M-Payments: Drivers and Barriers to Adoption


As we have seen in our recent article about Mobile Payments Security and Consumer Confidence, the growth of mobile payments has defied the predictions of most industry analysts by happening much more gradually than expected. But there is certainly no question that it is happening and that a consumer culture with mobile devices firmly at its centre is inevitable.

In this article, we’re going to look at some of the drivers of mobile payment growth as well as the barriers to adoption that have prevented m-payments from truly taking off (yet).

Why M-Payments?

Shopping habits and payment preferences have changed. We’re witnessing the rise of omni-channel commerce, the notion that consumers want (and are coming to expect) businesses to provide the same products, features and level of service regardless of the channel, whether on their computers, mobile devices, or in-store.

This is visible in the now-common practices of webrooming and showrooming, two shopping habits that have blurred the line between shopping online and in-store. Webrooming is when a customer researches a product online before purchasing it in store, whereas showrooming is when a customer visits a store to see and feel an item in person before purchasing it online. According to a report from Merchant Warehouse, more than half of shoppers take part in one or both of these habits.

Consumers Want Mobile Wallets

People are already relying on their smartphones as one step on their path to purchase, so it’s only logical that merchants should want to make it even easier for their customers to stay on that path to purchase by accepting mobile payments at the point-of-sale. 70% of consumers believe that we will see widespread adoption of mPOS within the next three to five years, and 40% of consumers in North America have already used smartphones to make a payment at the point-of-sale, a rise from only 16% in 2012.

Today’s omni-channel consumer envisages a future where you can leave your house with nothing but your smartphone in your pocket, acting as your wallet, ID, bus pass, maybe even your car keys. However, 62% of shoppers say they are not willing to use multiple wallets and are certainly not ready to leave their physical wallets at home just yet.

This suggests that widespread consumer adoption will not occur until most merchants start accepting m-payments. So the question is why have most merchants not yet embraced?

A Fragmented Market

There has been a lot of buzz about mobile wallets in the last few years, but even efforts by heavyweights like Google, PayPal and Wal-Mart have been unsuccessful. This is due in part to the fact that these and other players have tried to “own the customer” by offering their own stand-alone solutions. Not only does this create conflict with existing customer loyalties, but it also requires merchants to subscribe to a particular provider before their customers could use that mobile wallet.

Consumer demand is not the problem with m-payment adoption, although security concerns remain a deterrent. The issue is a fractured market with many incompatible solutions and no clear front runners, as well as a lack of adequate technologies and infrastructure on the merchant side to provide consumers with the m-payment options they desire.

Convenience is everything. If a new technology is less convenient than the existing technologies, as was the case with these unsuccessful mobile wallets, then most consumers will not adopt it, no matter what other benefits it may provide. Until a true market leader emerges and mPOS adoption becomes widespread among merchants, many consumers will continue to opt for the convenience of payment cards.

However, the latest mobile wallet solution, ApplePay, may provide an answer. Unlike earlier attempts, ApplePay has provided a solution to the issue of convenience by taking a customer-first approach to mobile payments.

How ApplePay Provides a Working Model for mPOS Adoption

ApplePay is the m-payment and digital wallet service introduces by Apple in October 2014. It enables Apple devices to make payments online and in-store (using a near-field communication or NFC antenna in the device), digitising and replacing the payment card transaction at checkout. Within three days of launch, ApplePay had already become the largest adoption of a mobile payment system with over 1 million registered users.


While only available in the US for now, ApplePay is the first true success story in mobile payments. The secret to that success is that ApplePay was built on top of existing payment infrastructure – Apple partnered with Visa, MasterCard and American Express so that their service utilises PayWave, PayPass and ExpressPay terminals rather than proprietary terminals provided by Apple.

This means that most stores that accept credit cards are already capable of accepting ApplePay payments, so shoppers could start taking advantage of this mobile wallet from day one.


