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Title 

THE ROLE OF PAYMENTS REGULATION IN MOBILE PAYMENTS 

ADOPTION: 

THE CASE OF MOGALE CITY, GAUTENG PROVINCE, SOUTH 

AFRICA 

 

Samuel Tebogo Phajane 

1623241 

 

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 

 

Johannesburg, 2023 

  



  

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DECLARATION 

I, Samuel Tebogo Phajane, declare that this research report is my own unaided work and all 

sources have been acknowledged by means of complete references. It is being submitted for 

the degree of Master of Management in Research at the University of Witwatersrand, 

Johannesburg (Republic of South Africa), and has previously not been submitted for any 

degree or examination at any other university.  

 

 

 

……………………………………………….. 

 

Samuel Tebogo Phajane 

28 February 2023 

  



  

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ACKNOWLEDGEMENTS 

 

I would like to thank God for the gift of life and the never ending revelations he continues to bring to 

the fore, and this research report is by no small measure a moment of discovery and the putting 

together of a tapestry of information that the universe reveals to me. I would also like to thank my 

family without any pressure of having to name each one singularly, but it is greatly important to give 

a special word of gratitude to the mother of my children Mmamotse moradi wa Bokako, my daughters 

Tlotliso and Thateho for their unwavering support and care throughout this tough journey which was 

complicated by the health scare mid-journey. My hearty gratitude also goes to Zipporah “Mmane” 

Makhubela my housekeeper who became so dependable during this period.  

 

Go botlhe Bafokeng baga mmaphalanyana mo ke tsalwang teng, le ho Bataung ba ha Molete moo ke 

tloholang teng kea tshepa le tla ananela boiteko baka ntshetshopeleng ya tsebo le ya setjhaba 

haholoholo se sootho. Bo-Phajane, Bo-Mosebi, Bo-Tsholo, Bo-Ramatlotlo, Bo-Rakhetsi, Bo-Mankoe, 

Bo-Ramaele, Bo-Khotle le bohle bao ke sa ba tsebeng feela ba ileng ba eba teng phelong bona pele 

honna, mme thapelo tsa bona eleng tsona tse nketelletseng pele ho nkopela mahlohonolo ho Mmopi 

wa ntho tsohle. Ho batho ba bileng teng kgodisong yaka ho tloha boseeng haholoholo batho ba 

Molapo e Soweto, Gauteng le ho mesuwe le mesuwetsana e bapetseng karalo ho fumaneng haka tsebo 

eka Ramasedi aka le etsetsa ka mohau wa hae o hlokang ho thijwa. Nka lebala jwang mohlankana e 

molele ka seemo a letseka la mathe mora Phajane, Tsietsi Abrahama ntate waka, le thope e tshwana e 

nnyantshitsheng le neng le sisa nnete, ebile a nkutlwisisa ho feta bohle bao ke phetseng le bona ho 

fihla nakong ena moradi wa Rakhetsi ka sebele Mapitso Jeanette Mma-’Musa mme waka. Ka ha 

Modimo o nthatile kesa motsebe, eka lerato la hae leka le fihlela bohle mme ale sitsa ka mohau wa 

hae o kekeng wa lekanngwa. 

 

A special thank you to Professor Brian Armstrong, who has not only been patient with me but allowed 

the discovery process in our quest for answers to unravel at its own pace. A very big thank you goes 

to the support staff at Wits especially Mmabatho for always giving me an ear during my times of 

need.  

 

 

  



  

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ACRONYMS 

 

SA Republic of South Africa 

SARB South African Reserve Bank 

MNO Mobile Network Operator 

FSCA Financial Sector Conduct Authority 

NPS National Payment System 

UCC Uniform Commercial Code 

MFS Mobile Financial Services 

TAM Technology Acceptance Model 

PASA Payments Association of South  Africa 

PCH Payments Clearing House 

MMO Mobile Money Operator 

CAGR Compound Annual Growth Rate 

TOE Technology Organisational Environment 

PU Perceived Usefulness 

PEoU Perceived Ease of Use 

PR Perceived Risk 

PT Perceived Trust 

ATM Automated Teller Machine 

EFT Electronic Funds Transfer 

PoS Point of Sale 

TA Thematic Analysis 

R&D Research and Development 
  

  

 

 

  



  

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ABSTRACT 

 

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. 



  

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TABLE OF CONTENTS 

 

DECLARATION……………………………………………………………………………2 

ACKNOWLEDGEMENTS…………………………………………………………………3 

LIST OF ABBREVIATIONS……………………………………………………………….4 

ABSTRACT…………………………………………………………………………………5 

CHAPTER 1: GENERAL INTRODUCTION 

1.1 Purpose of study………………………………………………………………………...9 

1.2 Context of study………………………….…………………………………………….10 

1.3 Research problem……….………………………………………………………………12 

1.4 Research objectives………….………………………………………………………….14 

1.5 Significance of the study……….………………………………………………………,15 

1.6 Delimitations of the study……………………………………………………………….15 

1.7 Definition of terms………….…………………………………………………………...16 

1.8 Assumptions…………….……………………………………………………………….18 

CHAPTER 2: LITERATURE REVIEW  

2.1 Introduction………………………………………………………………………………22 

2.2 Definition of topic and background……………………………………………………....23 

 2.2.1 The evolution of mobile payments…………………………………………….23  

 2.2.2 Mobile payments deployments in some developing countries…………………32 

 2.2.3 Mobile payment deployments in South Africa…………………………………39 

 2.2.4 Theory1 – Article 3 of the Uniform Commercial Code (UCC) Payments Theory.42 

 2.2.5 Theory2 - Technology Acceptance Model……………………………………….44 

 2.2.6 Theory3 – Technology Organisational Environment ……………………………47 

2.3 Mobile Payments Theoretical Framework………………………. ….…………………….50 

 2.3.1 Regulatory Structural options for implementing mobile payments…………….51 

 2.3.1.1 Mobile Network Operator led model………………………………..51 

 2.3.1.2 Bank led model………………………………………………………51 

 2.3.1.3 Third Party led model………………………………………………...51 

2.4 First research question……………………………………………………………………….52 

2.5 Second research question…………………………………………………………………….53 

2.6 Conclusion of literature review………………………………………………………………53 

CHAPTER 3: RESEARCH METHODOLOGY 

3.1 Introduction………………………………………………………………………………56 

3.2 Research Approach – Mixed Method…………………………………………………….57 

 3.2.1 Research design………………………………………………….……………58 

3.3 Data collection methods………………………………………………………...………...61 



  

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3.4 Population and Sample…………………………………………………………...……….62 

 3.4.1 Population…………………………………………………………………….62 

 3.4.2 Sampling Method……………………………………………………………...63 

3.5 Research instrument…………………………………………………….………………...64 

 3.5.1 External validity or transferability…………………………………………….65 

 3.5.2 Internal validity or credibility………………………………………………….66 

3.6 Procedure for data collection……………………………………………….…………..….66 

3.7 Data analysis and interpretation……………………………………………...…………….66 

3.8 Limitation of the study……………………………………………………………………...67 

3.9 Validity or reliability (quantitative study) and trustworthiness (qualitative study) ………...68 

3.10 Ethical considerations ……………………………………………….…………………….68 

3.11 Research Process…………………………………………………………………………...69 

 3.11.1 External Validity or Transferability…………………………………………….69 

 3.11.2 Internal Validity or Credibility………………………………………………….70 

3.12 Procedure for data collection…………………………………………………….………….70 

3.13 Conclusion …………………………………………………………….…………………….70 

CHAPTER 4: PRESENTATION OF RESULTS (Quantitative Research) FINDINGS (Qualitative 

Research) AND DISCUSSIONS 

4.1 Introduction………………………………………………………………………………………...72 

 4.1.1 Morale City Locality……………………………………………………………………72 

4.2 Qualitative Research Findings………………………………………………………………………74 

4.3 Quantitative Research Results – Merchants…………………………………………………………77 

4.4 Quantitative Research Results – Consumers…………………………………………………………...84 

 4.4.1 Consumer Results – Importance of Perceived Usefulness………………………………….85 

 4.4.2 Consumer Results – Importance of Perceived Ease of Use…………………………………87 

 4.4.3 Consumer Results – Importance of Perceived Trust………………………………………...88 

 4.4.4 Consumer Results – Importance of the Perceived Risk of the platform…………………….88 

4.4.5 Consumer Results – Important that mobile payments are approved by the  

SARB/Government………………………………………………………………………90 

4.5 Conclusion………………………………………………………………………………………………90 

 

CHAPTER 5: DISCUSSION OF THE RESULTS AND FINDINGS OF THE RESEARCH PROCESS 

5.1 Introduction…………………………………………………………………………………………….91 

5.2 Mobile Operator View pertaining to Proposition 1…………………………………………………….96 

5.3 Mobile Payment End-User View pertaining to Hypothesis 2………………………………………….96 



  

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 5.3.1 Merchants’ Perspective…………………………………………………………………….97 

  5.3.1.1 Assessing Merchants as mobile payments end-users using TAM……………...98 

  5.3.1.2 Assessing Merchants as mobile ecosystem enablers using TOE……………….99 

  5.3.1.3 Conclusion assessing merchants as both enablers and users of the…………….102 

Platform 

 5.3.2 Consumers’ Perspective……………………………………………………………………103 

  5.3.2.1 Introduction…………………………………………………………………….103  

  5.3.2.2 Perceived Ease of Use (PEoU)…………………………………………………103 

  5.3.2.3 Perceived Usefulness (PU)……………………………………………………..103 

  5.3.2.4 Perceived Trust (PT)…………………………………………………………...104 

  5.3.2.5 Perceived Risk (PT)……………………………………………………………104 

  5.3.2.6 Conclusion……………………………………………………………………..104 

5.4 Conclusion Mobile Payment End-User Views pertaining to the Hypothesis………………………....106 

5.5 Aligning the P1 and H2 hypothesis results…………………………………………………………...106 

CHAPTER 6: CONCLUSION AND RECOMMENDATION 

6.1 Introduction………………………………………………………………………………………….108 

6.2 First research question conclusions………………………………………………………………….109 

6.2 Second research question conclusions……………………………………………………………….115 

 

Annexure A………………………..…………………………………………………………………....123 

Annexure B………………………..……………………………………………………………………125  

 

 

 

 

 

 

 

 

 

CHAPTER 1:  GENERAL INTRODUCTION 

 

1.1 PURPOSE OF THE STUDY  



  

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South Africa first launched mobile phone services in 1994 and in the last two and half decades a 

general increase in the number of active mobile phones has been experienced. This increase in 

active mobile phones has been accompanied by a general increase of access to the service by the 

general populace. Although South Africa has one of the most sophisticated banking/financial 

system in the world, there exists a socio-economic structure of the country which is sometimes 

defined as having two parallel economic sectors existing side-by-side, referred to as the first and 

second economy respectively. With the first-economy characterised as being similar to any first-

world economy in terms of high levels of affluence, education and general standards of living by 

the segment of the population that falls within this group. Where else the second-economy 

represents that segment of the population that is marginalised, mostly financially excluded, 

predominantly staying outside of the main urban centres, with high levels of poverty and low 

levels of education and is also similar in socio-economic character to any third-world population.  

