.3 Company analysis: VRIO analysis of Alipay
Although the external environment is beneficial for the mobile payment leapfrogging and
entrepreneurship in technology adaptation, the reason of the unique success of Alipay is still
under discussion. With the fierce competition of mobile payment in China, why Alipay stood
out in the battle? To answer this question, the paper analyzes competitive advantages of Alipay
and their value, rareness, easiness to imitate, and the organization's ability to exploit the
capabilities (VRIO framework). The competitive advantages are categorized into sustained
competitive advantages, unused competitive advantages, temporary competitive advantages,
competitive parity, and competitive disadvantage.
3.3.1 Introduction of Alipay
Alipay was first founded in February, 2004 by the Alibaba group. Alipay is a third-party mobile
and online payment platform, and its initial function was to guarantee the transaction security
of Taobao, an E-commerce website of Alibaba group. Alipay began to grow rapidly, and replace
PayPal to become the world largest mobile payment platform in 2013 (Heggestuen, 2014). In
2015, the parent company of Alipay was rebranded as Ant Financial Services Group (Shih,
2014). Alipay started its internationalization in 2017 by launching the mobile payment service
in Hong Kong and Singapore. Its global keep expanding since then, covering the Asia Pacific
area, Europe, and North America. Alipay continue its leadership in the mobile payment market
with a market share of 53.76% in Q1 2018, far surpassing its competitor, Tencent Finance,
whose market share is 38.98% (CIW Team, 2018).
3.3.2VRIO Analysis of Alipay
The following table illustrates the VRIO analysis of Alipay’s competitive advantages:
Competitive advantage Value Rareness Imitability Organization
Alibaba Endorsement Yes Yes Yes Yes Sustained
Platform Integration Yes Yes No Yes Temporary
Financial Service Yes No No Yes Temporary
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Multiple Scenarios Yes Yes Yes Yes Sustained
Giant user base Yes Yes Yes Yes Sustained
Third-party function Yes Yes No Yes Temporary
Credibility System Yes Yes Yes Yes Sustained
Tech innovation Yes Yes Yes No Unused
Alibaba Endorsement
Alibaba is no doubt the tech giant and well-known brand in China now. Because of this
endorsement, it is easier for consumers to build trust toward Alipay. Among the nine major
businesses of the group, Alipay remained the most recognized company except Taobao, making
it hard to be imitated. (Appendix 12) Alipay also utilizes the bundle with Alibaba to improve
their performance.
Platform Integration
Alipay is the only payment method for online shopping in Taobao, the E-commerce website of
Alibaba group. Besides, Alipay is the log-in partner for some mobile applications, such as
Xianyu, a second-hand online shopping platform. However, log-in integration is also used by
other companies, especially Alipay's biggest competitor, WeChat Pay.
Financial Service
Alipay developed its product-mix by expanding its financial services. One is Yu'E Bao,
meaning Leftover Treasure in Mandarin, an investment management tool for users' leftover
balance, and have a similar function of saving in the bank. The others are Ant Cash Now, a
consumer loan service, and Ant Credit Pay, a virtual credit card service for purchasing in
Taobao. Many fintech companies in China provide similar services, but since these financial
services are well connected with the transactions and balance in Alipay, Alipay exploits these
financial services to increase user stickiness.
Multiple Scenarios
25
Nowadays, Alipay provides not only mobile payment services for online transactions but also
offline mobile payment. Alipay partners with restaurant, supermarket, cinema, hotels, etc. to
increase the use cases in multiple scenarios. By implementing QR code scanning payment, any
merchant can use Alipay for check-out transactions. Alipay also provides payment service in
transportation, utilities, mobile billing, healthcare and insurance, tuition, etc. These multiple
scenarios have a lock-in effect for users and strength the mobile payment ecosystem.
Giant User Base
According to the financial report in the 17-18 fiscal year, the number of Alipay users has
reached over 900 million (China Radio International, 29). The giant user base generates a
network effect for Alipay: the increasing users create more value to the product (Shapiro, Carl,
& Varian, 1998). Because the user base can easily achieve economies of scale for any new
feature of the product, Alipay develops more user cases and scenarios to benefit it, users. Such
as huge user base is rare in China, and hard to be imitated.
Third-party function
The original objective of Alipay is to build trust between buyers and sellers by holding the
payment as a third-party. It is the secure element located in the Alipay Cloud, the reputation of
Alipay, and long-term relationship that secure the transaction of all the marketplace in Alibaba
group (Guo & Bouwman, 2016). Although the third-party function is easy to be imitated, the
effort and time behind the powerful trust embedded in this function are the most valuable
resources of Alipay.
Credibility system
Sesame Credit, a private credit scoring and loyalty program, score the Alipay users based on
the user stickiness. Users can increase their credit by using Alipay for different payments to
gain convenience in daily life. For example, a user with a high score can skip the deposit when
renting sharing bikes or an apartment. Sesame Credit is revolutionary because it compensates
the absence of social credit system that presents in the Western countries.
