Working Papers
March 2021, No. 21-05R
Technology Adoption and Leapfrogging: Racing for Mobile Payments (Revised February 2023)
Paying with a mobile phone is a cutting-edge innovation that is transforming the global payments landscape. Some developing countries have surprisingly overtaken advanced economies in adopting the mobile payment innovation. We construct a dynamic model with sequential payment innovations to explain this phenomenon, which uncovers how advanced economies' past success in adopting card-payment technology holds them back in the mobile-payment race. Our calibrated model matches the cross-country adoption patterns of card and mobile payments and also explains why advanced and developing countries favor different mobile payment solutions. Based on the model, we conduct quantitative exercises for welfare and policy analyses.
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