Exploring Future of Mobile Payment in United Kingdoms

Subject: Case Studies
Pages: 30
Words: 10139
Reading time:
35 min
Study level: College


With the advent of mobile commerce a wide range of products and services are being offered today which has opened up different avenues in United Kingdom. By the use of Mobile ticketing tickets can be easily issued to clients by directly sending them to their mobile phones by means of a range of technologies. At present, mobile related digital content purchase and delivery markets are primarily constituted by products such as ring-tones, mobile graphics, and games for cell phones. Contrasting with the services accessed through a home PC, the location of the consumers is sometimes a vital aspect which is exploited in mobile commerce activities. This study adds to the growing literature base on the subject of mobile commerce by keying out prerequisites, drivers, and barriers in terms of adoption of one of the major supplementing technologies for mobile commerce- the mobile payment systems. In terms of benefits and advantages, prior research initiatives have primarily concentrated on the omnipresent and individualistic character of mobile equipment and applications whereas this initiative points out explicit drivers of mobile payment scheme from the vendors’ perspective. Amongst the prerequisites identified in this study, the advent of mobile machinery emerges as key feature that has also been talked about in several previously conducted researches on the subject of mobile commerce, whilst the further prerequisites are more pertinent to the perspective of mobile payment systems. It is suggested that the Mobile phone users in United Kingdom have to be interacted with in a manner such that they understand that mobile payment is a much more viable alternative to other conventional payment structures.


Background Information

Mobile Commerce, which is also referred to as M-Commerce, or U-Commerce, on account of the omnipresent temperament of the services it offers, is the capability to carry out commercial activities, by means of using a mobile apparatus such as a mobile phone, a PDA, a smart-phone and other up-and-coming mobile devices like dashtop mobile devices. The United Kingdom Mobile Commerce may be defined as any commercial operation which entails the reassignment of possession or privileges to make use of goods and services, which may be set off and/or accomplished by means of portable access to computer-arbitrated networks aided by an electronic contrivance. The world witnessed the earliest form of mobile commerce in 1997 when two mobile phones compliant Coca Cola vending machines were set up in Helsinki, Finland. They made use of SMS text messaging services to make the payments for vending machine transactions. In the same year the earliest mobile phone enabled banking service was initiated by the Merita bank based in Finland. This service was also based on text messaging technology. In the following year, the earliest digital content sales were manifested with downloads to mobile phones being enabled and the initial commercial downloadable ringtones were initiated in Finland by Radionlinja. (Okazaki, 714-731)

Mobile devices such as the PDAs and cellular phones have gained huge popularity in the past two decades in United Kingdom. So much so that a lot of business outfits are starting to adopt m-commerce as a resourceful means of getting close to and interacting with their customer base. Even though most technological trends and progressions are usually confined to the Asian region and to some extent in Europe, countries like Canada and the United States have also started to adopt and implement m-commerce. M-commerce is at a very early phase of development in a lot of countries.

In United Kingdom the lesser cost sensitive early accepters belonging to the 13-25 age groups are likely to provide an impetus to the preliminary growth phase. Development of mobile products and services like ringtones, mobile games, and graphics display the potential to dislodge consumption of several long-established youth products for example music, fashion, and movies. This would drastically alter the kinetics of all optical entertainment and goods / service circulation across the planet and vendors could reach consumers with a varied assortment of attitudes. The youth dominated market sections have in the past exhibited trends of express viral growth and these products in due course achieves recognition in the general markets as well. While up-and-coming market sections are emerging as the ultimate solution for maintaining revenue figures regardless of the falling average price per unit (ARPU), experts in the field are of the view that the fast paced commercialization of 3G utilities may probably herald new-fangled prospects in the developed market arena. So as to take advantage of the m-commerce market potential, various business giants are collaborating to formulate WAP-enabled concepts and means to access them. (Chen, 1019-1031)

With the advent of mobile commerce a wide range of products and services are being offered today which has opened up different avenues. In this paragraph a wide variety of m-Commerce activities are described in order to give the reader an idea about the magnitude of growth of the m-Commerce concept. By the use of Mobile ticketing tickets can be easily issued to clients by directly sending them to their mobile phones by means of a range of technologies. Clients are subsequently capable of making use of their tickets right away by showing their phones at the ticket checking point. Tickets may be reserved and invalidated on a mobile platform by means of straightforward application downloads or by logging on to WAP portals of different Travel agencies or service providers.

Another important form of United Kingdom m-Commerce is digital content purchase and delivery. At present, mobile related digital content purchase and delivery markets are primarily constituted by products such as ring-tones, mobile graphics, and games for cell phones. Contrasting with the services accessed through a home PC, the location of the consumers is sometimes a vital aspect which is exploited in mobile commerce activities. Being aware of the location of the consumer enables service providers to offer location based services like maps, local offers, weather, and tracking and monitoring services. A wide range of info services may be delivered to mobile customer in a similar way as done in case of PC users. Such services may consist of news updates, dynamic stock data records, sports news, financial updates, and traffic information. Banking institutions and other financial establishments have also started experimenting with the implementation of mobile commerce to facilitate their clients with not only access of client account information, but in addition easy transaction process, e.g. stock acquisitions, money transfer, by the use of mobile phones and various other mobile devices.

Such services are commonly dubbed as Mobile Banking or M-Banking. Stock market services made available by the use of mobile equipments have also grown in popularity and are often referred to as Mobile Brokerage. In the very recent past mobile reverse auction solutions have emerged as a novel concept. (McMillan, 756-768) In contrast with conventional auctioning processes, the reverse auction process, commonly known as low-bid auction, charges the client’s cellular phone directly whenever they decide to place a bid. Apart from these avenues, Mobile marketing is also an emerging M-Commerce concept, but the rapidity with which it’s developing and being implemented is extraordinary. Mobile marketing is an extremely receptive form of marketing operation, particularly from the brands’ experience viewpoint and nearly all brands are experiencing greater campaign response rates proving the productivity of the concept. (Au & Kauffman, 84-102) In light of the rapid growth of M-commerce in United Kingdom and the wide variety of opportunities it offers mobile payment schemes have assumed immense significance in the commercial markets and is the subject of study in this paper, particularly from the UK perspective.

