Technology Investment Decision-making under Uncertainty in Mobile Payment Systems

Robert John KAUFFMAN, Singapore Management University
Jun LIU, Singapore Management University
Dan MA, Singapore Management University


The recent launch of Google Wallet has brought the issue of technology solutions in mobile payments (m-payments) to the forefront. In deciding whether and when to adopt m-payments, senior managers in banks are concerned about uncertainties regarding future market conditions, technology standards, and consumer and merchant responses, especially their willingness to adopt. This study applies economic theory and modeling for decision-making under uncertainty to bank investments in m-payment systems technology. We assess the projected benefits and costs of investment as a continuous-time stochastic process to determine optimal investment timing. We find that the value of waiting to adopt jumps when the related business environment experiences relevant shocks. Also, when the rate of benefit flows, the time horizon for decision-making, and the time value of money change, the recommended investment timing and optimal investment value will change too. We also consider how network effects influence decision-making for this IT investment context.