Should we wait? Network externalities and electronic billing adoption

This study examines the adoption of electronic bill presentment and payment (EBPP) technology solutions. EBPP continues to grow and has a huge potential for becoming a multi-billion dollar e-commerce industry. The adoption configuration is quite interesting because it involves four stakeholders: billers, bill consolidators, banks, and consumers. In this case, banks and bill consolidators compete against each other to act as an intermediary between billers and consumers. Network externalities play a significant role since the more billers that adopt the technology, the more consumers are willing to use the services. The 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 because of expected network externalities, billers are more likely to adopt the existing technology early, despite the fact that 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.