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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Why Aren’t You Paying With Your Phone Yet? Mobile Payments Security and Consumer Confidence


Industry analysts have been predicting the mobile takeover for over a decade, but time has consistently proven them too optimistic. Consumer adoption of mobile payments has been slow, to the surprise of many in the industry, and studies have pointed to one overwhelming reason why: security.

Most online shoppers avoid mobile payments because they don’t think of them as secure. In a survey released last week by Bizrate, over 60% of respondents believed that the security to protect their personal information while using their phones (both online and in-store) to make a purchase wasn’t strong enough.

But are mobile payments actually as dangerous as people think they are? Let’s take a look.

We wrote recently about the rise of the omni-channel consumer and how the retail industry is just beginning to experience the blurring of barriers between various sales channels (e-commerce, m-commerce, brick-and-mortar). One of the reasons why this didn’t start sooner and why it remains an ongoing process is that as much as shoppers want an omni-channel marketplace, many still perceive using their phone to make a purchase as unsafe.

A new survey from Tripwire asked consumers: “What is the safest way to pay for a purchase in a store?” A measly 1% of respondents chose mobile payments, while almost 30% of respondents chose credit cards, more than double the amount who chose debit cards. This survey shone the light on the public’s misconception about which method they feel is safest versus the industry’s knowledge that debit cards are safer than credit cards. So, is it possible that mobile payments are, in fact, more secure than consumers feel they are?

While consumers appear unanimous on the issue of security, researchers and analysts are conversely united. A report published by Kaspersky Laps suggests that at this point, mobile security is nothing to be worried about. Because online security and anti-fraud technologies had already matured before mobile payments arrived on the scene, banks, payment providers and retailers have been able to build a secure foundation into their mobile offerings, giving mobile payments a head start in protecting consumers.

A study from Javelin Strategy & Research, which predicts that value of mobile payments at the point-of-sale would grow to 5.4 billion USD by 2018, found that the mobile payment fraud rate of middle-market businesses is only 1% – that’s a considerable difference from the fraud rates of 52% for credit cards and 23% for debit cards. This suggests that payment cards are, in fact, the more dangerous choice.

The authors of Inside Revenue Management similarly agree that mobile payments may be more secure than the alternatives, writing: “From a security point of view, does it really make sense to carry on with little plastic cards, magnetic stripes and passwords?”

Should You Embrace Mobile Payments?

Despite mobile payment adoption having more than doubled last year, we’re still a long way away from leaving our wallets at home and using our phones to pay for anything we need or want. Mobile payment technologies are achieving a significant level of consumer acceptance, but many barriers to a truly mobile marketplace remain, from little annoyances such as small screen sizes to a lack of adequate infrastructure to allow merchants to reliably accept mobile payments.

If security is your concern, listen to the experts. While security risks will always be a reality, it’s likely that paying with your phone will prove to be more secure than paying with your credit or debit cards, with the right technologies in place to accept them.

While the majority of shoppers take a multi-device path to purchase, paying by phone still remains in the minority even though it’s the next logical step in today’s commerce ecosystem. Have you already embraced mobile payments? Tell us about it (or why you haven’t) in the comments!

Stay tuned to the DalPay Blog for more on this subject, with upcoming articles about the drivers and barriers of mobile payments and how to make your business mobile ready. For the latest news and views about the industry, follow us on Facebook and Twitter.

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