 

Financial exclusion has been identified as one of the key barriers to a world without poverty. In 

many third-world (Pal & Ansari, 2022), more than half of the population’s households do not 

have an account with a financial institution, whilst small enterprises often highlight their difficulty 

in accessing and affording financing as a key constraint on their growth. This exclusion limits the 

ability of the poor to save, repay debts, and manage risk responsibly. On a macroeconomic level, 

financial constraints resulting from the financial exclusion of the poor can slow economic growth 

and exacerbate inequality, (Donovan & Development, 2012). 

 

Mobile payments have the potential to increase levels of financial inclusion, and the M-PESA 

experience provides an indication of the potential mobile payments provide in delivering an 

alternative approach that focuses on building payment rails on which a broader set of financial 

services can ride, (Donovan & Development, 2012). The purpose of this study is to explore what 

alternative regulatory framework options can be considered to bring about increased financial 

inclusion in South Africa with a specific focus on the second economy, by exploiting the 

alternative payment rails offered by mobile payments and technology developments, especially 

opportunities that the fourth industrial revolution potentially presents.  



  

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1.2 CONTEXT OF THE STUDY 

 

The full potential of mobile money is yet to be realised, with many people in the developing 

countries still lacking a viable alternative to the cash economy and informal financial services 

whilst almost two billion of them have mobile phones. However the mobile money industry has 

found it challenging to launch and scale-up services for the unbanked because many a policy and 

regulatory environments are genuinely not enabling (Di Castri, 2013). 

There is general acknowledgement that financial exclusion is a source of risk for the world’s 

financial system, with the global Standard Setting Bodies (SSBs) finding resonance in the goal 

towards full financial inclusion, acknowledging that it affirms objectives of financial stability, 

integrity, and consumer protection. Mobile money is recognised as having the capacity to 

contribute to all of these objectives, driving economic and social growth through a cash-lite 

economy and digital pathways to financial inclusion (Di Castri, 2013).  

The view on the table is that regulators should recognise that for mobile money to succeed it is 

imperative to create an open and level playing field that allows non-bank mobile money 

providers, including mobile network operators (MNOs) to come into the market (Di Castri, 2013). 

By allowing both banks and non-bank providers, especially MNOs, to launch mobile money 

deployments, and putting in place effective and proportionate mechanisms to manage the unique 

inherent risks associated with this industry, mobile money has immense potential to significantly 

expand financial inclusion. Mobile money has the capacity to be delivered through lower 

transaction costs structure, deliver improved access to underserved areas, and higher levels of 

customer convenience (Di Castri, 2013). 

Differences in the various countries’ economic, regulatory and banking infrastructure are amongst 

some of the key reasons why the adoption of mobile-money has varied across markets. Countries 

such as Kenya, Tanzania and Ghana had limited banking and payments infrastructure and were 

more receptive to the deployment of mobile payments and achieved great adoption success,  

becoming great value-add to both consumers and merchants  (Gupta, 2013). In contrast countries 

such as South Africa, India, Bangladesh, and Uganda where mobile payments are classified as 

banking transactions and therefore require a banks involvement when executed,  the success of 

deployments has been very limited if at all  exists or very muted at best (Gupta, 2013).   

Key lessons from the rollout of M-PESA in Kenya has been a demonstration that the power of 

unbundling traditional banking services has led to an increased reach of services to the poor 

people in an unprecedented manner. The choice for policymakers and regulators is whether to 

allow such unbundling to proceed and determine the appropriate regulatory intervention to 

facilitate such activity. By allowing M-PESA to experiment, the Kenyan regulatory authorities 



  

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have provided a great deal of insight into new possibilities and consequences for regulation (Klein 

& Mayer, 2011).   What the MPESA deployment has illustrated with clarity is the existence of a 

manner in which payments systems can be disaggregated into component services, namely 

exchange, storage, transfer and investment. It therefore makes it an imperative that regulation 

should mirror the disaggregation and be structured by service rather than along traditional 

institutional lines, like it exists for a bank-led model. The question then is what type of regulation 

is appropriate for each type of service (Klein & Mayer, 2011). Mobile payment transactions are 

expected to reach up to 1.31 billion in 2023, increasing from 950 million in 2019, and the value 

transfer facilitated is expected to exceed 14 trillion dollars in 2022, up from 3.1 trillion in 2017 

(Rabaa’i et al.). 

 

On the other end of the spectrum is the traditional bank-led regulation model that has determined 

the pace of development for the financial sector in most economies, where promotion of 

innovation in the financial sector has however been an ancillary outcome for the authorities. This 

factor, coupled with the significant barriers to entry posed by banking regulation somewhat 

explains why the industry has developed at its own pace of innovation without fearing the entry of 

new players with radically different approaches, a position where being challenged by alternative 

models that will serve as catalysts for change is contained (González-Páramo, 2017). 

 

The regulatory stance in South Africa (SA) regarding mobile-money has mostly referenced 

electronic money, which is a subset of e-banking (Lawack-Davids & Tech., 2012). Electronic 

money encompasses the following five characteristics to this definition, namely, monetary value 

represented by a claim on the issuer, money is stored in electronic form, money is issued on 

receipt of funds, electronic money is generally accepted as a means of payment by persons other 

than the issuer; and it is redeemable for physical cash or a deposit into a bank account on demand. 

Storing “money” on a mobile phone could satisfy the definition of electronic money as defined in 

SARB’s 2009 position paper (Lawack-Davids & Tech., 2012). The legal and regulatory 

framework with regards to e-banking would apply to mobile banking.  In South Africa the legal 

framework comprises of the following, South African Reserve Bank Act, National Payment 

System Act, Banks Act, Exchange Control Regulations (in the case of cross-border transactions) 

and Financial Intelligence Centre Act (Lawack-Davids & Tech., 2012). 

 

The South African Reserve Bank Act of 1989 (Act No 90) read together with the Constitution Act 

of 1996 (Act No 8) determine the primary goal of the Reserve Bank. In section 224 of the 



  

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Constitution and section 3 of the Reserve Bank Act it is stated that the primary objective of the 

Bank is to protect the value of the currency of the Republic in the interest of balanced and 

sustainable economic growth. Section 224(2) of the Constitution further determines that the 

Reserve Bank, in pursuit of its primary objective, must perform its functions independently and 

without fear, favour or prejudice. Regular consultation must, however, take place between the 

Minister of Finance and the Reserve Bank (Van der Merwe, 2004).The National Payment System 

Act, sets out the rights and obligations of each party involved in effecting a payment through the 

payment system. A fundamental requirement for a stable and secure payment system is that it 

should operate in a well-defined legal environment (Lawack-Davids & Tech., 2012).The Banks 

Act, No. 94 of 1990 (the Banks Act), is the principal legal instrument which seeks to achieve 

credibility, stability and economic growth (Moloi, 2014). The exchange control system in South 

Africa is used primarily to monitor and control capital movements by SA residents. SA has, 

however, now reached a stage where there are no exchange controls on the movement of funds for 

non-residents and effectively no controls on current account transactions. Resident corporates, 

financial institutions and private individuals all have limited scope to make investments abroad, 

(Cross, 2003). The Financial Intelligence Centre Act (FICA) 38 of 2001 (FICA) compels certain 

persons and institutions, defined as "accountable institutions'' within the Act, to identify and 

verify the identity of a new client before any transaction may be concluded or any business 

relationship is established (De Koker, 2005). 

 

SA’s regulatory position has resulted in greatly constrained mobile payments deployments which 

have failed to provide the intended value-add benefit to the targeted consumers. This has resulted 

in mobile payments solutions that are not ubiquitous, not sufficiently differentiated from existing 

banking products but greatly constrained due to them not being interoperable. In the last decade 

several failed mobile payments deployment failures have been noted, although the financial 

exclusion challenge in what is termed the second economy persists. 

1.3 RESEARCH PROBLEM 

 

The objective of the research is to develop an understanding of the relationship between the 

following variables, namely mobile phone access, national payments regulative framework and 

consumer as well as merchant adoption patterns in driving the increased utilisation of mobile 

payments within the South African economy.  

 



  

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The research question is therefore, “What is the relationship between mobile phone technology, 

the national payments regulative framework and consumer as well as merchant adoption patterns 

in driving the increased utilisation of mobile payments within the South African economy?”  

 

Existing literature suggests that three models for handling mobile payments fundamentally exist, 

that is, (1) mobile network operator (MNO) led, (2) bank and financial institution led and (3) third 

party led, with numerous variations or combinations of these being possible (Duane et al., 2014). 

It is acknowledged that in practice, an accepted mobile payment model to facilitate the 

widespread adoption still remains elusive. Ultimately, consumers will play a key role in 

determining the ‘winning’ model, as consumer and merchant buy-in for any proposed mobile 

payment model is pivotal for the success of any mobile money solutions. 

