The role of payments regulation in mobile payments adoption

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University of the Witswatersrand, Johannesburg
The objective of this research is to develop an understanding of why mobile payments adoption has remained so low or insignificant for a country such as South Africa with a very economically unequal society. One of the areas where this imbalance manifest itself is in the very limited access to financial services or what is also termed financial exclusion for that segment of the population that is at the bottom of the economic spectrum. One of the basic financial services that should be accessible to each member of society, is the ability to conduct basic commercial transactions digitally as it allows members of society the ability to build a financial record. Having a financial record allows individuals and enterprises access secondary financial services such as loans and investments. However contrary to this logically sound expectation the adoption of mobile payments has remained very low or at best insignificant to make an impact to financial exclusion. It is within this context that the objective to conduct this research was conceptualized. The research process first looks at the evolution of mobile payments going back to the early 2000s, and then also evaluates how other countries have approached the deployment of mobile payments looking at both the regulatory posture of those countries and the adoption rates. Three areas of theory or theoretical framework are utilized to assess the various aspects of delivering a viable mobile payments ecosystem. The first is the Uniform Commercial Code (UCC) Payments Theory which is more a legal instrument than a theory, but is useful in evaluating that sound regulatory obligations are in place and are observed by participants throughout the payments ecosystem. The second theory is the Technology Acceptance Model which is used to determine whether the drivers of accepting technology innovation are in place. The third is the Technology Organisational Environment theory whose purpose is to examine the adoption process followed by companies when investing in IT products and services. Mogale City is a local municipality, in the Gauteng Province, of South Africa and has been selected as the primary site for the research as it is a microcosm of the South African society, in that it provides access socio-economic conditions of urban, township, farming and informal settlements. Through a mixed-method research approach that combines both the qualitative and quantitative research processes, it responds to the research questions “To what extent does mobile payments regulation enable the ability of a mobile payment deployment to scale-up” and “What influences the end-user to adopt mobile payments innovation at scale”. This is achieved through the testing of P1: Bank-led mobile payments regulation inhibit the rapid growth and adoption of mobile payments by the end-users, and H2 : The simplicity of the service components of technology innovation drive high adoption rates by end-users”. The findings of the research highlight the need to re-look at the regulatory framework for mobile payments in the SA context, so as create an environment conducive for all market players to thrive. Both the P1 and H2 hypothesis were affirmed by the research process. With the end-result the advancing an argument that it is necessary to make adjustments to the NPS framework, such that it allows mobile money to be issued as a new payment instrument, a process that would also include the establishment of a new PCH which allows banks and non-banks as participants.
A research report submitted to the Faculty of Commerce, Law and Management, University of the Witwatersrand, in partial fulfilment of the requirements for the degree of Master of Management by Research
Mobile payments, Financial serviceS, Basic commercial transactions, Financial record, Uniform Commercial Code (UCC) Payments Theory, UCTD