The KBW analysts argued that Apple and Google are well situated to change consumer behavior in wealthy nations, since those tech giants control the operating systems on most mobile phones. But PayPal is also in an enviable spot because of its strength in the payments business. Community Banking. Credit unions.
Log In. Follow Us In Real Time twitter facebook linkedin. Tags Digital banking Consumer banking. By Kevin Wack CloseText. About Kevin. Close extra sharing options. PayPal added Those numbers include accounts at Venmo, the popular payments app PayPal acquired in CEO Dan Schulman envisions a day when "hundreds and hundreds of millions of consumers" will use PayPal's digital wallet to shop for goods and services and build "their own personalized wish lists.
I think PayPal is the threat [to banks]. Daniela Hawkins, Capco consultant. Kevin Wack. National Editor, American Banker twitter linkedin. For reprint and licensing requests for this article, click here. Digital banking Consumer banking PayPal. Bob Gallman has worked in the credit union industry for more than 45 years and has been at the helm of the league since By Ken McCarthy.
By Kate Fitzgerald. And where innovation is being defined by the problems that are being solved, the frictions it can eliminate, and the new experiences that it can enable — not how it is done.
And where disruption then becomes the magnitude by which the innovation creates and delivers value to key stakeholders — not where or how it starts, or even whether markets are new or old. Most companies should do the same: concentrate on making their core business as good as it can be, and making incremental improvements to stay well ahead of the competition.
And in payments, using their scale to their advantage. The Holiday Shopping Outlook, PYMNTS surveyed more than 3, consumers to learn what is driving online sales this holiday season and the impact of product availability and personalized rewards on merchant preference. The portion sizes may ebb and flow, but restaurant margins are as thin and unforgiving today as they were in the BC Cash flow considerations are not limited to one sector or business type.
Delays or errors in the process can have colossal ripple Still clear as mud to me! So, here we go. Except of course when they do — but hold that thought. Since they certainly do according to everyone else. Ask any taxi driver how they describe Uber. What about PayPal? Recommended for you. The Big Story PayPal offers mobile phone applications, mobile wallet services, and one click payment options, all of which put it in direct competition with mobile pay options offered by banks some of which we will discuss in later blogs.
While at first glance this may not seem too worrisome for institutional banks, any competition in areas of customer convenience and transactions is a serious threat to their business model and cannot be taken lightly. With the growing popularity of online shopping 1 and mobile pay, banks could not sit idly by while these services and revenues were taken from them. First, information is more and more symmetrical, allowing customer to access to all kinds of payment modes.
Second, the Internet security problems cannot be ignored. Third, in China, due to the historical reasons of market development, the credit management system is imperfect.
There is a lack of relevant law and policy constraints to regulate the dishonest activities in online trading. Therefore, we come to the following hypothesis:. The successful disruptive innovations of the 3rd-party online payment are able to identify and utilize the competitive basis change in Chinese context. This finding is somewhat different from the perspective of Christensen on the relationship between disruptive innovation and competitive basis.
However, our finding suggests that it is the competitive basis that could change on its own initiative and further facilitate disruptive innovation. The main reason why our finding is different from the existing ones is that the 3rd-party online payment we study on is in the emerging technology environment.
Many new product attributes spring up with the emerging technology and become new competitive basis of product suppliers. Thus, suppliers are engaged in disruptive innovation based on the new competitive basis. For example, Internet security is a new product attribute of payment born with emerging online payment technology.
These new attributes facilitate Alipay Co. On the other hand, from the comparison of PayPal Co. So, the online payment technology is no longer disruptive when Alipay Co. Why Alipay also show vivid disruptiveness? That is because of region segmentation owing to domestic regulation. Region segmentation, just like the high entry barrier set by the government, impedes companies to enter in without permit [ 50 ].
Chinese government has always been strictly supervising the financial market, so as to maintain the normal order of financial market and promote the construction of financial market system. This also explains why PayPal China was launched into the Chinese market, but its influence is far less than Alipay. Because in Chinese segment market Alipay Co. In the meantime, since the 3rd-party online payment market in China is relatively independent from the international 3rd-party online payment market, innovatively introducing 3rd-party online payment technology into Chinese market also can effectively drive the disruptive innovation.
Therefore, we put forward the following hypothesis:. The successful disruptive innovations of the 3rd-party online payment are able to utilize the region segmentation in Chinese context. Disruptive innovation is a relative phenomenon [ 22 ], which emphasizes the same innovation can be competency enhancing relative to one company and competency destroying relative to another.
Our finding further develops this point of view, stating that the nondisruptive innovation in one market segmentation can still be disruptive in other untapped market segmentation caused by government regulation. It has a similar conclusion with the regulation theory. Regulation theory suggests that regulation shapes the competitive situation [ 9 ]. The competitiveness of online service innovation changes due to three reasons: basic competition, environment of competition, and competing strategy [ 43 ].
Therefore, the special competitive situation under different regulation in different areas offers motivations and abilities for entrants to conduct disruptive innovation. The new product attributes of the three successful disruptive innovation cases and the corresponding proof are summarized in Table 3. As the summary of disruptive product attributes shown in Table 3 , we find out two new attributes that Christensen did not mention: security and quickness.
