Cross-Side Network Effects, Brand Equity, and Consumer Loyalty: Evidence from Mobile Payment Market

ABSTRACT

Given the intense competition in the mobile payment market, researchers have been exploring strategies to maintain brand equity and consumer loyalty. By considering the characteristics of mobile payment, we incorporate cross-side network effects (CNEs) and the complementarity actions (i.e., platform-application, application-service, and service-strategy complementarities) to examine mobile payment brand equity and consumer loyalty. We test the research model using survey data collected from Alipay Wallet (n = 647) and WeChat Wallet (n = 327). The results show that platform-application, application-service, and service-strategy complementarities positively influence brand equity, which in turn leads to consumer loyalty. In addition, service-strategy complementarity reinforces the impacts of platform-application and application-service complementarities on brand equity. This study contributes to the literature by introducing CNEs in the mobile payment context and examining the relations between CNEs, brand equity, and consumer loyalty. Furthermore, the results provide practitioners with insights into consumer loyalty in the mobile payment context.

KEY WORDS AND PHRASES:

• Mobile payment
• two-sided markets
• network effects
• cross-side network effects
• perceived complementarity
• brand equity
• consumer loyalty

Acknowledgments

The work described in this study was supported by grants from the National Natural Science Foundation of China (Nos. 71671174 and 71801166) and the Hong Kong Research Grant Council (Nos. 7004777 and 9042584).

Supplemental material

Supplementary data for this article can be accessed here.

Notes

¹ The term mobile payment applications refers to payment software applications that are designed to run on mobile terminals such as smartphones and to allow consumers to perform ubiquitous payment activities with the help of a wireless network.

² CNEs were originally defined as a variety of “complementary services” available for use with a specific technology network. On the basis of Xu et al. [76, 77] and the platform-application-service-strategy hierarchy of mobile payment, we identify three types of “complementary services” available for use with a specific mobile payment application: third-party transaction platforms, first-party payment services, and supporting-payment strategies.

³ Third-party transaction platforms are a large variety of offline/online transaction platforms powered by third-party operators and are independent of a specific mobile payment application provider.

⁴ First-party payment services are a large variety of inherent payment services that are powered by a specific mobile payment application provider rather than third-party operators.

⁵ Supporting-payment strategies are a large variety of supplementary strategies that are offered by a specific mobile payment application provider to help consumers reach their payment goals effectively.

⁶ Oliver [53] identified four forms of consumer loyalty: cognitive loyalty, affective loyalty, conative loyalty, and action loyalty. We do not include action loyalty in our research model for three primary reasons. First, action loyalty is essentially the actual behavior following conative loyalty (i.e., behavioral intention). Prior studies have demonstrated that behavioral intention is a strong predictor of actual behavior and employed behavioral intention as the final dependent variable. Second, our research model is empirically validated through two cross-sectional surveys, thus being subject to significant practical constraints in terms of meaningfully measuring action loyalty within a narrow window of time. Finally, most of the extant studies on consumer loyalty also use cognitive loyalty, affective loyalty, and conative loyalty to represent consumer loyalty (see Appendix D).

Additional information

Notes on contributors

Xiang Gong

Xiang Gong ([email protected]; corresponding author) is assistant professor at the School of Management, Xi’an Jiaotong University, China. He received his Ph.D. in Information Systems from the joint program between the University of Science and Technology of China and City University of Hong Kong. His research interests include financial technology, cyberdeviance, and social commerce. Dr. Gong’s research has been published in Information Systems Journal, Information & Management, Information Technology & People, and other journals.

Christy M. K. Cheung

Christy M.K. Cheung ([email protected]) is professor of Information Systems and e-Business Management at the School of Business, Hong Kong Baptist University, Hong Kong, China. Her research interests include technology use and well-being, social media and electronic commerce, and adaptive and maladaptive use of technology. She has published in major IS journals, including MIS Quarterly, Journal of Management Information Systems, Journal of Information Technology and Journal of the Association for Information Science. Dr. Cheung is President of the Association for Information Systems—Hong Kong Chapter. She is editor-in-chief of Internet Research and has served as a senior or associate editor of several other journals.

Kem Z.K. Zhang

Kem Z.K. Zhang ([email protected]) is a member of the Faculty of Business Administration, Lakehead University, Canada. He received his Ph.D. in Information Systems from the joint program between the University of Science and Technology of China and City University of Hong Kong. His research interests include consumer behaviors in social media and mobile contexts. He has published papers in such journals as Decision Support Systems, Information Systems Journal, and Information & Management.

Chongyang Chen

Chongyan Chen ([email protected]) is associate professor at the Dongwu Business School, Soochow University, China. She received her Ph.D. in Information Systems from the joint program between the University of Science and Technology of China and City University of Hong Kong. Her research interests include IT usage and addiction. Her research has been published in such journals as Information Systems Journal, Information & Management, and Information Technology & People.

Matthew K.O. Lee

Matthew K.O. Lee ([email protected]) is chair professor of Information Systems & E-Commerce at the College of Business, City University of Hong Kong, Hong Kong, China. He is the principal investigator of a number of CERG grants and has published more than 100 refereed articles in international journals such as MIS Quarterly, Journal of Management Information Systems, Journal of the Association for Information Systems, Information Systems Journal, International Journal of Electronic Commerce, and Decision Support Systems. He has served as an associate editor of various journals.