26
Tech Innovation
Alipay has many innovative technologies, such as facial recognition and artificially intelligent.
However, this technology is still edging in the Alipay mobile application. This advantage is still
unused.
3.3.3 The relationship of Alipay’s performance and competitive advantages
The presence of competitive advantages is not enough; a proper organizational structure is
needed to implement the strategies that allow Alipay to fully exploit all the competitive
advantages (Chatzoglou, Chatzoudes, Sarigiannidis, & Theriou, 2018). In 2016, Ant Financial
reconstructed the Alipay by dividing Alipay into four departments: Users and communities,
Merchant service and open platform, IT development, and Rural Finance (Lu, 2016). These
four departments enable Alipay to exploit its competitive advantages more with specialization
and efficiency. (See Appendix 13)
The change of organizational structure implies Alipay's strategic orientation. Alipay anticipates
the transformations from simple mobile payment tool, to a service platform that cover all the
scenarios in users' daily life. The strategic orientation is toward globalization, SME financing
service, and credibility service. This strategic orientation mediates the competitive advantages
and the organizational structure toward formalization, complexity, and centralization (Claver-
Cortes, Pertusa-Ortega, & Molina-Azorín, 2012) in Alipay’s business.
In brief, most of Alipay's competitive advantages are sustainable. The strategic orientation and
the new organizational structure help Alipay to exploit the unused and temporary competitive
advantages better and finally achieve outstanding firm performance.
In conclusion, the leapfrogging phenomenon of mobile payment is inevitable for three reasons:
27
1) The government support in policies and infrastructures, the social and economic change
that lead to massive market need, and the leapfrogging in ICT facilitated the economies
of scale in the mobile payment industry.
2) The cultural, social and material attributes that shaped the entrepreneurial ecosystem in
Hangzhou, and the interaction of these attributes that strengthened ecosystem accelerate
the adoption of mobile payment technology.
3) Alipay became a driver for the mobile payment leapfrogging with its competitive
advantages. Its strategic orientation and adjusted organizational structure ensure the full
exploitation of these competitive advantages to realize Alipay’s performance.
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Chapter 4 Leapfrogging effect and Alipay’s technology adoption in Singapore
In this chapter, the possibilities of leapfrogging and Alipay’s strategies in Singapore are
evaluated. Same methodologies in Chapter 2 is used to analyze the situation in Singapore.
Brezis’ leapfrogging theories, and technology adoption theories from different perspectives are
applied to evaluate Alipay’s strategies in Singapore.
4.1 Situation Analysis of Singapore
Singapore is an island city-state in Southeast Asia. Having been through the British and
Japanese occupation, Singapore separated itself from Malaysia in 1965 and became a Republic.
Nowadays, Singapore has become an international city and global financial centre with its
cultural and religious diversity.
4.1.1 Micro and macro environment analysis
PESTEL Analysis
Politically, though Singapore has a multi-party system, the reality is that only one party has
been ruling the nation to ensure a stable political environment. The People's Action Party has
been ruling Singapore since 1959 (Worthington, 2002). Supportive policies for mobile payment
are introduced by the Monetary Authority of Singapore (MAS) to transform Singapore into a
competitive nation in the global FinTech industry. The initiatives include the construction of a
technology hub, partnership with the Association of Banks in Singapore, and the investment of
225 million USD in FinTech project (Rastogi, 2018).
Economically, as a high-developed free-market economy (Central Intelligence Agency, 2012),
Singapore is known for its ease of doing business and corruption-free. The market need in
Singapore is stable thanks to the high GDP per capita, low tax rate, and high Purchasing Power
Parity (The Heritage Foundation, 2019). What’s more, the government also strive to stabilize
and boost the economy of Singapore.
Socially, 74.3% of the Singaporeans are ethnic Chinese (Department of Statistics Singapore,
2017), making Singapore the first choices during the international expansion of Chinese giant
29
tech companies. Although the payment card environment is advanced in Singapore, the card
usage is relatively low with a low transaction rate of payment card and small percentage of card
holders, compared to other countries in Asian Pacific. (See Appendix 14)
Technologically, being the technology hub in Southeast Asia, Singapore is the headquarters of
the APAC region for international IT corporates and startups. ICT is one of the main drivers of
the economy in Singapore. 13,486 organizations in the information and communication
services industry contributed 75,870 million SGD revenues, and IT development and
consultancy was the largest segment of the industry in terms of number and value added in 2017
(Department of Statistics Singapore, 2017).
Environmentally, the information and communication infrastructure is well established,
Singapore was named as “Tech-Ready Nation” based on the market, political and regulatory
infrastructure for connectivity (Dutta, Geiger, & Lanvin, 2015).
