Exploring consumer adoption of mobile payments – A qualitative study

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Abstract

This paper presents a qualitative study on consumer adoption of mobile payments. The findings suggest that the relative advantage of mobile payments is different from that specified in adoption theories and include independence of time and place, availability, possibilities for remote payments, and queue avoidance. Furthermore, the adoption of mobile payments was found to be dynamic, depending on certain situational factors such as a lack of other payment methods or urgency. Several other barriers to adoption were also identified, including premium pricing, complexity, a lack of critical mass, and perceived risks. The findings provide foundation for an enhanced theory on mobile payment adoption and for the practical development of mobile payment services.

Introduction

The emergence of new retail channels such as the Internet and mobile commerce create requirements for new payment instruments to enable feasible and convenient transactions in these channels (Ondrus and Pigneur, 2006). While existing card payments are suitable for most purchases, their transaction costs are too high to be profitable in micropayment transactions (Mallat et al., 2004).

Mobile payments have been suggested as a solution to facilitate micropayments in electronic and mobile commerce, and to provide an alternative for the diminishing use of cash at point of sale (POS) (Menke and de Lussanet, 2006, Ondrus and Pigneur, 2006). Mobile phones have several characteristics which make them useful for payment purposes. First, the proliferation of mobile telecommunications technology has made mobile phones increasingly common and available for users. Second, compared to fixed-line computers and telephones, mobile phones are closer to the user, which enables the storing of personal information in them and facilitates their use as a payment instrument. Third, existing telecom operator billing systems are already suitable for handling micropayment transactions. Finally, the success of early mobile content services such as logos and ring tones suggest that consumers are already accustomed to using their mobile devices for payment purposes.

At present, there are many examples of successful mobile payment applications such as the mobile content market which has developed into a billion dollar business, (Menke and de Lussanet, 2006), PayPal Mobile (Wolfe, 2007) or use of mobile payments in public transportation (Mallat et al., 2004). Wider adoption of mobile payments, however, has not been as rapid or widespread as expected (Ondrus and Pigneur, 2007) and there is a long list of discontinued mobile payment services such as the Simpay initiative and the Paybox launched in several European countries.

The success or failure of mobile payments has strategic implications for many companies. Companies may gain competitive advantage through offering mobile payments to their customers or becoming a mobile payment service provider themselves. When considering the future of electronic and mobile commerce, the ability to develop suitable payment systems for these environments is of critical importance. The new mobile channel with integrated mobile payment systems could significantly facilitate the development of new business models in the emerging multi-channel and multi-device environment. At POS, new payment instruments have the potential to both increase the convenience of payments and lower the transactions costs. Yet, the use of mobile payments by different companies is significantly hampered by the uncertainty of their advantages and the success of the new technology.

A recent survey suggests that companies in the mobile payment business perceive consumer acceptance as the greatest barrier to mobile payment adoption (Edgar Dunn and Company, 2007). Consumer adoption behaviour is therefore one of the key issues and we need to ask why new mobile payments will or will not be used by their intended users. Prior studies suggest that consumers are generally interested in using mobile payment applications (Dewan and Chen, 2005, Kreyer et al., 2003) but more research is needed to examine the specific factors that influence consumer decisions to adopt mobile payments.

The objective of this study is to explore consumer adoption of mobile payments by empirically detecting the adoption determinants that are relevant for the new mobile payment context. The paper contributes to existing mobile commerce and technology adoption research. It does so by presenting a detailed description of the traditional adoption factors that are postulated to enhance and inhibit mobile payment adoption and presenting new factors that are postulated to augment the contemporary adoption theories in the context of mobile payments. It also provides the foundation for future research by extending the findings of the present study to more general research questions that guide future research on the adoption of mobile services and technologies. The findings also facilitate strategic organizational decision-making by providing insights into areas where consumers see mobile payments as most applicable and by providing guidance for the developers and providers of these new payment systems.

Section snippets

Mobile payments

Mobile payments are defined as the use of a mobile device to conduct a payment transaction in which money or funds are transferred from payer to receiver via an intermediary, or directly, without an intermediary. This paper focuses on examining consumer willingness to use a mobile phone as a payment instrument in retail transactions where money is transferred from a consumer to a merchant in exchange for products or services. The payment instrument is determined as a tool for the payer to

Adoption of mobile and electronic payment systems

The theoretical background of this study is drawn from the diffusion of innovations theory (Rogers, 1995) that is augmented with constructs of network externalities (Economides, 1996, Van Hove, 1999), trust and security (Gefen et al., 2003, Jarvenpaa et al., 2000) and situational factors (I. Lee et al., 2005). This chapter further discusses the theory of consumer life cycle to provide background for the focus group design in the methodology section.

Diffusion of innovations is a

Methodology and data collection

As mobile payments are a relatively new area for research, a qualitative approach using focus group interviews was chosen to explore consumer adoption of mobile payments. Focus group interviews have been suggested as a suitable method for explorative studies (Calder, 1977) and previous research has demonstrated their feasibility in studying innovative mobile services (Jarvenpaa and Lang, 2005).

The strength of focus group interviews lies in group dynamics and interaction, which provide

Mobile phone and mobile service use

The group members had an average of 4 to 7 years experience in mobile phone use. The phones were mostly used for communication either by calling or sending an SMS. Premium SMS services and WAP services were used more infrequently.

Each interviewed group included persons who had made purchases with a mobile phone. Altogether, 39 out of the total 46 interviewees had some experience in using mobile payments. Typical purchases paid for with a mobile phone included mobile phone content such as ring

Discussion

The purpose of this paper was to examine factors that affect consumer adoption of mobile payments. As the study is explorative in nature, we use the findings to guide theory development by offering a detailed description of the postulated adoption factors. Furthermore, we raise research questions to generate new research directions based on the explorative findings.

The findings are summarized in Table 3, which lists the general adoption determinants and related contributing items that are

Acknowledgements

The data for this study was collected in the Micropayment project in the Helsinki School of Economics. The project was partly funded by the Finnish Funding Agency for Technology and Innovation (TEKES). I thank the researchers in the project for their contribution to the data collection. I also like to express my appreciation to the editors and four anonymous reviewers for their valuable comments.

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