Another thing that sets ApplePay apart from less successful mobile wallets in the past is its approach to security. Security is one of the leading consumer concerns about mobile payments and previous solutions didn’t offer any additional security features. Apple, on the other hand, has been very vocal about integrating cutting-edge biometrics and tokenisation into ApplePay.

Apple’s biometric system, TouchID, prevents anyone other than you from making a payment using your device by scanning your fingerprint. To prevent the interception of payment information, Apple uses a tokenisation system, which generates a dynamic security code unique to each transaction, eliminating the need for raw data to pass between customers, merchants and financial institutions.

It’s worth noting that the recent news about ApplePay “fraud” was not a breach of ApplePay’s security features but rather spinoffs of the Target and Home Depot breaches. The stolen credit card information obtained by the Target and Home Depot hackers was used to create iTunes accounts, which in turn were used to create ApplePay accounts, enabling these cybercriminals to steal millions of dollars’ worth of merchandise. How this happened and why is a topic for another blog post altogether.

What’s Next?

ApplePay’s effect on m-commerce has been likened to the iPhone’s effect on the smartphone industry – it truly is a game changer. Until now, the lack of adequate technologies available for merchants to accept m-payments has been the main barrier to adoption and ApplePay has provided a solution.

Its success is an example for the whole industry, not only proving how wide and profitable the m-payments market is but also showing us how it can be used. ApplePay has hit on the winning formula but doesn’t own that formula, and now future market entrants have a working model to follow.

We know that mobile payments are here to stay and we want to make them more accessible for consumers and merchants alike. Though currently only available to Icelandic members, DalPay is planning the international release of our smartPOS system, allowing merchants to accept mobile payments, as well as credit and debit card payments, at the point-of-sale using DalPay as a single provider.

For more information about mobile payments and m-commerce as well as the latest updates about DalPay and smartPOS, subscribe to the DalPay Blog and follow us on Facebook and Twitter.

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Everything You Need to Know about Selling in MENA


In the Everything You Need to Know series, we take a look at a specific e-commerce market to help you decide whether you should expand online sales across borders. As a provider of comprehensive payment processing services, we at DalPay specialise in cross-border commerce and have first-hand experience facilitating business in over one hundred markets worldwide.

Online marketplaces vary significantly around the world in a wide number of ways, such as their level of economic development, shopping habits, preferred payment methods, access to technologies, legality, logistics, etc. Because of this, there are a great many factors to consider when choosing which international markets to expand to. This series is designed to provide you with all the information you need to choose which countries are a good fit for your business and to begin selling across borders.

Unless otherwise noted, figures in this article are sourced from:

The MENA region (Middle East and North Africa) has the fastest growing e-commerce market in the world. Compared to the global average of 20%, MENA’s growth rate of 45% is attracting the attention of many international businesses and investors, and with 48% of online shoppers taking part in cross-border e-commerce, now is the time to expand your business to this region.

By all accounts, e-commerce in MENA is still in its early days. The region represents 33 million online shoppers, which is less than 10% of the total population, in part because of a relatively low internet penetration of 29.6%. The 15 billion USD in e-commerce sales in 2013 accounted for less than 1% of total retail sales.

Even though these numbers are relatively small when speaking on a global scale, the growth potential is huge, driven in part by the widespread adoption of smartphones, with 88.9% of internet users browsing on their mobile phones and with m-commerce (which currently accounts for over 10%) predicted to reach 20% of total e-commerce transactions before the end of 2015.

Quick Figures

  • Total population: 382 million
  • Internet penetration: 29.6% (113 million)
  • Mobile penetration: 45%
  • Online shoppers: 33 million (8.6% of population)
  • E-commerce sales: USD 15 billion
  • M-commerce sales: USD 1.8 billion (12% of total online sales)
  • E-commerce annual growth rate: 45%

Typically, each article in our “Everything You Need to Know” series will focus on a single country, but in this case we will be looking at the overall trends within the entire MENA region. Keeping in mind that each individual market is going to have its own unique benefits and drawbacks, let’s take a closer look at the market conditions and realities of selling online in MENA.

