Investment Timing for Mobile Payment Systems

The recent launch of Google Wallet has brought the issue of tech-nology solutions in the mobile payment (m-payment) area to the forefront. In deciding whether and when to adopt m-payment technology, senior managers in banks are naturally concerned about uncertainties regarding future market conditions, technolo-gy 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 invest-ments in mobile payment 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 envi-ronment experiences relevant shocks. Our analysis shows that when the volatility of the expected payoff, the time horizon fo