5 Empirical Study
5.2 Specific Business Conditions
5.2.2 Trend Analysis
126.96.36.199 Technical Infrastructure
average time constant may support the argument that it took an average of 14.5 years for electronic payments at the POS to travel from 10 to 90%. For online shopping practices, the average time constant is 18 years. This means that the process of dissemination of the two specific cases took several years longer in Germany.
Based on the analysis of the time constants and the logistic fits, it may thus be reasonable to conclude that new payment and purchase practices need more time to diffuse in Germany.
This may be interpreted as Germany being more hesitant when it comes to changing established habits and adopting new practices.
5 Empirical Study
Figure 13. Internet Users in Germany and the USA – Forecast and historical data.
Currently around 84 out of 100 people have access to the internet in Germany and in the USA. In both countries, the number of internet users has already surpassed its forecasted ceiling level, but ranges well within the 90% confidence bands (MUS = 83.23, MGER = 83.48).
The phenomenon is called homeostasis and describes random oscillations that occur as the niche capacity is reached (Modis, 2011a). The error in the German data set was found to be lower than in the US data set: 4.2% MAD as opposed to 10.4%. This influences the 90%
confidence interval (illustrated by the thin grey lines) and leads to a wider corridor in case of the USA (see right side of Figure 13). Due to the comparably high error in the historical data, it is reasonable to highlight that the future level of internet users may reach about 87 in the US and 85 in Germany. These numbers were obtained from the calculations for the upper 90%
confidence level in both cases.
The historical data on the number of mobile cellular subscriptions (per 100 people) come from The World Bank (2014b) and consist of yearly data points from 1985 through 2013 for Germany and 1984 through 2013 for the USA, respectively. The error in the German data is higher than in the US American data, which is again represented in the wider 90% confidence band (MADGER = 11.8%, MADUS = 2.7%). However, in both cases the historical data clearly follow the shape of a sigmoid curve. The forecast shows that both countries have already come close to the forecasted ceiling level M (MGER = 121.51, MUS = 99.9): Germany has so far completed 98% of the growth process and the US 96%. These numbers express the
percentage of people who will eventually have a mobile cellular subscription and already did so in 2013. Based on the data and the associated forecast, there are no relevant changes to expect in Germany and the United States. The forecasts are shown in Figure 14.
Figure 14. Mobile Cellular Subscriptions in Germany and the USA – Forecast and historical data.
The analysis of the dissemination of internet and cell phone usage shows that those people who will eventually use the individual technologies have already adopted them at this point.
Thus it may be argued that both technologies have successfully spread and the foundations of the digitization have successfully been laid in both countries.
Mobile payments rely heavily on the availability of supporting instruments. No matter what technology will prevail, the smart phone is an essential complement of the payment process31. In addition, a recent report found that smart phone users were more likely to use mobile payments at the point-of-sale (Ernst & Young, 2013). The number of smart phones sold can provide a good understanding of the relevant infrastructure for mobile payments. The historical data from Euromonitor International (2014a) cover the years 2007-2012 for Germany and 2008-2013 for the USA (Euromonitor International, 2014b). Even though data are only available for a rather short and recent period, they are suitable for constructing a meaningful forecast. The error in the data is comparably low (MADGER = 6.3%, MADUS =
31 The analysis of smart phones without considering NFC-supporting models is sufficient since they could, for instance, be upgraded with an NFC sticker attached to the phone.
5 Empirical Study
2.2%). Nevertheless, the 90% confidence intervals are slightly wider around the midpoint of the S-curves. This is due to the fact that smart phones have completed a lower percentage of their eventual diffusion. Figure 15 shows the relevant forecasts.
Figure 15. Sold smart phones in Germany and the USA – Forecast and historical data.
The smart phones sales have so far reached 72% of the forecasted ceiling level in Germany and 64% in the US. Based on the obtained forecasts the following interpretation is possible:
Compared to 2012, 39% more smart phones per year will be sold in 2018 in Germany32. Thereafter, the forecast does expect the smart phones sales to remain at around 25 million per year in Germany. In the USA, additional 49% growth in smart phones sales is expected until 2018. After 2021, the forecast expects the growth to plateau at around 190 million smart phones sold per year in the USA.
The comparison of the forecasts in standardized form provides additional insights. Smart phones are a rather new technology compared to mobile phones and the internet. The forecast suggests that they have the longest way to go until the ceiling level is reached. The standardized form of the data presented in Figure 16 also supports this argument: Having just crossed the 50% mark (i.e. the 1 on the logistic axis), smart phones are trailing the dissemination of the internet and mobile phones. Apart from smart phones, all indicators have covered more than 90% of their growth. Nevertheless, these findings may suggest that the
32 The remaining growth can be calculated from (M/Yn)-1.
infrastructure necessary to enable consumer acceptance was found to be sufficiently developed and, thus, to enable the widespread acceptance of mobile payments.
Figure 16. Internet usage, mobile phone usage, and smart phones sales – Standardized form.
A comparison of the three indicators further shows that the two straight lines describing the forecasted diffusion of smart phones are the steepest. Consequently, it can be argued that smart phones spread faster than cell phones or the internet. This argument can be made irrespective of the actual level of diffusion. Furthermore, the standardized form shows that in all three cases the light grey line describing the growth of the respective indicator in Germany is steeper than the line describing the USA and causes an intersection between the two lines around the 50% mark. This may imply that technical infrastructure in Germany starts to
5 Empirical Study
diffuse later but then grows faster. Put another way: despite German consumers of start adopting a technical innovation later than their US American peers, the technical innovations then seem to spread more efficiently in Germany.
The standardized growth processes also allow evaluating the time constant ΔT. Table 6 shows that smart phones spread in just 5.5 years whereas mobile phones needed around 15 years, and the internet about 13.5 years to diffuse. The time constant drops over time.
Comparison of indicators for Germany and the United States of America.
ΔT (in years)
Indicator Germany USA Average
Mobile Cellular Subscriptions 13 17 15
Internet Users 10 17 13.5
Sales of Smart Phones 5 10 7.5
As aforementioned, the available data is insufficient to construct a forecast for mobile payments as such. However, based on these findings, the following may be argued: the later a technology starts to diffuse, the lower the time constant, i.e. the faster the growth process.
According to this line of argumentation it may be possible to predict that the technical infrastructure required for mobile payments is likely to follow a diffusion pattern that is more similar to the pattern describing the diffusion of smart phones than to that describing mobile cellular subscriptions or internet usage. Under the assumption that mobile payments are going to spread faster than smart phones (which needed five years in Germany and ten years in the USA to reach 90% of their final diffusion level) it may be possible that the infrastructure necessary for mobile payments is going to be a conventional part of daily life within up to five years in Germany and the USA.