What You Need to Know

Top e-commerce categories

While fashion is one of the top performing e-commerce categories around the world and MENA is no exception, the fastest growing categories in the region are video games and the travel sector. The travel sector has been growing at a rate of 45% on average, with rates above 50% in Lebanon, Qatar, Saudi Arabia and the UAE.

The gaming market in MENA is worth 1.6 billion USD as of 2014, with 90% of the regional market controlled by international developers. While the online gaming industry is growing globally, in MENA the growth is outpacing the global average due in part to the accelerating smartphone adoption as well as the size of the under-25 demographic, which makes up 60% of the regional population.

In both of these categories, most of the money spent online is being spent across borders. In fact, 48% of all e-commerce spends in MENA are cross-border transactions, which underlines the region’s welcome to international entrants. However, to market successfully in any region, you need to provide consumers with localised options, including language, currency and preferred payment methods.

Preferred payment methods

10% of all card transactions are spent online and card-not-present transactions are growing faster than both point-of-sale and cash. However, the real distinguishing factor in MENA is the relative unpopularity of payment cards in favour of cash-on-delivery.

According to a 2013 study by Ipsos, 56% of internet users in MENA listed concerns about credit card fraud as the number one barrier to e-commerce, which may account for the fact that 70-80% of all online transactions in the region are cash-on-delivery (COD), where the payment is made directly from the purchaser to the courier when the product arrives at their door.

While e-wallet acceptance is growing and several local online payment gateways have been launched, as long as COD remains the preferred payment method, international merchants are going to have a few additional concerns. Aside from finding a courier you can trust to collect payments for your products, COD can also have a significant impact on your cashflow since couriers may take as long as a month or more to deliver the funds.

Cybercrime & m-commerce

The good news is that the fraud rate in MENA is very low at 3 cents per $100, half the global average of 6 cents per $100. While a public lack of confidence in the security of online payments within the region remains a barrier, the reality that online transactions are relatively secure will attract more business to the region and bring more consumers online.

Meanwhile, consumer confidence in online payments may already be growing, according to a recent survey on m-commerce reported by the Gulf Times. 75% of respondents felt local websites to be secure and 69% expressed a preference for payment cards over cash.

This coincides with the recent trend for consumers in the region to view mobile payment options as a key factor in their choice of merchant, as highlighted by the Everything Mobile forum in Qatar. Because the infrastructure to support m-payments has not yet been adequately development by local banks and payment providers, the rapid growth in mobile penetration has driven more consumers to cross-border e-commerce to find merchants who support m-commerce.

MENA E-Commerce in Brief


  • 33 million potential customers
  • Fastest-growing e-commerce market in the world
  • Low fraud rates
  • Widespread acceptance of international merchants


  • Payment infrastructure underdeveloped
  • Logistical challenges relating to the preference for cash-on-delivery
  • Regulatory requirements vary from country to country

The e-commerce market in the Middle East and North Africa is on the verge of ripening and now is the time to invest. The growth potential is considerable as there are over 300 million people in MENA, most of them under 25, and businesses have an opportunity now to meet their needs and gain their loyalties.

However, it still remains an emerging market with some very really barriers. Second only to concerns about credit card fraud, the Ipsos study showed that 37% of respondents are “wary that the product will not have a return policy if they don’t like it.” Coupled with the popularity of COD payments, this could turn shipping logistics into a major headache.

Language is also a key driver, as it is most everywhere. Despite the overall success of international merchants in the region, one of the reasons why e-commerce giants like Amazon have not been able to unseat the local mass merchant Souq is because they have failed to offer adequate language and currency support.

Despite these barriers, the region provides considerable room for growth andnumerous market segments that are underserved, compared to most mature e-commerce markets. By expanding your business into MENA, you have an opportunity to gain significant traction as the region matures into a global e-commerce force.

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