Should We Wait? Network Externalities, Compatibility, and Electronic Billing Adoption

Prior to joining the doctoral program at Minnesota, he worked in industry and consulting for eleven years at several major companies, including Digital Equipment Corporation as a software specialist, a coal-mining company in Indonesia as a superintendent of computer and network operations, Andersen Consulting as a senior consultant and manager, and an Internet startup as a general manager. His current research interests are in the areas of information technology adoption and e-commerce applications in the financial services industry. His current research interests focus on the evaluation of organizational investments in IT and e-commerce and their market impacts, e-commerce and technology in the financial services industry, and the application of theory and methods from economics and financial economics in IS research. ABSTRACT: This study examines the adoption of electronic bill presentment and payment (EBPP) technology. EBPP continues to grow and will become a multi-billion dollar e-commerce industry. The technology adoption configuration in this context is quite interesting because it involves four stakeholders: billers, bill consolidators, banks, and consumers. Banks and bill consolidators compete to act as an intermediary between billers and consumers. Network externalities play a significant role: the more billers that adopt the technology, the more consumers are willing to use the services. Our analysis is based on the welfare economics concept of finding the socially optimum adoption configuration and the resulting adoption pattern in a market with sponsored technologies. The results show that due to network externalities, billers are more likely to adopt the existing technology early, though the next technology might be superior to the current one. When the higher costs of early adoption are taken into account, the model shows that billers are more willing to wait, ceteris paribus. Our results also show that anticipation of a new and better, but compatible technology might cause billers to wait, depending on what benefits they expect by adopting early and how much cost they anticipate to upgrade their technology later. for offering useful suggestions that shaped this work. We also thank the anonymous JMIS reviewers, who offered additional suggestions that enabled us to refine our claims about the contributions of this research. Finally, we are indebted to Michael Killen, Founder and Chairman of Killen & Associates of Palo Alto, CA, for sponsoring our ongoing research on electronic bill presentment and payment in financial e-commerce. All errors of fact or interpretation are the responsibility of the authors.