The Impact of Third-Party Payment on Commercial Bank Performance

Acknowledgments

Abstract

Table of Contents
1 Introduction..................................................................................................5
1.1 Background and Research Motivations..............................................5
1.2 Research Questions............................................................................5
1.3 Research aim and Objectives.............................................................5
1.4 Outline of the Research......................................................................5
2 Literature Review..............................................................................................5
2.1 Introduction............................................................................................5
2.2 Digital Payment and Bank’s performance......................................................5
2.2.1 The Development of Digital Payment..................................................5
2.2.2 The Relationship Between Third-Party Payment and Commercial Bank form
Positive and Negative Influence Mechanism......................................................6
2.3 Prior study and research gap.......................................................................7
2.4 Theoretical foundation............................................................................10
2.4.2 Financial Intermediary Theory-Financial disintermediation theory............10
2.4.3 Technology spillover theory............................................................11
2.5 Theoretical Framework...........................................................................11
2.6 Contributions........................................................................................15
3 References.....................................................................................................20

1 Introduction
1.1 Background and Research Motivations
1.2 Research Questions
1.3 Research aim and Objectives
1.4 Outline of the Research
2 Literature Review
2.1 Introduction
At first, this chapter takes a look at the current state of digital payment and
this leads naturally to third-party online payment. Then, the project introduces
the relationship between the third-party payment services market and
commercial bank from a literature review perspective. Next, combined with
the prior studies, the author makes an evaluation and comparative analysis
and finally gains some inspiration from that relevant literature. Not only that,
but the author also summarizes the research gap and makes some
assumptions based on previous study and research questions. Finally, the
study gives the innovation points and contributions to this paper.
2.2 Digital Payment and Bank’s performance
2.2.1 The Development of Digital Payment
Digital payment could be defined as the payment which is made with the help
of digital modes such as mobile applications. In order to use it, it is very
important for both the parties involved in the transaction should have digital
modes. These parties are payer and receiver. The development of internet
finance is different from that of Fintech finance outside various countries.
Represented by the developed countries, the United States have sufficient
traditional financial supplies, and the needs of public could be satisfied offline
(Patil, Rana and Dwivedi, 2018). However, most of the countries around the
world are still in the early stages of financial development while the case of
insufficient financial infrastructure and financial markets. It obviously exists a

big gap with developed countries. This gap is gradually being filled due to the
emergence of internet finance. Internet finance provides strong technical
support for electronic payment system.
Tandulwadikar (2015) proposes that digital payment as an instant convenient
and convenient way includes desktop payment, mobile payment, and digital
wallets which means no hard cash (current notes). The digital payment as an
electronic payment has become a necessary daily way which means payer
and payee both use digital modes to send and receive money(O’Leary et al.,
2003). There is a large numbers of well-known third-party payment companies
cover the whole world such as the United Kingdom Worldpay (1993), the
United States PayPal (1998), China Alipay (2004), Germany Giropay (2006),
Apple pay (2014) and Google pay (2018). As Manning (2015) investigates
that the business of banks may face challenges due to the expansion of third-
party digital payment companies because third-party payment providers such
as PayPal, and Google in the United States are establishing direct
relationships with customers over convenience. In this way, they attract some
young customers in a short time to seize the opportunity of the mobile market
and engage in the mobile payment gateway. Driven by globalization, the
demand of cross-border good are increasing. People in their home country
pay more attention to the online shopping rather than offline shopping which
means there are high potential for the third-party mobile payment
development in the cross-border transactions. As the figure 1 shows that there
is a stable increase trend in the scale of third -party online payment in China
recently.
Figure 1: The scale of third-party industrial payment transactions in China

The above chart is focused with analysis of scale of the third-party
payment transaction in China from year 2013 to 2022. According to the chart
the payments in year 2013 were very less but with passing of time the
payments were increased. The estimated data for year 2020 was more than
80% and it has been forecasted that till 2022 it will be increased more than
100%. It shows that with the time the third-party payment scale is developing
in China with the time. Additionally, the next topic which will be covered for the
completion of the dissertation will relate to banks from positive and negative
influence mechanism which will help to enhance the knownedge about
relationship between commercial and third party payment.
2.2.2 The Relationship Between Third-Party Payment and Commercial
Bank form Positive and Negative Influence Mechanism
The rapid development of Internet payment, especially the explosive
development of third-party payment and the rise of mobile payment, it has
become an issue of great concern in many countries because it involves part
of the business of commercial banks (DeYoung et al., 2007). It means third-
party payment companies has entered the bank activities and it accounted for
a large operational productivity in the payment field. It can be from the picture
that there is more in line when the third-party payment companies entered.
This dissertation research on the relationship between third-party payment
and commercial banks’ performance. Therefore, it is necessary to figure out
the relationship between the third-party and commercial bank. It mainly
focuses on cooperation, competition and cooperative competition (Frost and
et.al., 2018). All of them lay the foundation for the following research
(Hryckiewicz, Kryg and Tsomocos, 2020).
Cooperation
The emergence of third-party payment is an extension and supplement to the
payment service function of commercial banks, showing a cooperative
relationship with banks (Bank for International Settlements, 2003).
Commercial banks provide technical interfaces and settlement services for
third-party payments to share the profit with third-party payment companies. It
involves cooperating in payment gateway, fast payment, withholding payment
and POS trade system (Kokkola, 2010).
According to the conclusions from empirical analysis from (Zhou et al., 2008),
there is no doubt that cooperation would be increasingly in-depth for
commercial banks in China. The positive impact of third-party payment on the
operating efficiency of commercial banks mainly highlights in increasing the