Regulatory, strict regulations are present in the areas of FinTech, data protection, and
intellectual property. MAS is the main regulator in the FinTech industry, but there is no act
specific to FinTech so far, so the industry was regulated as financial services. New
cybersecurity act and Singapore's Personal Data Protection Act 2012 comprises are carried out
to protect data usage. Finally, Singapore IP regimes have been ranked as one of the best in the
world (Rastogi, 2018).
The entrepreneurial ecosystem in Singapore
The entrepreneurial culture in Singapore in historically low, but the SME was increasing their
weight in the economy after the economic recession from 1985 to 1986 (Choo, 2006).
According to the 2014 Global Entrepreneurship Monitor Report, the entrepreneurship keeps
prospering with a total early-stage entrepreneurship rate at 11% (Chernyshenko, et al., 2015).
Recent successful startups, such as Grab, Lazada, and SEA, also inspire many entrepreneurs.
As for social attributes, the two dominant factors are worker talent and investment capital. As
the most pro-business country (Doing Business, 2011), Singapore is an ideal working country
30
attracting talents from all over the world, and the top Singaporean universities output talents.
The funding sources are abundant in Singapore: angel investors, VCs, corporate venture
divisions, and governments, and there are many investors focus on investment in startups: 500
Startups, Golden Gate Ventures, Sequoia Capital, Singtel Innov8, and government entities such
as GIC and Temasek (Rastogi, 2018).
The material attributes are well presented in the entrepreneurial ecosystem. The government is
very active in assisting start-ups through financing, creating communities that connect start-ups,
investors and professionals, and the accelerator program to boost the entrepreneurship in
Singapore (Choo, 2006). Two of the Singaporean universities, the National University of
Singapore and Nanyang Technological University, are among the Top 20 universities in the
world (Quacquarelli Symonds Limited, 2019). The characteristics of talent-attracted, and
technology hub ensure the supporting services and infrastructure for the entrepreneurial
ecosystem. Finally, as a member of ASEAN (Association of Southeast Asian Nations) and a
global city, Singapore has access to regional opportunities and global market.
To summarize the interaction of the cultural, social and material attributes, the social and
material attributes support each other to reinforce the culture attributes in the entrepreneurial
ecosystem.
4.1.2 Mobile Payment in Singapore
Before the introduction of mobile payment in Singapore, 60% of the transactions were in cash
(See Appendix 15). Nowadays, the average number of users in digital payment is over 4.4
million, with a penetration rate at 69.6%. However, the penetration rate of mobile payment is
only 11% in 2019(see Appendix 16). The compound annual growth rate of the transaction value
of the mobile payment is 35.8%. Starting from 334 million USD in 2017, the transaction value
is estimated to grow to 2095 million USD in 2023 (Statista, 2019). According to PwC's Global
Consumer Insights Survey 2019, Singapore ranked 5th out of the 6 Southeast Asian countries
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for growth in mobile payment (SPH Digital News, 2019). There are still obstacles to the mobile
payment implementation, such as security concerns, lack of merchant partnership, and technical
barriers.
Alipay was launched in Singapore in 2017 by partnering with a local startup, CC Financial
Services (Tham, 2017). The partnership gained Alipay access to 20,000 service point the
merchant in Chinatown, and the touristic area for the convenience of Chinese tourists in
Singapore (Tan W. , AliPay to launch local wallet for Singapore, 2017). The mobile payment
service is still limited to Chinese bank account owner, so the usage is still limited to Chinese
tourist and immigrants in Singapore. According to a survey on social media, only 20% of the
Singaporean residents prefer Alipay use a mobile wallet, while the preferable one is PayPal,
representing 76% (PayPal, 2019).
Except for Alipay and PayPal, several more providers are offering mobile payment service in
the Singaporean market. WeChat Pay continues its battle against Alipay in Singapore.
Smartphone brands, such as Apple, Samsung, developed their mobile payment function. For
local banks, PayLah! of DBS, Pay Anyone of OCBC, and PayNow of other seven banks are a
mobile application for mobile payment. Other local competitors, such as Fave Pay, also bring
intensity to the competition in the industry.
In conclusion, the mobile payment in Singapore is underexplored, even giving a beneficial
environment and ecosystem. The market is competitive with the presences of multiple players.
The adoption of mobile payment is facing difficulties in technology, partnership, customer trust,
etc. Only overcome these difficulties can Alipay stand out in the competition and enable the
leapfrogging of mobile payment in Singapore.
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4.2 Theory application and assessment
In this part, the central questions of the paper will be answered by applying theories, models,
and frameworks. This part assesses the possibility of leapfrogging to mobile payment, and
Alipay's strategies in Singapore. The old technology refers to a payment card, while the new
technology refers to mobile payment in this part.
4.2.1 Mobile payment leapfrogging in Singapore
The possibility of mobile payment in Singapore
The possibility of leapfrogging is assessed based on five preconditions that must present if the
technology adoption will potentially lead to leapfrogging (Brezis, Krugman, & Tsiddo, 1993).