Mobile Payment

Mobile payment is a novel, innovative and fast growing alternative payment system with particular implementation being observed in parts of Asia and to some extent in Europe. Rather than paying up in cash, through checks or by using credit cards, by making use of mobile payment methods a customer may simply use his or her cellular phone to pay for a wide variety of material products as well as digital services such as music, videos, mobile ringtones, mobile gaming subscription or articles, graphics and other digital products; transportation charges for buses, subways or rail travel, parking meters and other utility services; books, periodicals, tickets and various other items in United Kingdom.

The entire market for the various forms of mobile payments taken collectively is likely to become a in excess of $600B industry worldwide by the year 2013, while the mobile payment industry for products and services, not including Contactless NFC transactions and money transfers, is projected to go beyond the $300B mark internationally by the same time. A number of mobile payment initiatives are also made use of in developing economies for micropayment procedures. (Dahlberg, 56-79)

Premium SMS based transactional payments

In this mode of mobile payment the users issue a payment request by means of a text message using a predetermined code and a payment charge is billed directly to their mobile phones. The payment status is communicated to the vendor concerned and after a successful payment the vendor dispatches the product which has been paid for. Most often these products are digital contents and the vendors respond via a Multimedia Messaging Service to distribute the product bought. Sometimes barcodes which can be scanned are delivered through MMS technologies and these are used as electronic tickets for admission to particular locations and events or to procure material products. This mode of payments was well-accepted in various parts of the world but is currently being surpassed by other payment modes like mobile web payments (WAP) and Direct Mobile Billing on account of:

  • Poor reliability – payments can often be unsuccessful with messages being undelivered;
  • Slow speed – messages delivery may be delayed due to bandwidth availability and it thus can be time consuming. Consumers require speedy transactions and don’t want to be kept waiting for long;
  • High cost – There are a lot of high expenses related to this mode of payment. The cost of formulating predetermined codes and charges for the distribution of media by means of a Multimedia Messaging Service and the consequential client support overheads are some of them.
  • Low payout rates – the machinists are familiar with elevated price of in-service and sustaining transactional payment methods that in turn results in the disbursement rates as minimal as 30% for the dealers.
  • Low follow-on sales – after an imbursement appeal is sent and the products procured there is nothing else for the purchaser to do. It is also not easy for them to retain purchase information making it difficult to remember how to make a recurrent purchase. (Jarvenpaa & Lang, 7-23)

Direct Mobile Billing

In this mode of payment, the client uses the mobile billing selection in the course of a checkout process at an ecommerce web location like an online game portal in order to confirm a payment process in United Kingdom. Following to a two-factor verification protocol consisting of a PIN and a One-Time-Password, the client’s mobile phone account is billed for the acquisition of any product. It is an effective alternative payment mode that is free of the hassles of credit/debit cards or registration processes with online payment method providers, for example PayPal, thus sidestepping banking procedures and credit card providers all in all. This mode of mobile payment method, being widely ubiquitous and well-accepted in Asia, offers the following advantages:

  • Security – Two-factor authentication protocol and risk management procedures to put off fraudulent activities.
  • Convenience – No tiresome registration processes and no additional mobile utilities are necessary.
  • Easy – It’s a straightforward substitute within a checkout procedure.
  • Fast – For the nearly all part, transactions are completed in no more than 10 seconds.
  • Established– A vast majority of all digital content sold online employs Direct Mobile Billing payment modes in Asia. (Musa, 213-224)

Mobile web payments (WAP)

In this form of payment the client draws on the webpage presented or supplementary software they’ve downloaded and configured on their mobile devices to enable payment making processes. It makes use of WAP (Wireless Application Protocol) as the principal technology, and thus accedes to all the benefits and shortcomings of the WAP technology. However, using a well-known web payment form provides numerous established advantages:

  • Follow-on sales wherein the mobile-web payment can be retraced to a certain provider or to other products the client may be interested in. The webpage is linked to a particular URL and thus enables them to be bookmarked making it simple to re-access or refer to others;
  • High customer satisfaction due to rapid and reliable payment structures;
  • Ease of use due to a recognizable set of online payment models.

Quite a few dissimilar actual payment methods can be employed under the face of a constant group of webpages. (Valcourt, Robert, & Beaulieu, 29 – 36)

  • Direct operator billing: A straight link to the operator billing structure necessitates assimilation with the operator services, but at the same time offers several advantages:
    • Simplicity – the providers already have a billing format initiated with respect to each individual client;
    • Immediate payments provides consumers with the highest levels of satisfaction;
    • Precise responses demonstrating payment status and explanation for failure of payment processes;
    • Security to safeguard payment information and costumer identity to prevent fraud;
    • Superior conversion rates due to just a sole click-to-buy and no requirement for providing any additional payment information;
    • Reliability that generates confidence and trust amongst consumers;
    • Lessened customer support overheads for vendors and providers
    • High payout rates
  • Credit Card: A straightforward mobile web payment scheme may also involve a credit card payment module facilitating a customer with the option to provide their card information to purchase products they like. This procedure is very common although any providing of information through a mobile device has proved to decrease the success rate (conversion) of payment processes. Additionally, if the retailer involved can by design and securely recognize purchasers then card information can be re-fetched for future transactions making credit card payments a straightforward one time entry and future sole click-to-buy process enabling better conversion rates for further purchase activities in United Kingdom.
  • Online: Online firms like PayPal, Amazon Payments and Google Checkout also provide mobile options for checkouts. This process needs the consumers to authenticate with an individual PIN prior to making any payment. Succeeding payment processes also necessitate a PIN code to be drawn on. However, such options are known to decrease the success rate (conversion) for payment procedures. Nevertheless, such systems may be assimilated directly or can be merged with the provider services and credit card payments structures by means of an integrated mobile web payment model. (Malloy, 351-374)

Contactless NFC (Near Field Communication)

NFC is employed generally in payment processes in relation to purchases made in material product stores or in transport services. A customer makes use of a mobile device outfitted with a special smartcard and the device is waved in front of a reader device. Most dealings do not need validation, although some transactions necessitate authentication via a PIN code, for the transaction to be completed successfully. The payment amount is then be subtracted from a pre-paid account or billed directly to the customer’s mobile phone account or debited to the bank account.