  

Regulatory restrictions are some of the key factors driving the structure of partnerships and 

ecosystem participants in the various markets. In some markets, non-bank players will have more 

motivation and competitive advantage than banks, and bank-based regulation can deny these 

companies from leading a deployment. In other markets, banks with a mass retail ambition may 

have strong motivation to lead implementation, but the absence of appropriate agent banking 

regulations may place them at a disadvantage (Lai, 2015).  

 

The ubiquity that a mobile phone presents,  provides a compelling business case and it has been 

an influential factor in the adoption of mobile payment systems, particularly when the majority of 

the population is unbanked, both in the developed and developing countries, (Dennehy & 

Sammon, 2015). When it comes to mobile payments, the chicken-or-egg analogy is frequently 

referenced to best describe the challenge facing merchant and consumer adoption issues. On one 

hand, merchants are unwilling to invest in the systems needed to enable mobile payment 

transaction unless there is consumer demand, whilst on the other hand, consumers will not use 

mobile payment systems unless merchants accept them (Dennehy & Sammon, 2015). 

 

For financial inclusion to truly happen, a significant majority of the adult population must have 

the capacity, skills, knowledge and understanding to make the best use of financial products and 

services, including mobile money accounts that may not necessarily require one to have an 

account with a financial institution (Aro-Gordon, 2017). It had earlier been expected  that mobile 

technology would reach globally ubiquity by the early 2020s a projection slightly impacted by the 

global shut-down due Covid-19 however the world is still on a trajectory to reach 70 percent of 

the world population using smartphones and 90 percent on mobile broadband networks, and it is 



  

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within this context that the role of mobile money such as M-Pesa, is seen as playing a significant 

role in bypassing traditional banking, in terms of accelerating financial inclusion, such as its been 

the case with M-PESA in Kenya. Mobile money has the advantage of ease of use, however its 

operational efficacy still depends on internet connectivity, mobile phone coverage and 

affordability of the mobile phones (Aro-Gordon, 2017). 

 

The regulatory stance in SA with regards to mobile-money has mostly referenced electronic 

money, which is a subset of e-banking. This has therefore meant that the legal and regulatory 

framework with regards to e-banking would apply to mobile payments.  The end-result from this 

regulatory stance is that the SA deployed mobile payment solutions have been based on a bank-

led model, whose structure has an inherent limitation in that it is a closed loop system. In the 

context of mobile payments, a closed loop is created when subscribers of a bank sponsored 

mobile payments solution are unable to use their instruments outside their sponsoring bank 

network, this includes not being able to conduct commercial transactions or funds transfer with 

subscribers outside of their mobile payments solution or sponsoring bank. The challenge with a 

close-loop system is that a customer is unable to send or receive money nor pay another customer 

in a different system. With SA having multiple banks and MNOs, a closed-loop system has a 

parallel co-existence to systems deployed by other MNOs and the interoperable payments rail 

utilised by banks (Gupta, 2013). The mobile payment deployments in SA which were 

implemented by MNOs have thus far failed to gain traction and meaningful scale to be sustainable 

due to the closed-loop deficiency which then resulted in the early deployments failing or being 

aborted. 

 

 

1.4 RESEARCH OBJECTIVES 

 

The objectives of this research is to achieve the following: 

i. Develop an understanding of how regulation influences the ability for mobile payments 

deployments to achieve scale in the markets which it is launched, and  

 

ii. Develop an understanding of what drives end-users (consumers/merchants) to adopt 

technology innovation specifically as it relates to mobile payments. 

 

 



  

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1.5 SIGNIFICANCE OF THE STUDY  

 

The findings of the study would serve as a contribution to society and benefit the following 

communities: 

 

Policy makers. Data derived from the study should enable policy makers improve their 

understanding of how the current policies on mobile money and payments, are constraining 

societal development in the space of financial inclusion and non-cash based payments, which is 

an area that is critical for driving socio-economic development.    

 

The South African Reserve Bank. The study should possibly highlight to the SARB that current 

National Payments System, has a particular bias that favours banks which has throttled the 

sustainable development of alternative payment rails in South Africa, although non-banks have 

made several attempts to introduce alternative models and continue to do so.   

 

Innovation management scholars. Data from the study must serve to enhance existing 

understanding and paradigms in terms what are the drivers of change or influences that come into 

effect when an individual consumer makes a new technology adoption choice. In the same vain 

what influences enterprises especially merchants when they have to make decisions to adopt new 

technology solutions for conducting business.    

 

 

1.6 DELIMITATIONS OF THE STUDY 

 

The study has focused on the mobile payments regulation in South Africa and how it has enabled 

the bank-led mobile payments model to thrive, whilst constraining the development of alternative 

models. 

 

The research aimed to develop an understanding of what has influenced the decision by merchants 

(from small to large) to accept different payment methods and what the limitation with mobile 

payment method has been. In almost a similar manner developed a view of what drives consumers 

to adopt the use of alternatives to cash in order to pay for goods and services, and what the 

limiting factor for mobile payments growth has thus far been. This research was confined to the 

developments, behaviours and patterns of consumers and merchants in the South African market 

context. 

 



  

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The other element of the research was to develop a view of what components of a broad-term 

referred to as “mobile technology” are critical in the development of mobile money and 

payments. The context within which mobile technology is assessed has covered the following 

components: 

i. solutions provided by the carrier network in terms data and messaging services; 

ii. network coverage and available services; 

iii. the actual handset features and functionality; and  

iv. the cost of services offered by MNOs to merchants and consumers. 

 

1.7 DEFINITIONS OF TERMS  

Financial Inclusion, entails key aspects of access to formal financial services, such as payments, 

savings, insurance, credit, and so on by the vulnerable or low income groups at an affordable cost. 

Properly executed financial inclusion initiatives can lead to a process of strong and sustained 

growth and efficient delivery of social security benefits to the under-privileged sections of the 

society (Aro-Gordon, 2017). 

   

Mobile money, ecosystems create the platform for mobile transactions and these ecosystems use 

a currency known as mobile money. Mobile money allows consumers to store electronic value in 

a mobile wallet on their mobile phone (Finau, Rika, Samuwai, & McGoon, 2016).    

 

Mobile payment, is defined as a payment that is carried out via the mobile phone, that is, any 

conventional or new payment system which enables financial transactions that can be made 

securely from one organisation or individual to another over a mobile network (Van der Heijden, 

2002).  Mobile payments are also defined as, a transfer of funds in return for a good or service, 

where the mobile phone is involved in both the initiation and confirmation of the payment. This 

definition dovetails with the view expressed that the use of an application-enabled mobile phone 

as a payment form, substitutes for a cheque, cash or a card, to eventually create a mobile wallet 

(Dennehy & Sammon, 2015).  

Mobile Wallet, mobile wallet or e-wallet allows for the safe storage of money, providing a 

compelling alternative to storing money under the mattress or in goods such as livestock, which 

are risky and insecure (Lai, 2015). 

e-Banking, is the use of electronic delivery channels for banking products and services. It is 

regarded as a subset of e-finance, with the most important electronic delivery channels being the 

Internet, wireless communication networks, automated teller machines (ATMs), telephones and 

mobile phones (Lawack-Davids & Tech., 2012)  



  

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Interoperability, is a system which allows for cross operation participation between and across 

participants, and in the case of a mobile payments system it would be cross operation between 

banks and MNOs (Gupta, 2013). Interoperability is also defined as to the ability of diverse 

systems and organisations to work together (‘inter-operate’). The term is in many instances 

utilised in a technical systems engineering sense, or alternatively in a broad sense, taking into 

account social, political and organisational factors that affect system to system performance 

(Gillis et al., 2012). 

Closed loop system, is a system where all transaction data is captured within the system and 

utilises a single owner that has contracts with all card or electronic-mechanism holders and 

merchants employing the system. The single owner authorises and settles all transactions. It is 

also a single owner that obtains a fee, typically from the merchant, for enabling the transaction 

(Hruska, 2013). 

Financial Regulation, regulation and supervision denote respectively the establishment of rules 

relating to a particular industry and the monitoring and enforcement thereof (Botha & Makina, 

2011). Financial regulation is therefore important for designing and maintaining an efficient and 

effective financial markets, financial institutions, financial service providers and lies at the very 

core of the country’s economic wellbeing (Falkena et al., 2001).  

South African Reserve Bank(SARB), is a central bank of the republic and within the context of 

a payments system is considered a neutral agent, that is in the best position to oversee and 

supervise the NPS. The SARB derives its powers and duties relating to its function of providing 

clearing and settlement facilities to banks within section 10(1)(c) of the South African Reserve 

Bank Act. This subsection empowers the SARB to establish, operate, oversee and regulate 

payment, clearing and settlement systems (Lawack-Davids & Tech., 2012).    

National Payments System(NPS), it is through the national payment system that money is 

transferred between buyers and sellers in commercial and financial transactions. If properly 

iconducted, the development of the national payment system has the capacity to reduce overall 

transaction costs and expand the opportunities for commercial and financial transactions in an 

economy (Gillis et al., 2012).  

Fourth Industrial Revolution, is building on the third industrial revolution, with the digital 

revolution that has been occurring since the middle of the last century, and is characterized by a 

fusion of technologies that is blurring the lines between the physical, digital, and biological 

spheres (Schwab, 2017). 

Monetary Policy, is defined by central banks as those actions that influence the availability and 

cost of money and credit. Because market participants’ play an important role in determining 



  

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prices and economic growth, the definition of monetary policy can also include the directives, 

policies, statements, and actions of a central bank that influence future market perceptions 

(Bernanke, 2020). 

Financial Sector Conduct Authority (FSCA), was initially established under the FSB Act to, 

supervise and ensure compliance with the relevant laws that regulate the provision of financial 

services and financial products by financial institutions in South Africa. The FSCA was 

empowered to develop and promote financial education and l literacy programmes by financial 

institutions and/or other bodies representing relevant persons in the SA financial services industry 

(Chitimira, 2020). 