Precondition 1: The difference in wage cost
Since the old technology industry, which is traditional finance and banking, in this case, is less
developed and experienced, the wage in the old technology is lower, the experiment in the new
technology industry, which is FinTech, appears attractive (Brezis, Krugman, & Tsiddo, 1993).
The average annual salary of traditional finance and banking is 135,870 SGD (Feng , 2019),
while that of FinTech is 141,313 SGD (Sandhu, 2018). The difference between the salaries in
these two industries is not large enough to enable the technology shift.
In the national level, Singapore is the 12th highest paid country, but the wage gap between
Singapore and Monaco, Liechtenstein, Bermuda, Switzerland, and other European countries
(World Data, n.d.). Since the wage cost in leading country and following county must be large
to enable leapfrogging, Singapore is still able to leapfrog these countries.
Precondition 2: The new technology appears initially unproductive compare with the old
If the new technology is less productive, the leading country has less incentive to adopt the old
technology, while the lagging country adopts the new technology since the new technology is
as undeveloped and unproductive as the old one (Brezis, Krugman, & Tsiddo, 1993).
33
In Singapore, the number of ATMs per million inhabitants is around 500, while the number of
POS terminals per million in inhabitants is around 25,000 (Bank for International Settlements,
2015). As shown in Appendix 17, the number in Singapore is low compared to other countries.
The inconvenience of the payment card, such as service fee, transaction fee, credit card fraud,
and merchant integration, may be the reasons for low payment card productivity. The
implementation of mobile payment is also unproductive upon its introduction; barriers exist
such as infrastructure, consumer trust, technology, the convenience of merchants, etc.
Precondition 3: Experience of old technology cannot be applied to the new one
The technologies used in payment cards include chip technology, biometrics, multi-factor
authentication, dynamic CVV, and Tokenization (EPF, 2018), while the technologies used in
mobile payments include Near-Field Communication (NFC), Bluetooth (Meola, 2016),
blockchain, and POS (Joanna, 2018). Hence, the technologies are not compatible with car
payment and mobile payment. However, due to the disruption from mobile payment, traditional
bank, and finance service also innovated in the contactless card and digital transfer these years.
In this case, the experience of new technology conversely applied to the old one.
Precondition 4: The new technology has potential substantial productivity over the old one
Mobile payment has higher productivity over card payment in terms of speed, cost, security
and tracking convenience. Firstly, transactions are possessed faster, easier and less complicated.
Secondly, for merchants, the transaction fee is less than mobile payment; and for clients, the
transaction times are not limited anymore. Thirdly, the payment information is stored in Cloud,
preventing the theft of information, and thus is more secure. The last advantage is the
convenience of information tracking; merchants can update their cash flow and inventory, while
consumers can track their consumption items with ease.
Precondition 5 Free Capital Mobility
Another determinant hat leads to leapfrogging of one country is free capital mobility. As the
center of international finance, Singapore has free capital mobility. Aim at developing the
34
offshore financial market, Singapore has excluded all the exchange controls and restriction on
outflow and inflow since 1978 (CHOW & XIE, 2016).
Leapfrogging with country-of-origin bias
Despite the cost-competitiveness and high quality of the product, leapfrogging might also be
impeded due to the country of origin bias (Diodato, Maleraba, & Morrison, 2017). In this case,
the made-in effect exerted on a developing country during its export in a developed country.
Chinese companies also encountered this situation even when they leapfrogged the Singaporean
companies in Singapore. The rise of China is perceived as a menace to Singaporeans. Although
Chinese products, such as mobile phones and electronic appliances, appear as high-tech and
high quality recently, the Singaporean consumers still have trust issues and concern about the
information lease and theft in mobile payment. The concerns on Chinese mobile payment
provider might be higher due to the country-of-origin effect. For example, traditional taxi
drivers refuse to accept payment via WeChat Pay and Alipay, the mobile payment methods
provided by the two biggest Chinese companies (Chen, 2018). This concern occurred mainly
because of the lack of information, which can be alleviated by the policy and government
intervention through the spread of information (Diodato, Maleraba, & Morrison, 2017). The
Singaporean government is encouraging its citizen to embrace mobile payment to build up a
cashless city and appraised the technology advances of Chinese mobile payment usage in public
speeches (Bloomberg, 2018). The government endorsement might provide information to
Singaporean consumers, but the demand that stems from consumers' acknowledgment on
Chinese mobile payment providers can play a complementary role in leapfrogging (Diodato,
Maleraba, & Morrison, 2017). Chinese companies still need to work on the market education
to gain trust and recognition among Singaporeans and compete with the local providers.