Mobile payment mode through NFC is exposed to some major challenges in terms of extensive and rapid implementation. Although a number of phone companies and banking institutions are passionate about NFC, other lack the impetus as a result of insufficient infrastructure, multifaceted issues of stakeholders, and compliance standards in UK.

A number of NFC enabled merchants, particularly in parts of Europe, draw on Contactless payment through mobile services to make payments for parking facilities in specifically defined regions. Parking supervisors can put into effect the parking guidelines by using license numbers, transponder codes or barcode labels. The users gain from the expediency of facilities to compensate for parking services easily from the their car itself through their mobile phones, and parking service providers are saved from the troubles of spending in either already present or new street-based parking facilities.

NFC-compliant payment systems are much simpler and less expensive to operate as compared to cash transactions and other conventional payment structures. In addition, as an extra benefit, users have a well documented record of all payments made unlike cash transactions which are difficult to keep track of. (Hassinen, 165-177)


A number of experts in the field believe that mobile payment is the next technological revolution that has the potential to effectively supplement existing electronic and mobile commerce activities and can open up new avenues in the world of mobile business. In light of such circumstances, this paper aims at exploring the prospects of Mobile payment and analyzes the phase through which it is undergoing at present particularly in relation to the United Kingdom.


The main objectives of the research can be summarized as follows:

  • To understand and explain adoption rates and the state of mobile payments in UK;
  • To Analyze adoption rates and the state of mobile payments in UK;
  • To study the adoption rates and drivers and barriers of mobile payments in UK;
  • To recommend ways to improve adoption rates and enhance the state of mobile payments in UK.

Research Question

The research question that this initiative aims at answering is that to what extent has the implementation of mobile payment infrastructure been effective in UK in terms of its relevance to mobile commerce and what are the drivers and barriers it is exposed to in the process.


Mobile payment is believed to be a major technological revolution by various professionals and holds the potential to effectively enhance existing e- and m-commerce structures in UK. The mobile payment holds immense possibilities for all involved in the long term but at present it is in an early development phase and needs a great deal of careful attention. Various approaches have been tried by different entities and the existing requirements have been attempted to be addressed, but till date no uniform solution exists.

Literature Review

The Present State of Mobile Payment

In accordance to Nikhilesh Dholakia, Morten Rask and Ruby Roy Dholakia it can be stated that “InfoSci-Online is available to libraries to help keep students, faculty and researchers up-to-date with the latest research in the ever-growing field of information science, technology, and management.” (Dholakia, Rask and Dholakia, 310) Thus, in UK, it is evident that information on mobile based communication is much more available these days. The advent of mobile communication concepts in the past three decades and the successful accomplishments of the preliminary mobile content products, such as ringtones, graphics and mobile games, have sprouted up a novel form of business operation carried out by utilizing telecommunication channels. This form of trade has been termed Mobile commerce or m-Commerce. Mobile commerce is a kind of electronic business where a component of or the entire transaction is carried out with the help of a mobile equipment, typically a cellular phone (Becker, 98-101).

A worldwide study carried out by LogicaCMG (2005) articulates that every one out of five mobile phone users across regions of Europe, North and South America, and Asia Pacific are familiar with downloading and installing digital content to their mobile phones. The digital content sales industry has turned into a billion dollar enterprise (Menke and de Lussanet, 67). Purchase of mobile commerce products, for instance digital content, are usually associated with mobile payment methods. Such modes of payment schemes are designed, implemented and offered by telecom service providers, financial and banking establishments, and handset manufacturing firms and new dedicated establishments, or mutual undertakings amongst various entities. (Hassinen, 165-177)

McMillan suggested that Mobile payment processes in UK are characterized as the utilization of mobile equipment, such as a cellular phone or a PDA, to perform defrayal transaction wherein capital or funds are transmitted from one entity (spender) to another (recipient), either directly or by means of a mediator, electronically. A mobile payment initiative is usually commenced by issuing payment request via a SMS (short message service) text message to a service number of the vendor. (McMillan, 756-768) The transaction amount is then billed directly to a mobile subscription account, subtracted from the prepaid airtime of the mobile phone user, billed via an accessible credit or debit card payment structure, or debited to an individual dedicated mobile payment account (Au & Kauffman, 84-102)

The most modern mobile payment schemes, for example the I-mode FeliCa in Japan, make use of Contactless RFID (radio frequency identification) concepts. While the progress of mobile payment systems has been impelled by the requirement of the telecommunications and the digital content sector to embark on adequate micropayment initiatives for their product offerings, mobile payment operators have of late commenced development of extensive exploitation of mobile payment structures. The requirement for novel modes of payment is impelled by the advent of electronic payment mechanisms and gradually retreating utilization of cash. The surfacing of new retailing situations, for instance the Internet and m-commerce, has sprouted additional necessities for practical and opportune payment apparatuses (Ondrus and Pigneur, 142-152).

As a result, mobile payment schemes have been initiated for Internet based transactions and mobile commerce in UK, and even for procurement of a variety of material products and utilities in the physical markets, for example retailing, ticketing, and parking. (McMillan, 756-768) From the vendors’ point of view, the implementation of mobile payment schemes is likely to decrease various operational costs and make the sales operation simple for the consumers, at all times and from most suitable and convenient locations. This enables corporations to generate more interaction opportunities with clients and to distribute top grade products and services directly to their doorsteps. Nevertheless, merchant implementation of mobile payment infrastructure has not proved to be as rapid or extensive as was projected (Ondrus and Pigneur, 142-152).

Although there are prospective benefits on offer, yet there are several obstructions, such as lack of standardization policies and numerous overheads involved, which decelerate the adoption and implementation of the novel payment structures in UK. Bearing in mind the possibilities that mobile payment schemes offer in progressing dealings in electronic, mobile, and physical settings, a more reflective contemplation with regards to their adoption process amongst the business entities is desirable. (Tan, 116-126)

Drivers for the Adoption of Mobile Payments

The primary impetus providers for the adoption and implementation of mobile payment modes have been acknowledged to be associated with the omnipresence (Frolick and Chen, 2004) and personal character (Jarvenpaa and Lang, 2005) of the infrastructural equipment and products. Mobile payment structures offer added value to vendors by make easy payment schemes possible in distant and proximal dealings. Omnipresence is usually identified as a better value proposition in terms of mobile technology and a major distinction amongst portable and fixed Internet trade.