Money, is that for which all other goods and services are traded. This fundamental characteristic 

of money must be contrasted with those of other goods. For instance, food supplies the necessary 

energy to people, whilst capital goods permit the expansion of infrastructure which in turn permits 

the production of a larger quantity of goods and services (Kubát, 2015). 

Money Supply, is simple terms is defined as combined value of the currency and the total 

commercial bank deposits (Shostak, 2000). 

 Payments Clearing and Settlement Systems (PCSS), consist of a network of interconnected 

elements (such as central operators, participants, and settlement agents) where operational 

problems at any one of these key elements can potentially disrupt the system as a whole and 

negatively affect financial stability of a country (McPhail, 2003). 

Payment Clearing House, the organisation that operates a clearing system is referred to as a 

clearing house. A clearing system is a mechanism for the calculation of mutual positions within a 

group of participants with the end-goal being to facilitate the settlement of their obligations to 

each other (McPhail, 2003).  

Payments Association of South Africa (PASA), is a body that facilitates engagement of the 

payments industry with the SARB to ensure that the national payment system in maintained and 

enhanced from time to time (Maistry, 2021). 

 

1.8 ASSUMPTIONS 

 

The existence of two parallel economies is a commonly acknowledged and accepted factor within 

the South African context referred to as the first and second economies.  



  

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The second economy is characterised by underdevelopment, minimum contribution to the gross 

domestic product (GDP), comprises a large percentage of the population, incorporates the poorest 

of the rural and urban poor, is structurally disconnected from both the first and the global 

economy and is incapable of self-generated growth and development. While the first economy, is 

modern, operates with advanced technology, is integrated with the global economy and produces 

a bulk of the county’s wealth (Valodia & Devey, 2012).   

This acknowledgement of an existence of the second economy makes it is necessary to prioritise 

financial inclusion, and mobile payments can be one the enablers of financial inclusion within the 

second economy.  

Although different mobile payments business models exist, with the most visible ones being the 

bank-led model (a bank controls the customer relationship and provides mobile services as a 

channel), MNO-led (reduces/removes the involvement of banks in the payment delivery, clearing 

and settlement processes) and the partnership model (where MNOs and third-party service 

providers such as dealers collaborate and partner to create a payments ecosystem) (Merritt & 

Systems, 2011).  

The South African regulatory framework has not been an enabler for the development of business 

models that challenge the bank-led model in the mobile payments space. This has resulted in the 

previous failed attempts by Vodacom mobile payments (MPESA) and MTN mobile money which 

were built as closed-loop system and were enabled by a bank to interact with the NPS. This 

research focuses on understanding how the SA regulatory framework in its current form has been 

has been a limiting factor to the development of a properly functioning and thriving mobile 

payments ecosystem.  

 

The theoretical perspective for analysing payment systems and options is derived from Article 3 

of the Uniform Commercial Code (UCC) which in purest form is not a theory but a legal 

framework, however for the purpose this research best captures the essence of how third party 

facilitated payments mechanisms are treated within a National Payments infrastructure— UCC is 

viewed as the codified law of negotiable instruments is a linguistic maze which expresses 

payment precepts in confusingly intertwined phrases, (Khan, 2008). Simply put however, 

payment systems can be viewed as a legally regulated industry in which financial institutions 

provide professional services to transfer monies from account holders to payees. Due to payment 

systems having preceded the emergence of financial institutions, payment systems are seldom 

viewed as payment services (Khan, 2008).  

 



  

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Principles of payment systems determine liability. They are derived from statutes, not contracts. 

They are mandatory, not optional. They allocate loss to various parties involved in payment 

services. They address questions of fairness and efficiency. They guide legal professionals in 

resolving payment disputes. They chart a normative path for future payment systems. Despite 

differing historical origins of payment devices and despite the progression of payment services 

from tangible to intangible medium, the legal principles of authorisation, negligence, and 

dishonour constitute the common core of payment systems. According to the principle, no 

payment must be made unless it is authorised. No account holder should be held liable for 

unauthorised payments, the loss of unauthorised payments, should fall on financial institutions 

(Khan, 2008). 

 

For the purpose of evaluating the acceptance and adoption of mobile payments and mobile 

money, the Technology Acceptance Model (TAM) was utilised. Due to available research on 

TAM, which describes the factors that drive consumers to accept e-commerce and on-line 

transactions, TAM as a model is a relevant point of departure that helps inform the understanding 

of consumer and merchant behaviour in the adoption of mobile payments and mobile money. It is 

broadly acknowledged that with electronic payments and in the same way with mobile payments, 

consumers delegate or surrender their control during the transacting process to merchants and 

enablers of the ecosystem. As a result thereof a risk of potential  monetary loss exists, since 

consumers have to rely on electronic confirmation of the executed transaction, becoming 

vulnerable in the process and totally reliant on third-party provided information to confirm 

transactional movements (Pavlou, 2003). 

For the purpose of this research the following proponents of TAM were evaluated that is: 

i. Perceived usefulness; 

ii. Perceived ease of use; 

iii. Perceived risk; and 

iv. Perceived trust. 

Technology-organizational-environmental (TOE) framework which was developed by Tornatzky and 

Fleischer to examine firm-level adoption of various IS/IT products and services, was used to assess 

the journey by South African firms especially merchants when making investment choices regarding 

mobile payment deployments. TOE as a framework emerged as a widespread theoretical perspective 

on IT adoption, with its incorporation of technological, organizational and environmental variables 

making TOE advantageous over the other adoption models in studying technology adoption, 

technology use and value creation from technology innovation (Gangwar, 2015). The TOE framework 

https://www.emerald.com/insight/content/doi/10.1108/JEIM-08-2013-0065/full/html?casa_token=AKi3ar1uHd0AAAAA:eHg9JsxMBwslJ600rjgWOJly-vA1ttN7YwrCJKrvHxFRuBizOmovH-cCwtrn_KLZ8CYgSnPye_-Lr9cEaKCrUpJ7NKnK06lIDa-xkueOJIuRSeCsnuo#b77
https://www.emerald.com/insight/content/doi/10.1108/JEIM-08-2013-0065/full/html?casa_token=AKi3ar1uHd0AAAAA:eHg9JsxMBwslJ600rjgWOJly-vA1ttN7YwrCJKrvHxFRuBizOmovH-cCwtrn_KLZ8CYgSnPye_-Lr9cEaKCrUpJ7NKnK06lIDa-xkueOJIuRSeCsnuo#b77


  

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is also free off industry and firm-size restrictions, and as such provides a holistic picture for user 

adoption of technology, its implementation, foreseeing challenges, its impact on value chain activities, 

the post-adoption diffusion among firms, and factors influencing business innovation-adoption 

decisions (Gangwar, 2015). 

  



  

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CHAPTER 2:  LITERATURE REVIEW 

 

2.1 INTRODUCTION 

This study is driven by a need to develop a perspective of how the reach of financial services 

can be extended to those members of society regarded to be on the fringes, of what is 

classified as the vibrant economy. The globe and specifically South Africa has experienced a 

phenomenon where the rate of mobile phone penetration has reached levels where almost 

every adult member of the population has a mobile phone or access to one. Whilst on the 

other hand the level of access to financial services especially the most basic element thereof 

that is, the ability to transact electronically when conducting commerce remains elusive to a 

sizeable part of the population. Although the banking sector in SA has made several attempts 

to close the gap of financial inclusion, this gap has stubbornly remained intact especially for 

the peri-urban and rural communities.  

 

The review of literature process assessed the focal points and challenges encountered during 

the different phases of the mobile payments evolution process from the period early-2000s 

until around the period this research is conducted. The assessment process looks at role of 

different stakeholders in the mobile payments space, the role of technology and the regulatory 

regimes and frameworks adopted during or at the time of these different phases.  

 

Incorporated in the evaluation process was an attempt to look at the set-up of some of the 

mobile payment deployments in a few African countries (Kenya, Nigeria, Ghana), India and 

Fiji, with aim being to develop a view of how they are structured, how effective they have 

been in addressing the financial inclusion challenge, the adopted regulatory framework within 

a particular market and the adoption rates of the service. This was intended to aid the 

development of the lenses through which the SA mobile payment deployments were assessed 

and the impact that regulation has had on their viability.  

Another focal point of this literature review process, was the study the factors that generally 

influenced society’s decision to adopt new technology solutions. This process involved the 

assessment of the relevance of technology adoption theories in building an understanding of 

the prevailing adoptive trends for the South African consumer and merchant in terms of 

mobile payments.  

 



  

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2.2 DEFINITION OF TOPIC AND BACKGROUND 

A mobile-payment, is defined as a transfer of funds in return for a good or service, where the 

mobile phone is involved in both the initiation and confirmation of the payment. This 

definition incorporates a view that the use of an application-enabled mobile phone as a 

payment form, serves as substitute for a cheque, cash or a card, to eventually create a mobile 

wallet. Consumers can utilise a mobile phone to pay at the Point of Sales (PoS) or to purchase 

goods from cyber merchants. For the purpose this study this definition of mobile payments,  

includes any funds transfer transaction which occurs without the exchange of any goods or 

services (Dennehy & Sammon, 2015). 

 

2.2.1 THE EVOLUTION OF MOBILE PAYMENTS  

2000 - 2005 

In the early 2000s, given the observed volume of mobile phones that were in the hands of the 

world population, a view that the phone could be effectively used as a transactional device 

began to gain traction.  This view was especially prominently voiced within the 

telecommunications industry, which was looking for ways to counteract the decline of 

revenues in their traditional business and pursue the option where consumers are allowed to 

pay for products and services using their mobile phones (Van der Heijden, 2002). Recognised 

as a fundamental requirement to enable the execution of transactions using a mobile phone 

was an effective mobile payment system. The challenge at that stage was that no standardised,  

and widely adopted mobile payment system had yet emerged, and it was at the time believed 

to be one of the factors that inhibited widespread use of mobile phone for commerce, (Van 

der Heijden, 2002). Due to mobile payment systems broadly encompassing the retail sector, 

the financial services sector and the telecommunications sector, the prevailing view at the 

time was that the introduction of mobile payments should ideally be prepared by a consortium 

of market players. These players could possibly include telecommunications 

operators(Telco’s), airtime resellers, banks, credit card companies, third party clearing 

houses, hard & software suppliers, solution integrators  and retailers (Van der Heijden, 2002).  

