Should we wait? Network externalities, compatibility, and electronic billing adoption

This study examines the adoption of electronic bill presentment and payment (EBPP) technology. EBPP continues to grow and will become a multibillion d ollar e-commerce industry. The technology adoption configuration in this co ntext is quite interesting because it involves four stakeholders: billers, bill consolidators, banks, and consumers. Banks and bill consolidators comp ete to act as an intermediary between billers and consumers. Network extern alities 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 tec hnology might be superior to the current one. When the higher costs of earl y adoption are taken into account, the model shows that billers are more wi lling to wait, ceteris paribus. Our results also show that anticipation of a new and better, but compatible, technology might cause billers to wait, d epending on what benefits they expect by adopting early, and how much cost they anticipate to incur upgrading their technology later.