The ubiquitous ness of the mobile networks in UK is facilitated by extensive diffusion of mobile telecommunication infrastructure in the majority of developed and several developing economies. Prepaid and postpaid telecom service provider’s billing functionalities create inherent payment machinery for mobile users, who constitute a vast prospective subscriber base for mobile payment systems. (Hassinen, 165-177) In addition, consumers generally deem mobile gadgets as personal belongings, have become habituated to keeping the equipments within reach and switched on at all times, and in fact do not prefer to turn off the gadgets (Jarvenpaa and Lang, 2005). The individualistic character and the unremitting network availability of mobile technologies deem them principally suitable for carrying out payment operations and can help users keep track of associated personal information. Mobile payment operations can transpire under the pretext of mobile commerce, distant commercial activities, and even point of sales (POS) dealings.

From the perspective of mobile commerce, mobile payments can enable the smooth sales of mobile related products by means of the telecommunication channel in UK. While archetypal mobile purchases at present are constituted by digital content such as ringtones, graphics, music, mobile games and several other related services more sophisticated provisions, for example location dependent data services, dynamic impulse acquisitions, customized alerts, and tracking active data, demonstrate enormous possibilities in the upcoming times for the reason that they provide special value-added features which can be offered by means of mobile technology. The requirement for mobile payment structures in this regard is emphasized, in view of the fact that there exist just a small number of alternative payment arrangements that are available to subscribers.

For providers who are adopting and making use of the mobile network and implementing mobile payment schemes, the omnipresent character provides the opportunity to put their products on the market on a large scale and reach consumers at any time and from the majority of locations. Vendors may associate their products with mobile subscribers through their already existing services and generate more interaction opportunities with consumers by means of the new network; consequently developing added sales and service provisions for the consumers. (Tan, 226)

Mobile payment scheme can also be significantly applicable in the situation of distant commerce, for instance Internet based transactions and via mail purchase processes in UK. While more than a few substitute payment schemes for distant operative commerce already exist, the difficulty – particularly in case of the Internet based transactions– is that of the exceptionally undersized total of micropayments (that is to say approximately under the 1 USD mark). For vendors offering pay-per-view or miniature value content over the Internet, mobile payment systems may provide a viable substitute, given that the transaction overheads of credit card payment mode is not cost-effective in terms of dealing with micropayments. (Ondrus and Pigneur, 142) Mobile payment systems in relation to Internet based trade also facilitates offering of customized alert services and sales advertising and marketing by means of the telecommunication network.

In addition, mobile payment structure in UK are also pertinent in point of sales (POS) transactions context in both staffed service spots, like the retail stores and kiosks, and also unmanned service ends, for example vending engines and launderettes (Jarvenpaa Lang, 7-23). As electronic payment alternatives have emerged after facing significant challenges to replace cash desks, mobile payments are expected to experience the stiffest competition in that regard. Prior study carried out on the subject of electronic funds transfer at the point of sales (EFTPOS) reveal that the comparative benefits of electronic payment schemes consist of economic savings, decreased dealing with paper-based payment structures, for example cash and checks, rapid execution at check-out points, customer related expediency, faster gathering of finances, and improved inventory management. It is still undecided whether mobile payment systems will be competent enough to offer added value in such a setting. Malloy asserts, nevertheless, that mobile payment schemes may offer an opportune and economic substitute for vendors who do have not implemented the card payment infrastructure. (Malloy, 351-374) Likewise, mobile payment systems are likely to trim down the overheads of dealing with coins and to enhance consumer expediency at self-service service ends. Recent researches have also revealed a notable amount of consumer insistence for mobile payment systems at various forms of vending outlets. (Valcourt, Robert, & Beaulieu, 29 – 36)

Barriers to the Adoption of Mobile Payments

Implementing a new payment mechanism in UK is characteristically a significant operation, and consequentially there are several obstacles associated with the merchant adoption of these systems. One of the principal hurdles is the apprehension about excessive financial overheads and investment charges. The expenses linked with mobile payment mechanism adoption may take account of high costs and prices charged by defrayal service providers, equipment and software updates at POS, and related education of personnel involved. Another frequent unease having an effect on mobile payment mechanism adoption choices is the shortage of critical mass or in simple terms non-compliance by consumers.

Mobile payment systems in UK symbolize a highly sophisticated networked offering wherein the advantages of the service rely on the amount of participation. In addition, in the context of mobile payment schemes, two different groups of participants exist: merchants / vendors and consumers. The generation of critical mass for such payment systems is thus even more exigent, particularly in cases where the value propositions are required to catch the attention of these two participating sections and a number of subdivisions within these groups may be noticeably dissimilar. (Hassinen, 165-177)

The fact that the mobile payment markets are at the early phases of development and the it is still undecided in terms of worth or return on investment provided by mobile commerce are added obstacles for merchant adoption of such payment systems. The immature nature of the mobile payment industry is mirrored in quite a few discontinued initiatives, such as Simpay, Paybox, and Sonera mobile pay. This phenomenon has been illustrated by Menke, C and de Lussanet (2006), in their study where the researchers questioned twelve travel agency CEOs in Taiwan to study their perceptions and response to mobile commerce. Their findings reveal that, even though all CEOs anticipated mobile commerce to flourish in the long run, they believed that the existing pertinence of mobile commerce was less in the industry as a result of the dearth of competitive demands, shortage of consumer demands for such offerings, limited results, and potential incongruity of existing mobile technologies in the acquisition process of sophisticated travel services. (Menke, C and de Lussanet, 165-66)

The presently prevailing mobile concepts have precincts which puts load on payment mechanism designs and may hamper their exploitation in particular transaction forms. Such restrictions take account of constraints such as the undersized displays and small keypads, inadequate battery life, restricted processing capability and small memory, narrow bandwidth, and limitations in connection strength and consistency. On account of such limitations, mobile payment systems may, at the moment, be more relevant to uncomplicated, cautiously formulated applications.