 

2006 - 2010 

Around 2006, it was recognised that mobile operators needed more traffic and larger markets 

for mobile content services and applications, they had a huge customer base and their 

influence felt more prominent and louder than most other parties involved in the mobile 



  

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payments space. There was however, a view that they cannot fully handle a mobile payment 

system, as they had very limited experience in payment services (B Choi et al., 2006). It was 

felt that the financial sector has people that have a better handle of payment services and 

therefore can advance mobile payments faster as they have been working in the field for years 

and can better understand the intricacies involved in getting the system to function properly . 

The key players in the financial sector included banks, credit card companies and other 

financial institutions (B Choi et al., 2006). Device manufacturers, as producers of the mobile 

phones that are used by the customers, were viewed as controlling the technology and 

capabilities of the end-user-device which in turn affects the implementation and deployment 

of a mobile payment service. It was therefore considered a non-negotiable for mobile phone 

manufacturers to be aligned with each other and develop a common approach to mobile 

device payment capabilities (B Choi et al., 2006). The role of government was that it would 

be responsible for setting  standards and regulations for the players involved in mobile 

payments, govern the service providers to ensure that no company becomes a monopoly,  and 

regulate the device manufacturers and software providers to ensure the compatibility from 

phone to phone (B Choi et al., 2006). 

 

It was acknowledged that for mobile payment services to succeed, all key players must work 

together and follow a wide range of criteria to keep the services working. Each faction could 

not be single-minded and exclusively think of the technical or business aspects pertinent to 

them. It was understood that consumers would require a solution that will be easy and 

convenient to use with a small learning curve (B Choi et al., 2006). Another key expectation 

for success was interoperability. In financial services, interoperability has always been a 

highly contentious topic, and its progress has been uneven and in many cases rather slow. By 

standardising the payment services, the interconnection of networks and systems would 

become more cost-effective and technically easier to operate. The industry believed that 

mobile payment development should be based on standards and open source technologies that 

will allow any system to interact with another system on a global scale at all levels (B Choi et 

al., 2006). 

 

Security, trust and privacy was regarded key, as users must trust the mobile payment system 

to allow them access to their value-store account. This caused the need to incorporate the 

secure banking practices on the part of the merchant and service provider. All steps in the 

payment process had to be secured and trusted, not only from the technological standpoint, 



  

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but also from the social standpoint. If the payment system did not deliver secure transactions, 

customers would not adopt this method of payment (B Choi et al., 2006).  

 

During the period towards and around 2010, approaches to adopting mobile payment services 

differed across the globe as a result of a variety of factors, which included the regulatory and 

legal environments, access to supporting technologies, economic constraints, and experience 

with antecedent products and services. Consumer need and experience represent key 

components of each of these variables and were the ultimate determinants of adoption 

(Merritt & Systems, 2011). With the most successful of mobile payments initiatives, whose 

focus was predominately on the unbanked in emerging markets, the mobile network operator 

fulfilled the role of drawing the ecosystem together, by providing the infrastructure for the 

payment system and overseeing the agent network. In this process, mobile operators could 

derive additional revenue for the incremental data transmission to their voice network 

operating systems, either in cooperation with a bank partner or independently (Merritt & 

Systems, 2011). In instances where MNOs offered mobile money to consumers through the 

use of agent networks without the involvement of a bank partnership, MNOs provided the 

clearing and settlement capability for the transactions they facilitated (Merritt & Systems, 

2011).  

 

Different mobile payments business models had emerged depending on the regulatory 

climate, consumer culture, and demographics that existed during this period. The first model 

being the Bank-led model, characterised by the financial institution controlling the customer 

relationship and providing mobile services primarily as a new channel to other services 

already in place.  The second model being the MNO-led model, characterised by a reduction 

or total removal of the involvement of the financial institution in the payment delivery, 

clearing and settlement processes. MNOs became dominant in the emerging markets, within 

the areas of mobile money transfer market, creating the customer relationship and providing 

the service distribution channel. The third model being a partnership model, characterised by 

equal involvement of financial institutions, MNOs and third-party service providers such as 

the dealers who make up the ecosystem partner and collaborate to provide payment services 

(Merritt & Systems, 2011). 

 

During this early evolution phase of mobile payments, mobile network operators discovered 

that consumers in developing countries wanted the ability to fund other phone accounts, 



  

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typically friends and family members with whom they exchange remittances. In many 

instances the recipient of the airtime would want to cash out the value. MNOs responded to 

this consumer need and as a result thereof, airtime was now being used as a store of value that 

had replaced cash and barter-based transfer systems in many countries that have traditionally 

relied upon informal value exchange systems (Merritt & Systems, 2011). 

 

The risk of anonymity in mobile payments was mitigated by the introduction of new 

authentication technologies such as voice recognition and fingerprinting to verify 

identification and utilisation of appropriate know-your-customer programs, particularly at 

vulnerable points of a transaction when cash withdrawals are conducted. Employing more 

sophisticated control systems to flag unusual account activity, based on a customer’s user 

profile, was required to detect highly complex money laundering schemes, (Merritt & 

Systems, 2011). 

 

Mobile payments combined the regulatory environments of both telecommunications and 

banking into a new paradigm that ultimately demanded a collaborative engagement process to 

balance intervention for risk mitigation with market innovation. The regulatory landscape 

evolved differently country by country including the adopted mobile payments business 

model. Due to this factor, it became essential for telecom and financial regulators to 

coordinate a risk-based approach to understanding risks in mobile money transfer services 

and establish oversight for mobile money and payment regulation. When considering the 

future, policy and regulation on an international basis was critical to consider shared 

infrastructures that works harmoniously to address emerging risks in retail payments while 

recognizing the benefits of innovation and increased financial inclusion (Merritt & Systems, 

2011).  

 

2011 - 2015 

By 2012, mobile payment growth was viewed as being dependent on the support of the 

decreasing costs of GSM communications, devices and applications. An important factor for 

mobile payments growth was considered to be end-user awareness and the products and 

services compliancy to fast and simple payments methods, (Toma, 2012). Around this period 

mobile payments matured from just being a money transfer mechanism, but became an 

enabler for the purchase of products and goods using mobile-payment methods although the 

catalogue was still limited to electronic content such as applications, eBooks, games, video-



  

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on- demand, music, ringtones, wallpapers. Hard goods such as concerts tickets, books, 

journals, magazines, as well as access services such as transportation fare – bus, subway or 

train, parking meters, cinema access and other services (Toma, 2012). 

 

Up to the period 2013, the dominant narrative had been that mobile banking, payment and 

commerce should be synonymous with the financial sector, a view whose case was under 

challenge. Significant differences could be observed between institutions, countries and 

regions. New players such as Google, Apple, PayPal, mobile operators and technology 

companies were also entering the arena. These companies were taking strong positions and 

had the capability and knowledge to move much faster on the opportunities of mobility than 

traditional banks. With the capability of these new entrants into the market, banks no longer 

had the exclusivity of being service providers in the payments area, and banks’ traditional 

customer relationships were being challenged through the emergence of social networks, 

applications and rich media providing new platforms for direct end-user engagement 

(Flatraaker, 2013) 

 

Changes in technology and customer expectation were mutually accelerating each other, 

speeding up technology development, customer demands and adoption. They were also 

facilitating the emergence of new business models and brought more power into the ‘hands’ 

of the customer (Flatraaker, 2013). Mobile operators (MNOs) were faced with the challenge 

of high rates of customer churn and potential future fall in revenues from the traditional 

connectivity business such as voice calls, SMS and data traffic. A move towards the payments 

arena to acquire new revenues and reduce churn was observed. With their core infrastructure 

and business that is built around the UICC SIM, they were now trying to build new businesses 

using this technology, near field communication contactless payments at the point of sale 

being one example (Flatraaker, 2013). 

 

By 2014, the notion that Smart Phones could become valuable and critical business tools for 

the delivery of M-Commerce products and services had been touted by academics, 

professionals and the media. Smart Phones had the capacity to enable the delivery of a wide 

range of transactional M-Commerce products and services, including highly individualised 

and location-based Smart Mobile Media Services (SMMS) (Duane et al., 2014). A broad 

range of industry experts predicted that the extent of SMMS available through Smart Phones 

and other Smart Mobile Media Devices will increase significantly over the coming years, as 



  

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increasing numbers of commercial entities invest in M-Commerce platforms and applications, 

to satisfy growing consumer demands for fully fledged multichannel retailing. When the 

future of M-Commerce is contextually envisaged there was a realisation that it would be 

important to establish a standardised, interconnected and widely accepted mobile payment 

(m-Payment) system (Duane et al., 2014). 

 

Around 2015, mobile money ecosystems were rapidly evolving in markets across the globe, 

with at least 259 deployments in 89 countries. The evolution of the mobile device as a 

predominant infrastructure in developing markets presented an opportunity for established 

players to connect to a section of the populace that had until this point been excluded from the 

traditional financial services model. The problem of being ‘unbanked’ is not just a function of 

poverty, but also of the cost, travel distance and paperwork involved in opening an account 

(Lai, 2015). The increased speed of financial transactions could create real savings for those 

living in emerging markets. These people would be able to save critical time for working by 

not having to travel to urban centres to withdraw, deposit money or pay bills, in certain 

instances travel time to the institution and back takes several hours. Service time at the bank 

or post office also takes a while with waiting times of up to two hours and the entire trip 

potentially taking away over half a day’s salary (Lai, 2015).  