Internationalization challenge for leapfrogged Chinese companies in Singapore
35
Emerging economy (EE) multinational enterprises (MNEs) might encounter the difficulties in
transferring the capabilities and resources that enabled their leapfrogging in their home
countries (Meyer, 2018). Hence, the “firm-specific advantages(FSA), including marketing and
distribution capability, operational capabilities, institutional capabilities, political capabilities,
and innovation capabilities” (Meyer, 2018) of Alipay in China might be hard to be replicated
in Singapore. According to Meyer, EE MNEs can over the gaps in FSAs through existing
networks and acquisitions of local companies. Alipay integrated itself into the payment of
GrabTaxi, namely the "Southeast Asian Uber," a transportation network company in Singapore
to accelerate the learning process of internationalization. Besides, Alibaba also acquired Lazada
group, an e-commerce company based in Singapore to overcome the gaps in FSAs.
In conclusion, Singapore fulfills four out of five preconditions of leapfrogging. The only
missing precondition, the difference in wage cost between traditional finance and Fintech, is
less important since the traditional finance is also actively transforming itself toward
digitalization, and the boundary between these two industries will be narrowed down in the
future. However, as a Chinese company, Alipay needs to overcome country-of-origin bias and
the gaps in firm-specific advantages to leapfrog in Singapore.
4.2.2 Context screening for Alipay’s technology adaptation in Singapore
The fit of Alipay’s technology adaptation and Singaporean environment is analysed based on
organization, technology, and environment context (Tornatzky & Fleischer, 1990). The analysis
is based on the Alibaba group since every organization under this group, including Alipay,
pursue the same organization technology strategies.
Organization Context
The company itself can be a constraint or facilitates technology adoption (Tornatzky &
Fleischer, 1990). The two Singaporean companies adopt Alipay's technologies are Grab and
Lazada. Firstly, an organization with top management support is easier to adopt new
36
technologies (Awa, Ukoha, & Igwe, 2017). After the acquisition of Lazada, Alibaba assigned
Lucy Peng Lei, the former leader of Ant Financial, as CEO to accelerate its expansion in the
SEA region (Tao, 2018).
What's more, Alibaba also participates in the funding of Grab (Vertex Ventures, 2017).
Secondly, large companies are more likely to adopt new technologies than small ones (Awa,
Ukoha, & Igwe, 2017). Grab is the biggest startups in SEA, while Lazada is the biggest E-
commerce platform. They are more willing to adopt Alipay’s technology because of their slack
variables, the ability to achieve economies of scales, and their capability to mitigate the risks
of technology adoption (Tornatzky & Fleischer, 1990). Finally, the companies with a larger
scope of business can adopt the technology faster (Awa, Ukoha, & Igwe, 2017). In this case,
Grab only focuses on transportation service while Lazada only focuses on E-commerce, making
the wide-range application of Alipay's technology only limited to transportation and online
shopping.
Technology context
Three main determinants of technology context are perceived effortlessness, perceived
compatibility, and perceived benefit (Awa, Ukoha, & Igwe, 2017).
Despite the government effort to encourage mobile payment, cash remains the first preference
of payment for 90% of respondents in a survey of consumer attitude toward payment method
conducted by PayPal (Tan W. , 90% of Singaporeans prefer cash payments: PayPal, 2017). In
the survey, the perceived effortlessness is vaguely present, because 36% of the 4000
respondents stated the complexity of mobile payment due to the complicated consumer journey
with too many processes and steps. Only 23% of the respondents understood the function of
mobile payment. However, the usage has been rising to 53% since 2017 when this survey is
performed (Singapore Business Review, 2018).
The perceived benefit is also missing due to privacy concerns (51% of the respondents).
Although the payment card doesn't have more perceived benefit compared to mobile payment,
37
cash is perceived as the most beneficial payment method, and its only inconvenience is the
insufficient cash in hand and long queue at ATMs.
As for perceived compatibility, on the one hand, mobile payment is not compatible with the
infrastructure, acceptance cost for merchants, domestic market size, and payment interface in
Singapore. For users, the set-up of the Alipay account is highly non-compatible. Only Chinese
debit card is acceptable, and Singaporean can only use credit cards to pay for their online
shopping in Taobao. What's more, transfer cannot be realized via credit card. Even for
Singaporeans who possess a Chinese bank account, a Chinese mobile phone number is still
needed for verification.
External Environment Context
The environment context analysis is combined with culture analysis. The facilitators of the
external environment are facilitating conditions, price benefit, firm reputation, structural
assurances, social influence, and long-term orientation. The barriers of the external
environment are government regulation, tradition, uncertainty avoidance (Pal, De, Herath, &
Rao, 2019).
Environmental Facilitators and barriers
Facilitating Conditions: As mentioned in 4.1.1, the government support, economic development,
internet, and mobile phone usage, ICT infrastructure, and the entrepreneurial ecosystem
construct the facilitating condition of mobile payment technology adoption in Singapore.
Price Benefit: All mobile payment providers have offered different price benefit to incentive
users, including cashback, discount, reward, etc. However, Alipay's reward and discount are
limited to the tourism business, such as retail, F&B, and attractions (Business Wire, 2018).
