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.

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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

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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.

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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.

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