A primary objective of research is to understand the different models of third-party payment platforms in the two-sided market and how each of these models might hold advantages and disadvantages for the customer. There are different distinct customers at either end of the two-sided market and this has an impact on profits. Consumer’s choice of platforms is discussed based on platform characteristics such as the form of payment systems available, geographic restrictions, site availability, ease of navigation, privacy, security, and other offerings of Alipay and PayPal. The discussion also impinges on the growing smartphone payment trends in order to assess how well the two third-party payment sites Alipay and PayPal are making use of the smartphone market of users. All secondary research discussions recommend insights to how Alipay and PayPal can improve their existing structure for increased consumer choices. The research however notes that geographic element will lead to Alipay favoured in some areas and PayPal favoured in others.
It is interesting that third party payment platforms are achieving high results in markets compared to direct retail payment sites. As third-party payment platforms, which are actually updated or derivative products of credit cards and debit cards in terms of payment method, and mobile payment become increasingly popular, the analysis of market structure and performance of payment cards is now attracting more and more attention. Platform characteristics play a major role in the form of platform model which will be chosen by consumer. For instance, there are many debatable issues about interchange fee, which is a fee paid by a merchant to the card issuance institution when the merchant accepts payment via a credit card or debit card: 1) the interchange fee is generally set by the card issuance institution and payment platform (Zhang et al., 2010). In many cases, competition authorities think that the interchange fee is too high; and 2) such a case is especially prominent in the US where the interchange fee is the highest in the world (Zhang et al., 2010). In recent years, with decrease of the payment card industry’s cost, interchange fees have been increasing all the time. After Baxter (1983) proposed a ground-breaking idea, an important antitrust literature discussed the potential anti-competitive effect of collectively determining the interchange fee in the payment card system. However, several formal models of the payment card industry (such as Schmalensee, 2002, Rochet and Tirole, 2003 and Wright, 2012) have not been developed for systematic theoretical analysis until recent years. In this context, this research attempts to fill the gap by analysing the economics of Two-Sided Third-party payment platform based on platform characteristics, pricing models etc. on their influence on consumer preference. The research makes use of primary and secondary data in order to understand and measure factors that influence the two-sided market price and customers’ choice on the final market share.