Alipay’s competitors provide more interesting price benefit. Paylah! the mobile payment app
of DBS bank offers cash back for new registrations (Value Champion, n.d.). Another competitor
offers a discount of more daily user scenario. For example, Android Pay offers a discount on
Uber payment. Besides the mobile payment provider, credit cards cashback still appears more
38
interesting to consumers (Value Champion, n.d.). Alipay still needs to offer more price benefit
to attract users and compete with other mobile payment providers.
Firm reputation: Alipay is already one of the most well-known mobile payment provider in the
world with its advanced technology and business success. However, as mentioned in 4.2.1,
Singaporeans still have a country-of-origin bias toward Chinese companies, building barriers
in trust for Alipay's technology adoption.
Structural assurance: Structural assurance refers to the security protection guaranteed by laws,
banks, and security design of mobile payment. Structural assurances can prevent financial loss
of consumers through security measures and recovery (Pal, De, Herath, & Rao, 2019). As
mentioned in 4.1.1, Singapore has implemented strict regulation of FinTech. What's more,
Singaporean banks are also drafting the e-payment protection guideline under the MAS
instruction. However, the come into effect has been postponing from January to June 2019 (Yu,
2019), slightly influence the timing the technology adoption. In this case, Alipay’s protection
design needs to be trustworthy enough for Singaporean users.
The strict regulation on Fintech might be a barrier for Alipay technology adoption. What’s more,
as mentioned before, most of the Singaporeans prefer using the traditional payment alternative,
cash, which is another environmental barrier for technology adoption.
Both cultural facilitators and barriers are analyzed based on Hofstede Insights. (Appendix 18)
Cultural Facilitators and Barriers
Social influence: China and Singapore share the same score in Individualism of Hofstede
Insights. The score is low at 20, meaning that both countries are collectivism nations. Thus, the
adoption of mobile payment is high influenced by the behavior of others due to the high
technology network effect (Pal, De, Herath, & Rao, 2019).
Long-term orientation: Considering the long-term benefit of mobile payment, long-term
oriented cultures still bear the complicated set-up and system familiarity system process.
Singapore enjoys a long-term oriented culture, yet the index (scores 72) is slightly lower than
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that of China (scores 87), meaning that they are less likely to bear the complexity of mobile
payment.
Uncertainty Avoidance: uncertainty avoidance refers to the level that people feel threatened by
uncertainty. Cultures with low uncertainty avoidance are more open to adopting new
technologies. Singapore has a much lower score (8) in uncertainty avoidance than China (30).
Alipay can benefit from this culture attribute in technology adoption.
In conclusion, the organization context is favorable for Alipay's technology adoption. Alipay
has made the right choice in choosing Grab and Lazada as partnered organizations to transfer
its mobile payment technology in Singapore. However, the technology context is a constraint,
but the lack of perceived effortlessness, perceived compatibility, and perceived benefit is
normal at the early stage of technology adoption. Finally, Alipay needs to adjust its strategies
to overcome the environmental barriers and exploit environmental facilitators.
4.2.3 Factors affecting Alipay technology adoption
This part evaluates Alipay's strategies from the perspectives of product characteristics and
consumer insight, including the perceived attributes of Alipay and factor affecting late adoption
of the technology. A survey was carried out in Singapore to perform analysis on consumer
insight, and 53 responses were received. (see Appendix 19) Most of the respondents don't
possess a bank account in China, which is the requirement of using Alipay.
Perceived Attributes of Alipay
The first attribute is relative advantages, meaning the extent that the innovation is perceived as
better than the product it replaces. In the competitive advantages of Alipay that mentioned in
3.3.2, only Platform Integration, Financial Services, and Third-party function remain as its
advantages in Singapore. As for economic factors, Alipay doesn't have any relative advantages
in pricing. Socially, the use of Alipay is not linked to any social status implication. Alipay needs
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to exploit its advantages, explore advantages that fit the Singaporean market, increase incentive,
and work on branding.
The second attribute is compatibility. The compatibility here is that with values and beliefs,
previously introduced ideas, and needs (Rogers, 2003). Firstly, in such an efficiency-oriented
country, the higher speed and efficiency of mobile payment do match the values in Singapore.
However, diversity and harmony between different races are also valued in Singapore. Alipay
needs to address races besides ethnic Chinese for their promotion. Prudence is also one of the
values in Singapore (Chang, Wong, & Koh, 2003). This can explain the skepticism of
Singaporeans toward mobile payment. Secondly, mobile payment is compatible with traditional
banking since the Singaporean banks also introduced their mobile services. However, Alipay
hasn't built up any partnership with the traditional banking industry. Finally, the need for mobile
payment is still not obvious in Singapore since most of the citizens and merchants prefer cash
or credit card payment (Finextra, 2018). The related question in the survey is “Do you need
mobile payment to fulfill your payment need in daily life?” Only 6.4% of the respondents use
mobile payment as the only payment method, while 35.9% of the respondents don’t need
mobile payment at all. The technology is not compatible with the market need.
