Electronic purses in Euroland: Why do penetration and usage rates differ?

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Linck, Pousttchi and Wiedemann, Coase initiated the idea of transaction cost which covered all the costs arising from conducting a transaction Williamson, Papaefstathiou and Manifavas explained that since micropayment systems were used for purchase of extremely inexpensive items, it was vital to keep the cost of individual transactions low. Time spent is also a component of transaction cost. Convenience is definitely important.

Jeff Slawsky and Samee Zafar mentioned that the primary causes for failure of Mondex and other similar schemes were linked to its inability to offer the same level of convenience that payment cards offer for mid-value transactions or the speed that cash offers for small-value payments. After considering the above reviews and interviews with users and operators, we included safety, convenience and transaction cost as the three elements under the variable, confirmation, to explore whether they are influential for Taiwan users to continue using the program.

We propose the following hypotheses:.

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Perceived usefulness is an important primarily belief construct of TAM and is the degree to which a person believes that use of a system will improve his or her performance Davis, Hence, we suggest the following hypotheses:. The idea of network externality started off as bandwagon effect in Harvey Leibenstein described bandwagon effect as the extent to which the demand for a commodity was increased due to the fact that others were also consuming the same commodity. Rohlfs further developed the bandwagon effect and applied it to the development of communications network. Network externality is often defined as an increase in value of a product as the number of users of that product increase Katz and Shapiro, Network externalities provide positive benefits on both the supply and demand sides of the market Deak, Networked goods have characteristics such as complementarities, switching cost, lock-in, and economies of scale Shy, Furthermore, network economy is tippy and it can quickly become winner once the network has shown its worth and achieved the critical mass, Besen and Farell, The concept of network externality can help us to understand the factors needed for successful e-micropayment program.

Electronic payment system can be viewed as a networked good Baddeley, with micropayment market being a two-sided market with both consumers and merchants subjecting to network effects and facing the chicken and egg dilemma See-To, Jaisingh and Tam, The economic value of an e-micropayment program is an increasing function of its ubiquity, that is the more users demand side use it and the more merchants supply side accept it, the more valuable the system is to users, merchants and system operators.

Hence one key characteristic is the need for a captive audience that drives critical mass Chakravorti, and, hopefully lead to high transaction volume which in turn generate economics of scale Rochet and Tirole, Public transport system is one good choice for e-micropayment program as it has the required captive audience. If these consumers are concentrated in a small geographical region, chance of success will be higher Van Hove, Consumers and merchants must also be convinced of the benefits brought by the program. Transport ticketing systems require contactless feature to cope with the high volume of users and to minimise the processing time per user.

The card outperforms other e-micropayment programs backed by international financial organizations Westland, Kwok, Shu, Kwok and Ho, and has the support of key transport companies Poon and Chau, With more than 70 per cent of Hong Kong residents using public transport everyday and concentrating in a small geographical region, it has the captive market to achieve critical mass. Using contactless smart card, it is reliable, completes transactions faster than cash and offers an automatic reload feature. Over providers e. Wide adoption of Octopus Card is possible because of the interoperability of the system.

We thus hypothesise:. Each major category could be further divided into three sub-categories: transport-related e.

Euroland Foods SA - SSRN

Five-point Likert Scale was used. All the respondents were asked to identify the e-micropayment program which had the highest potential to succeed. Another section of the questionnaire was for users of non bank-issued programs to respond. The survey lasted for 1. A total of questionnaires were received with being valid returns.

Fifty-six per cent of the respondents fall within age group of , Fifty-seven per cent of respondents chose bank-issued program as the program which they thought had the highest potential to expand its services and succeed Table 1. Table 1 also showed that respondents from Northern Taiwan were generally indifferent to whether bank-issued or non bank-issued program had the highest potential. However, other parts of Taiwan showed stronger preference for bank-issued program. Table 2 revealed that respondents from Northern Taiwan felt that transport-related program had the highest potential while other parts of Taiwan felt that convenience store was the one, hence highlighting potential for both sub-categories.

Factor analysis revealed that while we could extract 2 components each from questions related to Convenience and Network Externality, the rest were one component each. Upon examining the questions, we named the 2 components from Convenience as Convenience Method of Usage and Convenience Place of Usage. Convenience Method of Usage was related to how the program was being used, for example through smart card and mobile phone. Convenience Place of Usage was related to where the program was being used, for example metro system and public bus service.