The first is security. The products in online payment are the virtual currency. On the one hand, virtual trade involves credit problems. If there are no effective laws or institutional constraints to restraint the dishonest behaviors, people may choose not to conduct the virtual transaction.
It also explains why PayPal Co. The credit system is not perfect enough at present, which makes it hard for the 3rd-party online payment companies to conduct innovations following the development mode of PayPal Co.
On the other hand, virtual trading relies on the security of Internet. The thefts and frauds in online payment took place frequently in China or other countries. In such situation, it was in great need of a payment product that can guarantee the security. Thus, we put forward the following hypothesis:.
It highlights security among the competitive basis of the 3rd-party online payment disruptive innovation in Chinese context. The second is quickness. In addition to the payment function of online payment product, people pay more and more attention to its quickness.
The disruptiveness of Alipay reflects in that it makes the payment quicker than the laborious payment modes such as bank transfer.
The disruptiveness of mobile wallet reflects in that it makes the payment further quicker than the online payment.
The quickness of the 3rd-party online payment has become an important product attribute nowadays. It highlights quickness among the competitive basis of the 3rd-party online payment disruptive innovation in Chinese context. Based on the analysis of Alipay and PayPal, we find that the business models including the profit mode, the operation mode, the marketing mode, and the incentive mode are very special in our cases.
The details are summarized in Table 4. It means that Alipay Co. But it would like to profit from advertisement, data analysis service, and other ways after its market share is big enough. That is what the president of Alipay Co. Everything will be well if the market share is big. At beginning, the main purpose of Alipay Co.
Gradually, Alipay Co. In the process of their diffusion, Alipay provides them with a huge customer base, which makes them to be known and adopted by a large number of customers in a very short time. Finally, the user number of all the three products will rise. It allows customers to both pay and manage their money, which meet their composite demand, while PayPal MMF is relatively independent and has no function other than a fund. The profit is calculated by compound rate every day.
It is indeed a mental stimulation giving rise to psychological satisfaction for customers, especially for the ones who are sensitive to financial profit. Sultan researched on the case of Microsoft Co. He stated, as is customary with Microsoft office, many of its products tend to integrate well with each other. The newest product SharePoint is not an exception to integrate to its famous product Microsoft office.
By doing so, Microsoft Co. Mobile wallet is Alipay Co. The two competitors both have strong parent company, Alibaba Co. Since the advent of taxi app in , mobile wallet and TenPay wallet, respectively, cooperate with two taxi apps Kuaidi and Didi.
They totally took out billions of yuan to compensate the passengers and taxi drivers who use the taxi apps and pay by mobile wallet or TenPay wallet.
The vigorous burning money activities are aimed at popularization of taxi apps superficially, but in fact, these are the disruptive marketing strategies of the two companies to cultivate their own mobile payment customer base. Mobile wallet survived in the battle. During that period, the payments completed by mobile wallet exceeded 2. Since then, Alipay Co. Thus, we propose a hypothesis:. For example, Alipay has launched credit score and its auxiliary services. This is a psychological incentive that can significantly improve user satisfaction.
Thus we, propose a hypothesis:. It should be noticed that the business model suited to disruptive innovation we proposed is different from the disruptive business model innovation on both the range of concept and the time innovation happens.
The business model we proposed refers to the one improved or constructed to fit the disruptive innovation, no matter it is a disruptive technology innovation or a disruptive business model innovation. The business model can be either a disruptive one or a general one.
The disruptive product usually underperforms on some product attributes at the beginning. The details are shown in Table 5. The point we focus on is the common characteristics in successful disruptive innovations of the 3rd-party online payment in China.
The existing researches mainly focused on the traditional industries in the context of developed countries [ 8 , 9 ] or focused on the theory descriptive stage [ 6 , 22 ]. However, the situation of 3rd-party online payment in Chinese context is unprecedented and complicated, but inevitable to confront if someone wants to contend for this attractive market. Therefore, we conclude some propositions and hypotheses, shown in Figure 2 , to enrich the disruptive innovation theory in the special and important context.
Our findings confirm that some propositions in disruptive innovation theory are also valid to the 3rd-party online payment in Chinese context and propose that some new points should be added to the propositions, such as innovation derivation P1 , product attributes P2 , business model P3 , and continuous improvement P4. Context factors of the 3rd-party online payment in China facilitate new derivations for disruptive innovation.
We suggest that competitive basis change H1. Moreover, disruptive innovation may also come from region segment H1. They also highlight security H2. In addition, we suggest that subsequent stages of disruptive innovation are also important. The suitable business model P3 should be constructed. No matter the business model by itself is disruptive or not, it must fit the disruptive innovation.
At the same time, continuous improvement P4 should be done in order to gain the sustaining profit. Our findings do not only confirm and enrich the disruptive innovation theory, but also give some suggestions for the emerging companies especially 3rd-party online payment when implementing disruptive innovation in China in the future.
First, companies could diversify through disruptive innovation.
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