The third attribute is complexity. The high complexity decreases the technology adoption rate.
The related question is "Do you think it is complicated to use Alipay (set-up account, payment,
and information tracking, etc.)?". Even though the set-up process is complicated as mentioned
before, the perceived easiness and complexity percentage are close: generally, 24% of the
respondents think it is very easy to use Alipay, while 25.3% think it's very complicated.
However, breaking down into age distribution, older respondents perceived more difficulties in
using Alipay: the majority of respondents age from 18 to 44-year state that it's easy to use
Alipay, while the half of the respondent's age more than 45 years think it's complicated. The
younger generation might be the early adopters and the majority of the mobile payment
technology, while the older generation tends to be late majority or laggards.
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The fourth attribute is trialability, which is the level that innovation can experiment with a
limited basis (Rogers, 2003). Though multiple mobile payments services provide consumers
the chance to experiment mobile payment, the small number of merchants that allow mobile
payment might limit its trialability, and the complexity limits the trialability of Alipay. The
related question is "Do you think it is easy to try Alipay mobile payment service (through
friend's mobile or account)?". As per the responses show, only about 20% of the respondents
think it is easy to try the Alipay mobile payment service.
The last attribute is observability, which is the visibility of the result of technology (Rogers,
2003). The related question is “How often do you see someone pay with Alipay mobile
application?”. The observability is absent since 60% of the respondents have never seen
someone pay with Alipay mobile application.
Factors affecting late adoption of Alipay technology
According to Jahanmir and Cavadas, the five factors affecting digital innovations in one region
are the attitude toward technology, negative word of mouth about the technology, global brand
image, consumer innovativeness, and lead users.
The attitude toward technology is the desirability of mobile payment (Davis F. D., 1989). The
attitude is positively related to the adoption (Porter & Donthu, 2006) of Alipay’s technology
and implies the branding, pricing and promotion strategies. The relative question of the survey
is “What is your attitude in using mobile payment services in Singapore?” to test their interest
in mobile payment. The desirability is low since over 50% of the respondents are not interested
in using mobile payment across most genders and age groups.
The negative word of mouth is the interpersonal communication of technology adoption, and it
is often from the late adopters and lag-users (Jahanmir & Lages, 2015). The relative question
of the survey is "Have you ever heard of/ generated negative feedback on Alipay's product?".
Over 70% of respondents never heard of or generated negative feedback toward Alipay, but the
low presence of negative word of mouth may be related to the low usage of Alipay.
42
Global brand image is another detriment of technology adoption, especially in such an
international country like Singapore. The higher the awareness that Alipay is a global brand,
the faster the Singaporean consumers will adopt its technology (Jahanmir & Lages, 2015). The
related question in the survey is "Do you think Alipay is a global brand?". The discrepancy of
the answer is small since 53.7% responded "no" and 46.3% responded "yes."
Consumer innovativeness, referring to the innovative efforts that lead to new ideas, is usually
found in the group of adopters. The consumer innovativeness accelerates the adoption rate since
this consumer group embrace the newness (Jahanmir & Lages, 2015). The related question is
"Have you considered other way to overcome the difficulties in cash and card payment before
the introduction of mobile payment in Singapore?". The consumer innovativeness is low since
71.7% of the respondents didn't consider other alternative of payment.
Lead users, those who possess more consumer innovativeness and more willing to adopt new
technology (Schreier, Oberhauser, & Prügl, 2007), often serve as an opinion leader in the
technology adoption. Leader users often generate commercially attractive ideas (Franke, Hippel,
& Schreier, 2006) compared to the late adopters who generate negative feedbacks. The related
question is “When did you start using mobile payment?”. Among the minority (13.2%) who
started using mobile payment the earliest before 2017, the year when Alipay was introduced in
Singapore, respondents age from 25 to 34 year represent the most. The second earliest adopters
belong to the age group from 35 to 44 years old. These two age groups could be the opinion
leader influencing the rest of the majority in Singapore.
In conclusion, Alipay needs to overcome the missing compatibility with need, the complexity,
the availability, and the observability to increase the adoption rate in Singapore. What's more,
the lack of interest and consumer innovativeness might lead to the late adoption of mobile
payment. However, the absence of the negative word of mouth, the global brand image of
Alipay, and the lead users can benefit the technology adoption.
43
4.3 Recommendations
The external environment, the government encouragement, and the rising trend of mobile
payment contribute to the readiness of mobile payment technology adoption in Singapore.
What's more, the social and material support in the entrepreneurial ecosystem, the productivity
and disruptive innovation of mobile payment, the free capital mobility, and the cultural
closeness to China, a leapfrogged country, fulfill the preconditions of mobile payment
leapfrogging in Singapore. However, Singapore still has a low adoption rate and remains a
lagged country within the ASEAN in terms of mobile payment development due to several
obstacles of implantation and strict regulation.