Lastly, in terms of merchant adoption of mobile payment structures, reliance and security concerns are of immense significance. In the study carried out on the subject of inter-organizational associations, trust is normally conceived as the eagerness to count on or to be susceptible to the actions of a different entity, derived from a confidence in the other entities capabilities, goodwill and reliability. In the study carried out by Gebauer and Shaw (2005) the significance of trust in business infrastructure and expertise in the B2B e-commerce framework is emphasized, and they put forward the perception of technology trust as an added trust conception. With regards to mobile payment systems, both concepts of technology trust as well as trust in business collaborators are expected to contribute to trust development. (Becker, 228-229)

The various transaction entities consist of mobile network providers and payment service sources, which may be telecom service providers, financial or banking establishments, or new dedicated firms in UK. From the merchants’ perspective, deficiency of the belief factor in transaction entities or in the mobile technology may emerge as an important obstacle to widespread adoption. The risks associated with existing technologies in terms of secure mobile dealings have been extensively discussed in preceding studies (McMillan, 756-768). However, merely a handful of initiatives have studied merchant prerequisites for secure mobile payment systems. (Becker, 228-229)

Standardization Efforts

At present several initiatives are being taken by the European Union (EU) and efforts are also being made at the global level so as to step up and firmly endorse the promising mobile payment system. Most of the leading firms in UK that handle infrastructural or software applications for the mobile industry, in addition to other giant companies like the mobile network operators (MNO) and financial service operators make integrated efforts through worldwide forums and syndicates to formulate the guiding principles which a mobile payment system should adhere to. The objective is to generate a procedure that is broadly suitable and would have a global reach and not target merely a certain customer section or isolated circumstances. In this context, as reported by Hassinen, in their study the following groupings have emerged:

  • Mobile Network Operator driven: Simpay (www.simpay.com), Starmap Mobile Alliance, GSM Association (www.gsmworld.com), ETSI (www.etsi.org), UMTS forum (www.umts-forum.org).
  • Bank driven: Mobey Forum (www.mobeyforum.org).
  • Cross Industry driven: Mobile Payment Forum (mobilepaymentforum.org), Mobile Payment Association (mpa.ami.cz) and Paycircle (www.paycircle.org).
  • Device Manufacturer driven: Mobile electronic Transactions (www.mobiletransaction.org).
  • Technology driven: Open Mobile Alliance (www.openmobilealliance.org) and Infra-red Data Association (www.irda.org).
  • Identity driven: Radicchio (www.radicchio.org) and Liberty Alliance (www.projectliberty.org).

Aside from such dedicated mobile payment syndicates whose activities directly influences the mobile payment frameworks, other parties which are circuitously but very much involved in the mobile payment sector also exist and belong to the financial / banking industry. (Nguyễn & Grzech, 154)

Given that none of these groups have conquered the mobile payment markets, in UK, it is a widespread phenomenon that the most firms play a part in one or more of these associations. It should also be noted that even though the objectives of each of these groups is to standardize and formulate mobile payment guidelines, there exist disparities in the prerequisites they stipulate. For example, the IrDA consortium concentrates just on payment systems that involve infra-red technology, whereas others like the Mobey Forum focus on dual chip phones with a SIM card and chip card dedicated to payment operations, and some others such as the OMA concentrate their attention on security issues and identity managing instead of explicit mobile payment settings. Major effects are likely to be observed on account of the recently formed Open Mobile Terminal Platform (OMTP – www.omtp.org) program that aspires to delineate standardized open application interfaces with regards to mobile equipments, given that such initiatives will lessen the learning curve of the consumers for experience with novel services like mobile payment. (Hassinen, 165-177)

The SEMOPS Approach

It is clearly evident that there is a dire necessity for a broad spectrum comprehensive and standardized approach towards payment system and existing initiatives have till date not turned their attention to this area to a satisfactory level. The EU IST Secure Mobile Payment Service (SEMOPS) initiative seeks to design, develop, analyze and implement such an approach that holds the possibilities of emerging as a globally standardized payment service.

The SEMOPS (Secure Mobile Payment Service) initiative is a European Union sponsored program spanning two years that was commenced towards the end of 2002 with the goal of covering successfully the majority of difficulties associated with a typical mobile payment service, and formulate an open, global and secure scheme for mobile payments. SEMOPS had 15 members belonging to four different nations and was founded on the mutual aid of banking organizations and global mobile network operators (MNOs).

The service model is based on the credit push theory. Derived from this form and merged with contemporary mobile technology, the SEMOPS project aspired to create a real time, easy to use mobile payment system, for virtual as well as actual points of sale (POS) in addition to person-to-person (P2P) dealings on an all-European level. The solution puts forward novel means of communication as it was essential amongst the entities, thus depending on the already founded conventional trust relationships amongst consumers and their home banks or home MNO, backed by a distinctive business model that facilitates revenue redistribution amongst the banks and MNOs. (Dahlberg, 56-79)

The accessibility of a common purpose mobile payment system in UK is likely to be a strong impetus provider for the creation of new mobile functionalities, and would step up the growth rate of mobile commerce, would create new commercial openings for the mobile service providers and per se will add to the general economic development. In light of the above situation the project’s objective was to integrate the new payment scheme with different kinds of established and high-tech mobile and wireless machinery (for example, 3G, SIM Toolkit, WAP, IrDA, Bluetooth and WLAN) to instill a concrete level of security, accessibility, ease of use and platform portability. To facilitate the institution of a all purpose mobile payment system on an pan-European range, the project depended a great deal on existent standards / guidelines and in addition stipulate the required new technological, operational prerequisites and directives, which a great deal of attention devoted to issues like customer identity security, accountability, anti fraud procedures, confidentiality and data security. (Stair & Reynolds, 254-258)

Research Design

A two phase data gathering approach, namely: Primary & Secondary was employed in this research initiative to collect the desirable information with relevance to the aim and objectives of this research. This research initiative makes use of the data sources to fabricate the following fundamental testimonials: respondents’ manuscripts and archival documents. Sources for the archival articles were mostly previously completed research initiatives, journals, academic text books, thesis papers and conference records which were studied extensively. The respondents’ manuscripts were composed by employing questionnaires and distributing them to companies which was randomly sampled amongst 19 market sections considered most likely to employ mobile payment systems. These market sections were inclusive of retail sector, media, and Information and Communication Technology sectors, while enterprises not expected to be amidst the early implementers of mobile payment structures, for example agriculture, wholesale, and construction, were not included in the survey sample.