 

A mobile wallet which allows for the safe storage of money, provided a compelling 

alternative to storing money under the mattress or in goods such as livestock, which are risky 

and insecure. Using mobile money, people would have no need to carry cash around or hand 

it over to informal providers of financial services. Mobile money could also be used to buy 

goods and services either formally (person-to- business) or informally (person-to-person) 

without the risk of handling cash (Lai, 2015). 

 

Regulatory restrictions remained a key factor driving the structure of partnerships in various 

markets. In some markets, non-bank players would have more motivation and competitive 

advantage than banks, but bank-based regulation denied these companies an opportunity to 

lead an implementation. In other markets, banks with a mass retail ambition may have had 

strong motivation to lead implementation, but the absence of appropriate agent banking 

regulations placed them at a disadvantage. To support financial inclusion, the levelling of 

playing fields for different types of institutions in terms of  key factors such as issuing e-

money, identifying and using agents and accessing communication channels was critical (Lai, 



  

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2015). The ubiquity of the mobile phone provided a compelling business case and it had been 

an influential factor in the adoption of mobile payment systems, particularly when the 

majority of the population is unbanked, both in the developed and developing countries 

(Dennehy & Sammon, 2015). 

 

When it came to mobile payments, the chicken-or-egg analogy is frequently referenced to 

best describe the challenge facing merchant and consumer adoption issues. On one hand, 

merchants are unwilling to invest in the systems needed to enable a mobile payment 

transaction unless there is consumer demand. On the other hand, consumers choose not use 

mobile payment systems unless merchants accept them (Dennehy & Sammon, 2015). 

 

Although mobile payments had become topical in recent years, the levels of success in 

attracting critical levels required for mass adoption by consumers and merchants has been 

uneven. In order to reach critical mass, a number of key requirements that influence adoption, 

simplicity and usability, universality, interoperability, security, privacy and trust, cost, and 

speed need to be met.  Failure to address these requirements might explain why mobile 

payments have not lived up to the hype as promised by its proponents in some markets 

(Dennehy & Sammon, 2015). The delivering of a mobile payment system is a classic example 

of an ecosystem as there are several stakeholders from multiple industries: consumers, 

merchants, MNOs, financial institutions, mobile device manufacturers, software and 

technology providers and regulators. During this period different types of business models 

through which mobile payments could be delivered were identified that is,  bank-centric 

model, telecom-centric model, collaborative model or independent service provider model 

(Dennehy & Sammon, 2015). 

 

 2016-Current 

By this period, the focus began to shift towards questioning what is limiting the mass 

adoption of mobile payments such that they reach a critical scale in most markets where 

mobile payments have been deployed. In this instance low adoption trends across various 

countries were looked at from both consumer and merchant side.     

  

The worldwide mobile payment volume in 2015 was estimated at US$450 billion with an 

expectation that it could surpass US$1 trillion by the early 2020s (Madan & Yadav, 2016). 

Despite the inherent benefits of mobile wallet and payment technology, the number of actual 

users of this service had remained low, when compared to other recent forms of cashless, non-

contact payment modes such as credit cards and online payment systems. For example, only 



  

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17.1% of mobile internet users had ever used mobile payment in China, and in the US, this 

figure was at about 12%. A similar trend of low adoption rates for mobile payment systems 

had been observed in many European countries such as UK and France (Gao & Waechter, 

2017). In India a country with 145 million unbanked families, mobile payments were 

estimated to grow from US$86 million in 2011 to US$1.15 billion in 2016. A compound 

annual growth rate of 68% although at first sight looks progressive,  is quite minimalistic for a 

country with financial inclusion challenges such as India (Madan & Yadav, 2016). 

 

Although there is acknowledgement that  Kenya witnessed a transformation through M-Pesa’s 

mobile payments serving 80 percent of the unbanked people in 2007,  and in India although it 

took a currency note crisis that was triggered by the demonetization in 2016 for mobile 

payments to reach  the cash-centric masses (Pal & Ansari, 2022). The unorganized sectors, 

including the local vendors, who for longest of times were dependent on cash for daily 

transactions switched to mobile payments as a safety net to continue business during the 

banknote crisis (Pal & Ansari, 2022). Especially in the case of India government policies also 

served as a critical catalyst for greater financial inclusion and digitisation. The four years 

between 2016 of the first push by demonetization upto 2020, witnessed the greatest digital 

finance transformation which can be recognized as the payment revolution. The unified 

payments interface (UPI) enabled individuals to directly transfer funds across banks through 

mobile phones and it was during this period that monumental growth of UPI could be 

witnessed with a sizeable growths in volumes and amounts of transactions, that could at times 

be reaching numbers as high as 20,000 percent (Pal & Ansari, 2022). Such numbers showed 

significant participation of the citizens in the modern payment system. However, there 

remains some doubt about the benefits of mobile payments reaching the truly marginalized 

population of the unbanked and illiterate population (Pal et al., 2020). A majority of the 

poorest citizens still did not own a smartphone or did not have adequate digital literacy to 

transact digitally (Pal & Ansari, 2022). A fundamental problem possibly lied in the attitudes 

and intentions of the customers at the bottom of the pyramid whose adoption of mobile 

wallets would be capable of providing the required level of scale and profitability to this 

relatively new technology (Pal & Ansari, 2022). 

 

Whilst mobile payments were reaching dominant levels as a payment method in parts of East 

and Southern African as well as parts of Asia, they still were in their infancy in Europe 

despite a high mobile phone penetration rate and service providers' considerable investments 

in the technology. A phenomenon best articulated by classifying mobile payment as an 



  

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example of the puzzle of abundance, a situation whereby the potential of a new disruptive 

technology is not tapped by the masses even though it potentially  offers substantial benefits 

to them (Rittiboonchai & Chienwattanasook). Various research studies including this one 

attempt to address this puzzle by investigating factors that influence the intention to use such 

disruptive technologies. Mobile payment has been drawn upon as an example of and an 

appropriate use-case to develop and test a refined technology acceptance model. Results from 

some of the current studies indicate that the intention to use mobile payment services is 

positively affected by perceived usefulness, perceived compatibility, perceived personal 

innovativeness, and perceived social influence, but is negatively affected by perceived risk. 

Both perceived costs and perceived risk mitigate the positive impact of several other 

characteristics. Early research findings of the studies conducted in Europe provide points of 

leverage to better tap the potential of mobile in similar contexts (Madan & Yadav, 2016). 

 

The strategic position of a merchant in the economic marketplace should be taken into 

account when one tries to understand their mobile payment adoption process. Within a mobile 

payment ecosystem, merchants are supposed to acquire knowledge about their partners, 

including their resources, needs, capabilities, strategies and other relationships, by exchanging 

information within the network. In this process, critical internal and external resources are 

necessary for an organization to position itself in the market place as well as within the 

business ecosystem (Guo & Bouwman, 2016). If a merchant adopts a strategy of operation 

excellence in the case of mobile payment, the perceived costs associated with mobile payment 

are very high based on their own resource configurations e.g. infrastructure, human resources 

and financial resources. In this case, the merchants in question might be lustful to adopt 

mobile payment because the aim is to minimize costs. If a merchant adopts a strategy of 

customer intimacy, the merchant would adopt mobile payment with their aim being to service 

their customers and in turn to realize long-term customer loyalty. When a strategy of product 

leadership is adopted, innovative merchants are more likely to adopt mobile payment with the 

main focus being to keep up-to-date with products or services (Guo & Bouwman, 2016). 

Based on the afore mentioned merchant adoption approaches noted, the following observed 

trends emerge:  

 

i. Observed trend 1: The internal and external resource configurations of merchants 

determine their willingness to implement an m-payment platform.  

ii.  Observed 2a: The internal and external resource configurations of merchants 

determine their strategic position.  



  

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iii.  Observed 2b: Merchants with a strategy of customer intimacy or of product 

leadership are more likely to adopt mobile payment. 

 

Merchants were regarded as critical in adopting mobile payments thus facilitating new 

business models, that promote the disintermediation of traditional intermediaries, so as to 

offer different possibilities for growing their businesses, and to reduce transaction costs (Afeti 

& Amanfo, 2021). This could be achieved at the backdrop of merchants believing that mobile 

payments adoption and the use thereof has the capacity to improve operational efficiency to 

their businesses, there however could be instances of fraud, particularly in the peer-to-peer 

transfer sector, data breaches, data security, and privacy concerns. It is thus  imperative for 

service providers of mobile payments to place significant focus on measures to enhance 

technological issues regarding privacy protection and risk mitigation  that can enhance trust 

thus improve mobile payment adoption (Afeti & Amanfo, 2021). 

 

2.2.2 MOBILE PAYMENT DEPLOYMENTS IN SOME DEVELOPING COUNTRIES 

 Kenyan Case   

M-PESA is a small-value electronic payment and store of value system that is accessible from 

ordinary mobile phones. Which has experienced phenomenal growth since introduction by 

mobile phone operator Safaricom in Kenya in March 2007. It already had 14 million 

customers (about 68 percent of Kenya’s adult population) and processed more transactions 

domestically than Western Union does globally (Mas & Radcliffe, 2010) by 2016. 

Introduction of M-PESA had enabled change and deflated the costs of money transfer service 

in Kenya, although other factors such as technological change could also be to some extent 

have influenced the  price drop besides M-PESA (IDRISS et al.). 

M-PESA’s market success could be  interpreted as the interplay of three sets of factors, (Mas 

& Radcliffe, 2010): 

 (i) pre-existing country conditions that made Kenya a conducive environment for a 

successful mobile money deployment;  

(ii) a clever service design that facilitated rapid adoption and early capturing of 

network effects; and 

(iii) a business execution strategy that helped M-PESA rapidly reach a critical mass 

of customers, thereby avoiding the adverse chicken-and-egg (two-sided market) 

problems that afflict new payment systems. 