As for Alipay, although it successfully transferred its technology among Chinese tourists in
Singapore via partnership and exploitation of FSAs, its mobile payment technology is not fully
adopted by Singaporeans because of technical barriers, limited partnerships, country-of-origin
bias, and perceived values of its technology.
This part is dedicated to recommendations for two sides: 1) The government, on enabling
mobile payment leapfrogging, and 2) Alipay, on successful technology adoption in Singapore.
Recommendations to Alipay on technology adoption
Branding
The objectives of branding strategies are the perception of global brand and to overcome the
country-of-origin bias of security trust.
The brand image of Alipay should be secure and easy-to-use to gain consumers' trust and
increase consumers' need. Creating an emotional bond with the consumer could be a good
branding strategy for consumers (Vera, 2018). Alipay is good at producing sentimental
advertising or short film to increase the emotional bond in the Chinese market, and they can
use the same branding strategies to accent on their faster and safer added-value in Singapore.
44
Alipay can also change its logo to have a more global brand image since the original local is
too Chinese-oriented with the Chinese character. (Appendix 20)
The reputation of a firm is essential to increase consumers’ trust toward mobile payment (Shao
& Zhang, 2018). Luckily, word of mouth toward Alipay is not negative, and lead users can
serve as opinion leaders to bring Alipay good reputation through showcasing and endorsement.
Marketing
The investment in advertising of Alipay can influence the mobile payment leapfrogging, but
the effect of advertising is linked to the made-in effect, so the investment of Alipay’s
advertising alone cannot overcome the country-of-origin bias (Diodato, Maleraba, & Morrison,
2017). Co-advertising with other Chinese companies, such as Baidu, can generate a good
impression of Chinese brands in Singapore and overcome the bias.
In a collectivism society like Singapore, social media play an important role in social influence.
Alipay can use Twitter, Facebook, and Instagram to increase user engagement.
Alipay can provide Singaporeans with more price benefits to incentive them to use the Alipay
application. Incentive promotion includes discounts, cashback, voucher, etc.
To increase trialability and observability, Alipay can hold experiment and info sessions in
shopping malls to illustrate and visualize the convenience of mobile payment.
Product Management
For product management, Alipay can increase the protection design by using E-signature and
increase information access barriers to prevent information theft. Security certificate design can
be more powerful.
Business Development
The first partnership is with local tech companies that can combine the partner's resource and
Alipay advantages. Alipay and Lazada merged both systems and served as complementary
functions to combine Lazada's resources and Alipay's firm-specific advantages(FSA). Alipay
can acquire or build joint-venture with more internet companies experiencing trust issue in
45
digital payment to combine the acquired resources and FSAs, creating new FSAs (Meyer, 2018).
The acquisition with companies in different areas can also expand Alipay’s user scenarios.
The second partnership is low-value merchant. Besides partner with large corporations such as
Santosa, Alipay can also partner with low-value merchants, who usually accept cash payment
less than 100 SGD (Ng, 2018). Since transactions over 100 SGD mostly covered by card
payment in big shopping malls, the partnerships with low-value merchants is a good way to
leapfrog from cash to mobile payment.
The third partnership is with traditional banks in Singapore to overcome the limitations of that
only Chinese payment card can set up Alipay account, and provide more price benefits.
The fourth partnership is with other Chinese companies expanding their business in Singapore.
This type of partnership can create an ecosystem of Chinese companies and overcome the
country-of-origin bias.
Recommendations to Singaporean government on mobile payment leapfrogging
Firstly, the Singaporean government can facilitate the co-operation between governmental-
influenced companies and foreign companies with advanced technology, accelerating
technology adoption and the influence of mobile payment technology. Secondly, the
government can prioritize investment in mobile payment development, such as infrastructure
for mobile payment, security regulation, etc. Finally, policy intervention can spread the
information of mobile payment to decrease the consumers' security concerns, and mitigate the
made-in effect of foreign companies with advanced mobile payment technology (Diodato,
Maleraba, & Morrison, 2017).
46
Conclusion
Through literature review, surveys and data analysis, we can conclude that the success of
mobile payment leapfrogging in China is inevitable because of the policy support, social and
economic change, ICT leapfrogging and the driving force of Alipay. Conversely, the success
of Alipay is because of not only its competitive advantages but also the interactive cultural,
social and material attributes in the entrepreneurial ecosystem. Singapore already fulfills every
important precondition of mobile payment leapfrogging according to Brezis, but the market is
still underexplored due to regulations and inefficient implementation. Alipay also encounters
the difficulties of made-in effect and firm-specific advantages transfer in Singapore. Although
the organization factor beneficial for Alipay technology adoption in Singapore, the
environmental factor and consumer perception are still constraints. Alipay can adjust its
strategies in branding, marketing, product management, and business development with
governmental support to implement technology adoption and accelerate mobile payment
leapfrogging in Singapore.
47
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