A carefully designed questionnaire was addressed to CEO’s or equivalent position occupying individuals for smaller companies whereas it was sent to people in managerial positions in case of larger corporations. This open-ended questionnaire consisted of three sections inquiring the respondents about there perspectives on the issues. The initial section enquired the respondent about background information about him /herself and the company, like the respondent’s position in the company and his or her experience level in terms of mobile technologies, the company size, delivery networks, and prior experience with mobile payment schemes. The second section gathered the respondents’ opinions about mobile payment features. Further questions in relation to trust, critical mass, and explicit benefits of mobile payment mechanisms were included in the questionnaire, as they were considered significant as a result of the findings from the literature review. The third part put up questions about the present and future application of various payment methods.


Adoption Intention

In the survey carried out 43% of the respondents planned to provide mobile payment options in the upcoming times to reap the benefits in the long term. 52% of the respondents however believed such systems had no applicability in their field and had no plans of future adoption of such systems, and 4% preferred not to reveal their future plans. Most respondents planning to implement mobile payment systems dealt with digital content and products, vending, or belonged to the ticketing industry. A notable number of respondents were undecided about the pertinence of the system to their mode of business. However, none of them completely ruled out the option of implementing such systems in the future. Some respondents said they were unadventurous and late implementers, who would look out for development prospects, superior consumer demand and more sophisticated technical provisions.


In course of the data analysis some issues were identified which could help better diffusion of the technology in the markets but were not enough to qualify as actual adoption reasons. These were:

  • A large number of consumers using mobile phones and their tendency to always keep mobile devices at hand;
  • A feasible industrial infrastructure for mobile payment framework;
  • Education about the system; and
  • A need for a alternative payment system which would be more cost-effective;


After analyzing the responses from the survey some essential benefits of the mobile payment system in UK were identified ad it was observed that these were the primary drivers of the adoption process.

A crucial advantage of such systems was identified as the possibility of impelling impulse purchases. The potential for impulse purchases would grow as customers have access to an easy payment mode through their mobile gadgets. These devices are usually always within reach and consequently it would be easy for them to pay for at the instant they have the urge to purchase something. Another likely advantage was the opportunity to provide a new alternative payment method which would be convenient for customers. Thus, implementation of such systems could improve consumer satisfaction. The vendors could also gain from it if it enhanced the accessibility of goods and services, either by enabling payments through a novel channel or facilitating a more expedient payment system through already existing networks. The respondents believed that the diffusion of mobile payment systems would allow them to launch new products or services which could be paid for through the new system.

The respondents suggested that such payment schemes could possibly catch the attention of the youth who are familiar with the use of mobile devices; do not own payment cards; and do not carry a lot of cash with them as well as technically enthusiastic individuals who might choose mobile payment schemes over traditional payment modes. Furthermore, a number of respondents also believed that adoption of mobile payment systems may add a constructive outlook to the image of the firm. They perceived lower charges and lower processing overheads as prospective benefits of the system. Cost cutbacks were considered as almost certain outcome by vendors who presently employ mobile payment systems for payments.

The factor analysis revealed primarily three kinds of advantages: improved sales, expense reductions, and the gains due to mobility, i.e., time and location free dealings and growth of impulse purchases.


However, alongside the advantages, the survey respondents also pointed out a number of barriers to the adoption and diffusion process of mobile payment systems. Vendors who already employed such systems articulated that the hurdles disallowed them to implement mobile payment schemes at a broader level. Those who did not implement such systems mentioned that the magnitude of the consequences of the obstructions surpassed the benefits offered by the drivers and thus hindered implementation.

One major obstacle to the vendors’ acceptance of mobile payment system is the apparent incompatibility of such methods with existing business processes. In particular POS expressed apprehension over the relevancy of such systems on a large scale at the check-out points. Mobile payment systems were also perceived as unsuited to large value acquisitions. (Dahlberg, 56-79)

Another shortcoming of the present status of the system is the lack of standardization. The existing billing processes of telecom service providers have diverse interfaces with little interoperability or no agreement amongst actors, making it arduous for vendors to adjust their processes to such systems. An additional difficulty in the adoption process is the supposed complexity of the present initiatives. The respondents expressed their uneasiness over the ease of use of such payment schemes and considered usability as a critical issue influencing consumer acceptance. Some respondents felt that text messaging codes were hard to keep in mind. Others perceived the provisions too complicated to be used normally. Disconnected and dedicated payment accounts also came under scores of criticism owing to their contribution to add to the complexities.

The respondents asserted that high costs associated with mobile payment systems were a major difficulty and hindered the adoption process to a large extent. In particular, the commissions charged by telecom service providers on billing processes were alleged to be too steep. Additional overheads of infrastructural installations, updates and training cost also received some attention. Vendors pointed out that at present mobile payment schemes are costlier to be implemented than traditional payment processes.

Another noteworthy difficulty in this regard was the apparent shortage of customer demands for mobile payment methods. It was observed that businesses were apprehensive about implementing solutions that is considered to be unlikely to have a broad consumer appeal.

The responders characterized trust and the security as critical rudiments for the diffusion of mobile payments in the markets. A number of respondents thought that mobile payments are a comparatively safe option, but some expressed apprehension over the security and reliability structures of new payment mechanisms.

Case Study

Case Study 1: Mobile Payments – The Scenario in UK

Findings on an extensive survey carried out across the United Kingdom revealed that user are a keenly interested in adopting mobile payment system but the starting revelation was that the consumers picked convenience over security as the reason for adoption. Above 40% of the 1000 samples surveyed in Britain stated they found the concept of using their mobile devices to make payments quite an appealing proposition and expediency and usability would be their primary reason for adoption of such a payment structure.

