Onboarding support helps merchants adopt digital payment methods

Change can be hard - especially when you're used to receiving change.

Switching from cash-based to digital payment methods can be a difficult sell, particularly in developing economies, for those in poorer neighborhoods and among older people who've gotten used to cash. But digital payments have certain advantages, for both businesses and consumers, and a Cornell-led research team explored ways to spur adoption of modern payment technology.

The team, led by Shreya Kankanhalli, assistant professor of marketing in the Cornell SC Johnson College of Business, found in a field experiment in central Mexico that supporting merchants during and after installation of digital payment devices resulted in significantly greater uptake of the technology, as opposed to simply giving merchants the devices for free and teaching them how to use them.

Employing consumer success managers (CSMs), a practice common among business-to-business technology companies, made digital payment tech less intimidating to new adopters. Wider acceptance of digital payments could help level the playing field for businesses large and small.

"The average business owner that we worked with was from a lower socioeconomic background, and their business was really important to their family and their community," Kankanhalli said. "We talk a lot about global digital divides, and if you think of the haves and the have-nots, if technology is concentrated amongst the haves, maybe it's not good for inclusive growth more broadly."

Kankanhalli is corresponding author of "Driving Merchant Adoption of Digital Payment Solutions through Customer Success Management," published June 12 in Management Science.

Co-authors are Stephen Anderson, professor of marketing at the Mays Business School, Texas A&M University; Leonardo Iacovone, an economist at the World Bank; and Sridhar Narayanan, professor of marketing at Stanford University Graduate School of Business.

Prior research has revealed several advantages to digital payment adoption, including boosting retailer performance, improving consumers' financial standing and enhancing government oversight for tax purposes. But adoption rates are lagging in the developing world due to challenges with digital literacy and individuals' reluctance to embrace technology.

In 2018, the Mexican government established a program in which free digital payment devices were delivered to approximately 10,000 merchants, along with instructions and literature explaining their benefits.

Of the 109 merchants interviewed by Kankanhalli and the team, fewer than 12% had accepted a digital payment six months after receiving the device.

"We found that there were two major reasons for that," Kankanhalli said. "About 60% said they just gave up because it became too complex for them, and another 40% said that none of their customers asked for it, and how did they know if they actually wanted it?"

For their experiment, conducted in Guadalajara, Kankanhalli and the team recruited 479 merchants and assigned them to one of three groups: a group in which CSMs train the merchants on how to use the system in two visits; a group where CSMs also demonstrated tangible benefits to the system by encouraging early trials of the technology; and a control group, with no interventions.

The team found that the first intervention raised participation in digital payments by 66.6% compared to the control group. For the second intervention, participation soared an additional 25% beyond the gains seen in the first group.

Kankanhalli said her team did a cost-benefit analysis and found that, even with the cost of sending CSMs to nearly 500 merchants, the benefits justified the expense. "According to our estimates," she said, "the profit increase would have covered the investment in the program within about six months to a year."

A bonus: Neighboring merchants, when becoming aware of the digital payment systems at shops nearby, were slightly more inclined than neighbors of control-group retailers to adopt the technology.

Previous tech-adoption research, Kankanhalli said, has found that efforts "kind of just stop at the point where you get the technology to the business. It's like, 'Bring it right to them for free, and they'll adopt it.' What we find is that, once the technology is in the hands of the business owner, that's just the beginning."

Support for this research came from the Stanford King Center on Global Poverty and Development; the World Bank's Latin America and the Caribbean Gender Innovation Lab; the Umbrella Facility for Gender Equality; and the MasterCard Center for Inclusive Growth.