A scaling law for two-sided networks? Empirical evidence for a mobile payment scheme

Abstract

Metcalfe's law holds that the value of a communications network is proportional to the square of the number of users. A recent paper proposes a similar scaling ‘law’ for two-sided networks that are subject to indirect network effects: their value would increase with the product of the two network sizes. The present paper operationalises and tests this growth law, with data for the BLIK mobile payment scheme in Poland. We effectively find a strong correlation between our proxy for network value on the one hand and the product of the number of active BLIK users and BLIK-accepting merchants on the other. This is true for both point-of-sale and online transactions. We also show that the value of the BLIK networks exhibits faster-than-linear growth over time. The main driver would appear to be the accelerating, S-shaped uptake of BLIK on the consumer side, rather than acceptance by merchants.