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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