Shoppers across UK believe that the scheme of contactless transactions might provide a practicable alternative to cash dealings in the country. This finding implicates an astounding under-valued attitude towards considerable sums of cash and also points out that customers construe and think about conventional cash, with regards to its disposal/loss, in a very different manner compared to other payment systems. A high degree of individual control and responsibilities of risk associated with cash emerge as a customary trade-off. Consequently, payment cards, which are bank-based mechanisms, give rise to the consumer’s view that the risk accountability is held by the bank. The scenario might be transformed in the upcoming times when mobile payment systems diffuse into the markets because mobile devices are being evermore perceived as a personal belonging.

In the context of a payment transaction, ease of use and convenience are dominant considerations in terms of the customers’ preferences. A third of the British consumers prefer to use cards to make payment at shopping outlets rather than extricating small change from their wallets, whereas a significant number of customers expressed their inclination towards replacing all their cards with a single card. Security levels associated with a new payment scheme did not emerge as a major concern for purchasers making use of mobile technologies. In fact, majority of consumers perceive ease of use as the most important benefit with just a small number of users view enhanced security structures as an added advantage. As per researchers, the investigation findings indicate that convenience overshadows the concern about risk factors to a large extent.

Nevertheless, the potential for fraud and other risk factors have not gone unnoticed by the UK Governmental organizations which led them to assemble a team to make sure that such factors do not pose a threat to the adoption and diffusion of the new technology. Making an effort to remove the possibilities of criminal activities in the design of the system itself and hence decrease effects of potential harm to users the UK government has collaborated with industry players to make sure that stringent security measures are in place at the earliest phases of the implementation process. Working alongside the government, the mobile, banking and financial sectors have decided to draft a set of guidelines for implementation and operations. (Tan, 175-178)

Case 2: Barclay in the UK Mobile Payment Structure

Barclays, a leading UK based payment card provider, has an established a novel payment mechanism for purchases made by simply waving the debit / credit card in front a reader module. The “contactless” cards may be made use of while making payments for ant article priced below £10 (micro-payments), but at the same time it provides convenience for consumers as they are not required to enter a separate dedicated chip or PIN numbers at payment terminals. Of late, most of the Barclay cards that are issued or reissued are embedded with the contactless technology to facilitate easy payment systems in an uncomplicated manner. Of course, the cards do still come with the chip and PIN attributes to continue to be used in the conventional system in order to make payments of higher amounts and to draw money from ATM kiosks. Nevertheless, due to the embedded contactless feature, a shopper may use the same card to purchase items priced below £10 by merely holding in near a particular reader device and the payment amount is subtracted from their account. Although in some instances the purchaser may be requested to provide a PIN to authenticate the consumer’s identity. To successfully implement the payment scheme, the firm has installed contactless payment devices at the outlets of various national brands across the UK, which includes leading brands such as Coffee Republic, Eat, Pret A Manger and Yo! Sushi.

This allows the customers to pay for purchased items using a new mechanism that is simple, fast, secure and easy to use and firm believes that such an initiative is bound to gain popularity due to wide range of advantages it offers. It anticipates that the number of customers using this payment scheme would cross the three million mark by late 2009. (Tan, 143)

Barclays and its subsidiary Barclaycard have also revealed that they are already in the process of making arrangements to facilitate payments by the use of mobile devices are would be commercially available by 2012.

Orange, leading mobile service providers in the UK, in association with Barclaycard has announced that it has entered into a long-term strategic collaboration with the card providers to structure and enhance mobile payment systems including the development of mobile wallet phones. At present, the two firms are focusing on incorporating and integrating their services with the help of NFC-enabled mobile devices and SIM cards, and are in the negotiating process with several handset manufacturing businesses. The duo stated that they plan to work alongside each other to initiate the entry of new and innovative products and services to facilitate their above 28 million combined customer bases with easy techniques to make payments by using their mobile devices and thus enhance management of their personal finances. The pair claims that their operations are underway and is proceeding with the objective of extensive diffusion of mobile contactless payment systems by the year 2012. Customers of the firms will be provided with the facility of making m-payments at retailers installed with contactless readers and the number of such retailers is at present approximately 10,000 spread across the UK. The firms also have expressed their desire to extend their plans to develop new products for ticketing, SMS transactions etc. (Dahlberg, 56-79)

Case 3: O2-NatWest Collaboration

The results of the mobile payment trial wherein 500 individuals made use of Nokia handsets provided and filled up with some cash value by UK mobile giants O2 in order to make payments for small shopping and transit fares on the London transport, indicated that customers are pleased and prefer to make payments for products and services by using their mobile devices. The NFC operation division of O2 asserted that the results were overwhelming with 90 percent of the six-month trial participants expressed their contentment with regards to the use of near field communications (NFC) technology to pay for their purchases.

Recently O2 has entered into a collaborative initiative with NatWest to commence O2 Money, a novel business initiative within the firm’s operative environment that that it claims will look to enhance the ever-increasing synergies amongst mobile devices and financial aspects. The preliminary products of O2 Money, sustained with the help of NatWest, are two different cash cards, developed in a manner that would provide customers with an enhanced means of financial control. These cash cards are two separate pre-paid Visa cards that entirely independent of any procurement or service charges, which would seek to assist people to more efficiently deal with their individual finances. This prevents amount overdraws with instantaneous account balance information being sent to their mobile devices through a simple SMS. This approach integrates a comprehensible, uncomplicated and transparent banking system with all the added advantages mobility and ubiquity.

The company states that their brand strength and excellent communication frameworks through which it interacts with its customers provides them with the perfect opening to expand O2’s operation into a entirely new market segment. It asserts that, by launching a brand new, clear and customer-oriented pre-paid card system, it makes an effort to provide an impetus to this market segment and claim a major share in the markets. In collaboration with NatWest, O2 Money is designed to offer novel and pioneering means of assisting consumers to better organize their monetary resource.

Apart from commonplace mobile banking services like text messaging updates and alerts, NatWest was the first banking organization to provide its customers with the facility of activating their payment card just by sending simple requests from their mobile devices, in addition to offering a messaging alert service to applicants informed at every phase of a mortgage request.

The pre-paid products offered by O2 money in association with NatWest are marketed under the names of Cash Manager and Load & Go. This enables individuals to protect their disposable earnings and never overspend. They may be used to make payments for any items purchased from a vendor that accepts Visa cards across the UK as well as in overseas outlets, and can also be used for online transactions.