  



  

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Safaricom exploited the fact that most Kenyans now have mobile phones. Users buy a sim-

card with the M-PESA application for their phone. Once signed up they have an electronic 

account and they may deposit money into it, withdraw money from it or send money from 

their account to that of another M-PESA account holder. To deposit and withdraw, they use 

cash merchants signed up with M-PESA. Some 23,000 such merchants operated out of small 

huts, shacks or rooms all across the country (Klein & Mayer, 2011).    

The cash merchants are called M-PESA “agents”. The word agent together with the acts of 

depositing or withdrawing money suggests that merchants perform services on behalf of the 

account provider, M-PESA, and like a bank branch performs some services offered by banks. 

In fact, the merchants do not dispose of M-PESA’s cash or other assets like a bank branch 

employee does for a bank. They transact with their own money – either in the form of book 

entry money(BEM) or cash. It is a service equivalent to the exchange of coins for bills that is 

allowed to happen without bank regulation anywhere in the world (Klein & Mayer, 2011).  

The merchants invest in their own business by acquiring an M-PESA account and deposit 

money of their own into it. Once the merchant holds electronic BEM at M-PESA, they can 

sell BEM to another person for cash. At the same time the merchant needs to hold cash to be 

able to buy BEM from another person by selling cash. When customers visit the cash 

merchant to deposit money into their account they give cash and receive M-PESA’s BEM via 

mobile phones. When they withdraw cash they transfer BEM via phones to the cash 

merchant’s M-PESA account and receive cash in return (Klein & Mayer, 2011).   

 

The M-PESA system as a whole has an overall holding of the net deposits from customers. It 

could just keep this net cash received in a safe but it is required by the Central Bank of Kenya 

to invest the net balances in regulated banks for safe-keeping. Presently the Central Bank does 

not allow interest on these deposits to be paid to M-PESA depositors; instead, interest income 

is covenanted to charity. The M-PESA system is thus compensated for net balances as if they 

were kept in a safe-deposit box (Klein & Mayer, 2011). 

The M-PESA example has demonstrated the power of unbundling traditional banking services 

in order to reach poor people. The fundamental choice for policymakers and regulators is 

whether to allow such unbundling and later determine what regulatory intervention is 

appropriate or if any is necessary. By allowing M-PESA to experiment, Kenyan regulatory 

authorities have provided a great deal of insight into new possibilities and consequences for 

regulation. What has been demonstrated is the way in which payments systems can be 

disaggregated into component services, namely exchange, storage, transfer and investment. 

Regulation should reflect this and be structured by service rather than along traditional 



  

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institutional lines, like a bank. The question then is what type of regulation is appropriate for 

each type of service  (Klein & Mayer, 2011)? 

 

Nigerian Case  

The context for Nigeria is that, the implementation of financial inclusion strategy was an 

emerging concern in the horizon of banks’ regulation and supervision (Umoh, 2016). A 

number of  policies that were targeted and  financial inclusion had upto that point not had the 

desired impact on the Nigerian economy due to lack of access to finance, with the end-result 

being that Nigeria remains lowly ranked when compared to its peers like South Africa and 

Kenya in financial inclusion  (Aro-Gordon, 2017). 

 

Amongst the attempts aimed at resolving the high rate of financial exclusion in Nigeria, a 

National Financial Inclusion Strategy (NFIS) was designed with its intent being to reduce the 

number of adults in the population who were excluded from the formal financial market, from 

52.5 percent in 2008 to 20 percent by the early 2020s. In order to achieve this objective, a 

number of strategic measures were embarked upon to enhance financial inclusion. These 

measures included, Know-Your-Customer (KYC), agent banking framework, national 

financial literacy programme, cashless policy, and mobile payment system, and establishing 

linkages between commercial banks, governments, and microfinance banks for funding 

micro, small and medium enterprises (MSMEs), as well as diverse credit enhancement 

schemes and programmes, (Aro-Gordon, 2017).  

 

Around 2021, Nigerian Communication Commission (NCC) estimated that 198.6 million 

Nigerians subscribed to mobile services, accounting for 96% of the population where else 

smartphone adoption continues to also rise rapidly and it was expected to reach 75% of total 

connections by 2025 (Nnene, 2022). 

 

In the 1990s, the Central Bank of Nigeria (CBN) undertook banking sector reforms to 

consolidate the sector increasing the minimum capital base of any bank to NGN 25 billion. 

This led to a significant reduction in the number of banks from 89 to 24 in 2005. By 2011, 

Nigeria had 20 MNOs with 93 million mobile subscribers, up from 266,000 in 2001. In 2012, 

rural areas mobile phone coverage stood at 40% with an expectation that the number would 

rise to 60% by 2015 and 100% by 2017. Mobile penetration increased to 71.5% in 2012 and 



  

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was expected to rise to 97.7%  by the 2020s, (Ondiege, 2015).  The Nigeria Communications 

Commission (NCC)which regulates MNOs, had the responsibility to ensure that MNOs and 

subscribers were free to use any mobile payments system of their choice, they were not 

receive deposit from the public except in the respect of prepaid air time billing of their 

subscribers, and were not allowed the use of the prepaid airtime for retail purchases (Nnene, 

2022). This seemed to have led to limited impact on financial inclusion when compared to the 

case of Kenya where regulators had allowed MNOs to handle financial transactions, 

(Ondiege, 2015). The CBN annual economic report, 2014 suggested that the Kenyan 

payments system which was characterised as being, simple and a cheap way to transfer 

money should be replicated as the model for enhancing financial inclusion in Africa, 

especially considering that majority of Africans live in villages and rural areas (Aro-Gordon, 

2017). 

  

Ghana Case 

Mobile money was first launched in Ghana in the year 2008. The population of Ghana was 

over 25 million and over 80% of the population was unbanked whilst mobile phone usage as 

at 2013 was over 100% (Tagoe & Affairs, 2016). Although mobile phone penetration was 

estimated at more than 25 million in 2012, mobile money subscribers were estimated to be a 

lowly 4.1million. Apart from the fact that mobile payments uptake and usage remained low, 

active users remained even lower at less than 10 per cent of the mobile payment subscriber 

base (Osei-Assibey, 2015).  

 

The Bank of Ghana (BOG) Summary of Economic and Financial Data Report showed growth 

across all the key indices between in the fiscal year 2020/21. Registered Mobile Money 

(MoMo) accounts increased by 25% from 32.7 million to 40.9 million, active MoMo accounts 

increased from 14.7 million to 17.5 million, the total number of transactions from 193 million 

to 295 million, the total value of transactions from GHS30.1 billion to GHS67.9 billion, 

MoMo interoperability complete transactions from GHS126.6 million to GHS990.7 million, 

and MoMo total number of transactions from 1.6 million to 6.2 million (Bank of Ghana, 

2021). These growth highlighted a high interest in mobile commerce and mobile payments by 

merchants and consumers (Akanferi et al., 2022).  

 

According to the Bank of Ghana’s(BoG) 2014 strategic payments system roadmap for Ghana, 

two of the key objectives of the payment system in Ghana were (Tagoe & Affairs, 2016):  



  

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i. to discourage the use of cash for transactions whilst encouraging the use of paper-

based instruments for payments as part of the short-term development plan; and 

ii. to develop an integrated electronic payment infrastructure that will enhance 

interoperability of payment and securities infrastructures. 

Although, there was the Payment System Policy and Oversight division at BoG, which in part 

oversaw the activities of mobile money operations(MMO). The BoG recognised the Telco’s 

as participants in payment system but only in the capacity as providing the telecommunication 

infrastructural arrangement for the payment system. Thus the central bank and commercial 

banks played more active roles because the BoG recognised them as financial intermediaries 

while the Telco’s were recognised as playing a more passive role. No concrete legislative 

framework for MMO existed as, the BoG saw the MMO as part of other electronic payments 

platform such as Ghana Interbank Payment and Settlement Systems Limited (GhIPPS) (Tagoe 

& Affairs, 2016). Although initially assumed that Ghana’s regulatory framework would have 

a limiting effect for MNOs’ effectiveness being a bank-led model, a spike experienced in 

mobile payments adoption around the time of writing this report had been very much led by 

MNOs. The mobile money service in Ghana, driven mainly by MNOs has proven to be a 

great transformer in its financial services industry. It is anticipated that mobile money  will 

serve as a tool to drive financial inclusion across the country and a vital delivery mechanism 

for the adoption of mobile commerce and mobile payments in Ghana to increase consumer 

banking (Akanferi et al., 2022).  

 

Fiji Case 

Mobile phones’ advanced functionality and technological capacity enabled the creation of an 

alternative platform for financial transactions, and this had enabled Telco’s to offer some 

services ordinarily provided by commercial banks, (Finau, Rika, Samuwai, McGoon, et al., 

2016). Fiji, is the second-largest economy in the South Pacific and one of the first Pacific 

Island countries to introduce mobile money. In Fiji unlike countries such as Kenya, Ghana or 

Haiti it already had a relatively well-developed banking infrastructure, with six commercial 

banks of which were multinationals. The central bank of Fiji, had used national financial 

inclusion strategies to advocate for mobile money in general as well as the deployment of 

mobile payment initiatives for unbanked rural dwellers. In this process it had worked closely 

with commercial banks, MNOs, and other development partners such as the Pacific Financial 

Inclusion Programme, (Finau, Rika, Samuwai, McGoon, et al., 2016). 

 



  

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Mobile payments were primarily facilitated by three MNOs (Vodaphone, Digicel, and Inkk), 

which collectively had an estimated reach 90% of Fiji’s population. Banks leveraged MNOs’ 

reach to enhance their own banking services to rural areas.  

 

Vodafone launched Fiji’s first mobile payments service, known as M-Paisa, based on 

the Kenyan M-PESA. M-Paisa was initially conceived as facilitating loan disbursements and 

repayments from micro-finance institutions such as South Pacific Business Development, but 

later evolved to include utility bill payments. M-Paisa enabled rural dwellers to receive loans  

welfare allowances, salary payments and also facilitated foreign remittances in collaboration 

with World Remit, (Finau, Rika, Samuwai, McGoon, et al., 2016). In 2011, Digicel 

introduced its own mobile money product, called Digi Money and like M-Paisa, it offered a 

wide range of services, including overseas money transfers through KlickExas well as 

domestic and international bill payments, (Finau, Rika, Samuwai, McGoon, et al., 2016)..  