The 2 components from Network Externality were labelled as Network Externality Demand and Network Externality Supply since the former was related to the demand side of network externality while the latter was related to the supply side of network externality. Coefficients of Cronbach's Alpha, with value ranging from 0. Statistical significance for all tests was set at the.

Hypotheses 3, 4, 5 and 7 were supported and hypotheses H2, 6, 8 and 9 were partially supported. Figure 1 shows the relationship between the various variables. Only those with significant relationships and ultimately related to Continuance Intention, either directly or indirectly, are shown. The supply side of network externality and convenience method of usage indirectly contributed to continuance intention. The idea of captive market providing the critical mass of users and hopefully generating the demand side of network externality is clearly evident in non bank-issued program.

This study also confirms findings that existing captive market is a good starting point for issuers of e-micropayment programs. Operators of transport-related metro and convenience store chain in Taiwan are involved in the e-micropayment programs. The high density of convenience stores in Taiwan and their popularity among the consumers have also created a ready captive market for program issued by convenience store operator. However, the development of non bank-issued program to include other functionalities is hindered by legal restriction.


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The current approach for transport and convenience store issuers to get around this legal restriction is to co-operate with Taiwan banks and introduce bank-issued e-micropayment program. As a matter of policy, investment proposals at Euroland Foods were subject to two financial tests: payback and internal rate of return IRR. The tests, or hurdles, had been established in by the management committee and varied according to the type of project as shown in Table 1. Table 1. Project hurdles. In describing the capital-budgeting process, the finance director, Trudi Lauf, said: We use the sliding scale of IRR tests as a way of recognizing differences in risk among the various types of projects.

Where the company takes more risk, we should earn more return.

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The payback test signals that we are not prepared to wait for long to achieve that return. In any event, they were not prepared to finance increases in leverage beyond the current level.

The president of Banque du Bruges had remarked at a recent board meeting: Restoring some strength to the right-hand side of the balance sheet should now be a first priority. Any expansion of assets should be financed from the cash flow after debt amortization until the debt ratio returns to a more prudent level. If there are crucial investments that cannot be funded this way, then we should cut the dividend! At a price-to-earnings ratio of 14 times, shares of Euroland Foods common stock were priced below the average multiples of peer companies and the average multiples of all companies on the exchanges where Euroland Foods was traded.

At the most recent board meeting, the senior managing director of Venus gave a presentation, in which he said: Cutting the dividend is unthinkable, as it would signal a lack of faith in your own future. Selling new shares of stock at this depressed price level is also unthinkable, as it would impose unacceptable dilution on your current shareholders. Your equity investors expect an improvement in performance.

For consideration, each project had to be sponsored by one of the managers present. Usually the decision process included a period of discussion followed by a vote on two to four alternative capital budgets. Worked for the company her entire career, with significant experience in brand management. Eager to position the company for long-term growth but cautious in the wake of recent difficulties.

Trudi Lauf Swiss , finance director, age Had been a vocal proponent of reducing leverage on the balance sheet. Also, voiced the concerns and frustrations of stockholders.

Euroland Foods SA - SSRN

Heinz Klink German , managing director for Distribution, age Oversaw the transportation, warehousing, and order-fulfillment activities in the company. Spoilage, transport costs, stock-outs, and control systems were perennial challenges. Maarten Leyden Dutch , managing director for Production and Purchasing, age Engineer by training.

Tough negotiator, especially with unions and suppliers. A fanatic about production-cost control. Marco Ponti Italian , managing director of Sales, age Oversaw the field sales force of representatives and planned changes in geographical sales coverage.

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The most vocal proponent of rapid expansion on the senior-management committee. Saw several opportunities for ways to improve geographical positioning. Hired from Unilever in to revitalize the sales organization, which he successfully accomplished. Fabienne Morin French , managing director for Marketing, age Responsible for marketing research, new-product development, advertising, and in general, brand management. The primary advocate of the recent price war, which, although financially difficult, realized solid gains in market share.

Nigel Humbolt British , managing director for Strategic Planning, age Hired two years previously from a well-known consulting firm to set up a strategic planning staff UVA-F for Euroland Foods. Supported initiatives aimed at growth and market share.