 

 

Vodafone Fiji, had 95% market share which was approximately 880,000 customers, with 

smart phones estimated at about 500,000 and about 480,000 social media users. MPAISA was 

launched in 2010 processing about 350,000 transactions per month processing 10 million FJD 

per month (Goundar, Mohammed, Devi, & Lal, 2021). The strongest deterrent to using 

mobile payments were the perception that it was costly and this view was supported by the 

findings of locally conducted research, where it was discovered that agents refused to 

disburse the full amount of funds received through mobile money. Users of mobile payments 

indicated that agents forced them to spend a portion of the funds they received in-store, 

although they wanted to use the money for other items outside of the channel (Goundar et al., 

2021) 

 

Due to conflicts with agents, customers preferred to withdraw the full amount of funds 

received via mobile payments rather than saving some of it in their mobile wallets, although 

they are actually cheaper than a conventional bank account. Agents insisted on users spending 

money in store as they used their personal cash to pay users and sometimes merchants would 

not have enough cash on hand for customer withdrawals. Float management and lack of 

liquidity were the two biggest challenges agents encountered. In Fiji unlike in Kenya implicit 

costs of mobile payments incurred by recipients, as opposed to senders in Kenya served as a 

major deterrent to adoption.  Users also perceived mobile wallets as unsafe due to a limited 

understanding of the dual layer of protection available to them, as a result thereof they were 

reluctant to use their mobile wallets as a savings mechanism. Thirdly financial literacy could 

assist consumers to more accurately evaluate the value of mobile payments versus other 



  

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means. Lastly demographic factors such as age also played a part in influencing consumers’ 

perceptions regarding benefits and thus adoption (Finau, Rika, Samuwai, McGoon, et al., 

2016).  

 

Although regulation did seem to be the contributing factor to low adoption and effective use 

of mobile money in Fiji, financial literacy on the consumer side and the liquidity challenges 

on the merchant side seemed to be even the major influencers of user take-up and usage a 

situation that seemed to still persist at the time of conducting this research.   

 

India Case 

 

India had a very limited network of 69,160 bank branches and 60,153 ATMs around 2011, 

however the at the time m-banking guidelines of the Reserve Bank of India(RBI) were very 

much based on a ‘bank-driven’ model and allowed mobile banking/payment only for existing 

customers of banks. Mobile payments were merely seen as another channel for accessing 

bank accounts and appeared far away from their full potential for contribution to financial 

inclusion (Ketkar et al., 2012). The view on the success of the deployment of mobile banking 

varied based on who takes the lead, how supportive the financial regulation of the country 

considered was to be to mobile banking and whether mobiles were deployed for additive 

banking or transformational banking. Collaboration between mobile operators and banks was 

an imperative for the successful growth and vibrant mobile banking and convergence of 

payments and mobile communications was not just logical factor of evolution, but an 

inevitable development (Ketkar et al., 2012). 

 

Until the historic banknote crisis of around 2017/18 resulting from demonetization, India had 

been amongst the low adopters of mobile money, when a rapid prominence of mobile 

payments from near absence was experienced. For mobile payments to be able to significantly 

contribute to financial inclusion, usage needs within the economy needed to be sustained even 

beyond the transient forces of the initial demonetization push (Pal & Ansari, 

2022).  Government-led initiatives such as Digital India and extreme focus on financial 

inclusion, along with fast penetration of smartphones, directionally pointed to exponential 

growth in the use of digital payments. Newer features in the digital payments domain such as 

unbounded fund transfers between wallets and bank accounts, mobile wallets would emerge 

to be an even integral part in India’s financial ecosystem. India’s mobile wallet industry was 

estimated to grow at a CAGR of 148 per cent and was expected to reach US$4.4 billion by 

2022 (Pal & Ansari, 2022; Sarwal). With the advent of the global players venturing into 



  

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digital payments, especially in the m-pay domain, as well as the already existing array of 

home grown m-wallets/aggregator apps, India was seeing a constant war between all the 

options available in the market (Pal, 2022) 

 

Unified Payments Interface (UPI), classified as instant real-time payment mechanism 

launched and developed by National Payments Corporation of India (NPCI), a regulated 

entity facilitating inter-bank transactions. It facilitated instant transfer of funds between two 

bank accounts on a mobile platform, and also enabled the customer to keep their bank account 

anonymous while transferring money. This option was available for integration over both 

desktop & mobile platforms. In the m-commerce space, NPCI launched this capability in 

December 2016, totally disrupting the then existing market of mobile wallets, and other 

payment aggregator apps (Pal, 2022). 

The trajectory at the time of this research was undertaken pointed to the payments landscape 

in India that was undergoing a major digital transformation with the emergence of 

instantaneous, cashless, paperless, financial transactions, with digital payments expected to 

reach US$1 trillion by 2023 from the value of less than US$200 billion in 2017-18 (Pal, 

2022). 

 

2.2.3 MOBILE PAYMENT DEPLOYMENTS IN SOUTH AFRICA  

At the time of this research was conducted SA was classified a middle-income country with a 

developed infrastructure in terms of roads, rail-network, harbours, electricity grid and 

telecoms network. It however remained a country with great contradictions where on one 

hand it was highly developed but also had pockets of great poverty and underdevelopment  

(Borg & Persson, 2010).   

In terms of SARB’s 2009 Position Paper, in the case of person-to-person payments, when 

money is sent by the payer to a beneficiary in the form of electronic value and such money is 

not due to the beneficiary as a result of an established obligation, participants involved in this 

type of transaction potentially contravene section 7 of the NPS Act unless undertaken within 

an infrastructure provided by banks as the transaction is be classified as deposit-taking. In 

terms of the Banks Act, the taking of deposits from the general public by an unregistered 

person (non-bank) is a criminal offence.  Another distinct and key pronouncement within the 

2009 Position Paper is that only South African registered banks may issue electronic money 

(Lawack-Davids & Tech., 2012). 



  

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From this perspective, for non-banks wanting to enter the e-money space, the prevailing 

interpretation was that the 2009 Position Paper limits their access to the payment system, as 

non-banks have to enter into a sponsoring arrangement with a bank, which comes with cost 

implications. Furthermore, the 2009 Position Paper was mute when one considers the 

opportunity presented by the high growth and penetration rates of mobile telephony that were 

transforming cell phones into banks in other parts of Africa  (Lawack-Davids & Tech., 2012). 

The legal payments framework for SA is therefore captured in fig 2.2.3. 

 Fig 2.2.3 SA legal payments framework 

 

 

Proximity mobile payments were an area of interest in the context of South Africa for several 

reasons. There was a plethora of mobile payment applications available in the country, with 

the most popular being SnapScan. A Mastercard survey in 2017 revealed that 31% of 

respondents used mobile payments, and 70% of them used apps such as SnapScan, Zapper, 

FlickPay, and Gust Pay. This review attempted to build a context on proximity mobile 

payments that were applicable to the commonly used apps in South Africa, based on a few 

studies had investigated why the adoption levels had remained low. Some of the reasons 

advanced in terms of the transition from cash to digital payments were that they could be 

divided into push and pull factors. Classified in the following manner negative factors can 

push people away from using a technology while positive factors can pull people to a 

technology. Thus, the push-pull framework in terms of the reviewed research had a potential 

to serve to build an understanding of the switching behaviour, which in the context on the 

referenced study was switching from using cash to digital payments. There factors that were 



  

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considered as contributing to push factors within the South African context (Eksteen & 

Humbani, 2021),  included an increase in cases where people are robbed, and about 1.1 

million of such cases were recorded in 2019/20 South African Police Service (SAPS) report. 

Based on these statistical facts, logically one would naturally believe that there would have 

been a faster transition to digital payments, yet the reality was somewhat disappointing, as 

only about 6.4 million out of a total of 20 million smartphone users were expected to be users 

of proximity mobile payments by at least the end of 2023. On the basis that mobile 

penetration rate exceeded 90%  South Africans had immense potential to be major users of 

proximity mobile payments (Eksteen & Humbani, 2021). 

With mobile phones at the time anticipated to become a common tool for initiating, 

authorising and completing transactions, the on the ground experience had been that many 

mobile payment service efforts had failed,  for instance M-Pesa, that was developed by 

Vodacom in 2010, was discontinued after 6 years non-impressive uptake despite what was 

potentially seen as inviting conditions in the South African context (Humbani, 2021), 

although a re-launch had been undertaken numbers regarding real take-up were yet to be 

published, at the time of conducting this research. 

 

SA mobile payment deployments have been less impactful in driving financial inclusion when 

compared to peer countries. Experiments began comparatively early and pioneering models 

such as Wizzit and MTN Mobile Money which emanate from SA, but the role that non-banks 

can play in issuing e-money is circumscribed by the current guidance note on e-money which 

has frustrated some potential innovators. To further enhance its environment, SA would have 

to amend its position, for an example by creating a category of regulation for non-bank as e-

money issuers, or licensing banks to operate a limited mandate banks which allows operators 

to facilitate payments and also prescribes instruments on where float is to be invested, 

(Humbani, 2021).  

 

The two biggest MNOs Vodacom and MTN have made several attempts to deploy mobile 

money solutions to the market, however they had at the time the research was conducted been 

unsuccessful in achieving the desired adoption as well as usage rates. Their deployments were 

also close-loop systems which were fundamentally dependent on a sponsoring bank to in 

order to access the national payment rails. Although each deployment tried to cultivate its 

own network of dealers/merchants as well actively advertise and promote their offering to the 

market, the lack of interoperability consistently became one of the constraints for adoption 

and take-up.  



  

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2.2.4 THEORY