Increasingly customers are becoming aware and actually using their mobile devices in order to manage their finances. Thus, NatWest and O2 are seeking approaches to integrate the possibilities and advantages offered by mobile phones and banking, to make sure that their clients can interact and make the most of their services with ease. The pair claims that such products and services, delivered through a collaborative initiative, are the preliminary strides towards a more sophisticated mobile-financial system, and seeks a closer alliance amongst mobile technology and payment structures. (Stair, Ralph & Reynolds, 78-81)

More examples

There are other examples and case studies too. As per Dahlberg, (2007)The next generation phones in UK are ready to be integrated with credit or debit account of subscribers through a combined venture amongst mobile network operators, banking and other financial corporations. They assert that a one-swipe mobile payment concept is likely to substitute credit and cash purchases and it would be possible to shop only with a mobile device in one’s pocket. Credit card firms perceive mobile payments as a means of promoting small purchases that are at present carried out through cash transactions, or on credit. In terms of volume, more than 65 percent of payments made in the UK are till date in form of cash dealings. However, mobile payment structures are set to change the payment scenario in the UK. One of the major players in the implementation such novel technologies is financial giant MasterCard, which endorses a mobile phone aided payment mechanism named PayPass in the US and France. MasterCard asserts that it is also in the process of expanding its mobile operations in the UK as well. In this context we study a Mobile-Payment trail initiative launched by mobile network operator O2 in the UK.

Britain’s earliest major experiment with NFC-oriented mobile payment schemes was launched by mobile network operator O2 in late 2007. The trial initiative aspired to analyze the acceptance of consumers in relation to using mobile phones to pay for transportation fares and retail transactions. In excess of 500 O2 network users participated in the trial initiative spanning six months, by utilization of contactless phones to travel on trains, buses and trams across London. The trial also involved UK’s leading credit card company Barclaycard will facilitated approximately half of the trial partakers to use up to £200 (278.70 euros, US$414.06) for low-value payments at any of the 1,000 retail points in London enabled with mobile payment facilities. The trial held major significance for the number of NFC pilot initiatives commenced over the recent few years since it implicated major actors in the mobile, financial and transit sectors and intercepts into one of the major fare-collection frameworks across the world in the form of Oyster, held by the Transport authority of London. (Stair, Ralph & Reynolds, 78-81)

At the moment, Nokia’s 6131 is the solitary NFC enabled phone available in the international commercial markets. It is equipped with an embedded tamper-resistant micro chip which is capable of store payment information in a secure manner and comes loaded with ticketing applications and was used in the O2 mobile payment trial initiative. This could facilitate them in the process of gathering better revenues on account of NFC provisions and put off customers from turning to various other mobile service providers when requires NFC compliant services for new handsets. (Stair, Ralph & Reynolds, 78-81)

Some service providers, particularly in Europe, assert that they would be able to gather payment charges from banks and other service establishments on account of embedding defrayal or ticketing applications with the SIM cards. The service providers could collect revenue in other different forms, as well, for instance, by promoting sending or receiving added data or making more voice calls to the subscribers. Through the O2 trial initiative, participants were allowed to tap chips implanted in smart posters, which mechanically dialed a number, send SMS-s or open a URL which could initiate a mobile Internet session. A participant, for example, was able tap his mobile phone on a microchip implanted on a movie poster that would automatically facilitate downloading of ringtones or video data or could search for show timings and locations.

The trial was just a pilot initiative and the most suitable business model for commercial activities is still undecided. The rationale underlying the initiation of such a trial was to evaluate the response of the consumer with regards to user experience, security issues and trust building. The response of the initiative proved to be encouraging and commercial offerings were started in early 2009. (Stair, Ralph & Reynolds, 78-81)


This study adds to the growing literature base on the subject of mobile commerce by keying out prerequisites, drivers, and barriers in terms of adoption of one of the major supplementing technologies for mobile commerce- the mobile payment systems. In terms of benefits and advantages, prior research initiatives have primarily concentrated on the omnipresent and individualistic character of mobile equipment and applications whereas this initiative points out explicit drivers of mobile payment scheme from the vendors’ perspective. The findings of this research reveal, for instance, that vendors correlate the omnipresent nature of mobile devices with enhanced impetus for impulse shopping, which sequentially turns out to be a key driver of the adoption process.

Amongst the prerequisites identified in this study, the advent of mobile machinery emerges as key feature that has also been talked about in several previously conducted researches on the subject of mobile commerce, whilst the further prerequisites are more pertinent to the perspective of mobile payment systems. In the context of the difficulties faced in the course of implementation of mobile payment schemes, several issues are in common with those identified in different researches relating to diffusion and implementation at a widespread scale, for instance overheads, complexity and shortage of critical mass. The dearth of standardized payment models, nevertheless, appears to be a definite obstacle to the adoption process of mobile payment structures. The results of this study present numerous significant implications for future research frameworks and realistic development of mobile payment mechanisms and points out critical prospects for further research.


The most significant footstep in developing a thriving m-payment framework is to lay down explicit incentives for all actors involved in the activity. Devoid of such incentives, progress would be hard to achieve. Each of the stakeholders, in addition, is required to acknowledge certain essentials on the ground and rise up to the occasion when needed for the greater good of the entire payment industry:

  • Banks and credit card companies (and existing participants like acquirers, which introduce new vendors into the system and deal with the transactions, and network operatives, who furnish vendors with the Point of Sales technology) in UK must draw on already present value chains, in lieu of developing entirely new competitive programs. They should furthermore assess mechanisms to allow mobile service providers contribute to shared value creation.
  • Mobile operators in UK must reflect on alternative mobile payment schemes in the perspective of novel means to generate revenue channels, in particular from periodic m-payment subscription bills or transaction based charges. Operators also need to make the most of the constructive consequence of impregnating the mobile technology even more into the lifestyle of the users.
  • Handset suppliers in UK are required to adopt new concepts and start contemplating about active assimilation of mobile payment facilities into product lifecycles. Mobile payment facilities are perceived by many as the next technological revolution which could impel handset substitution, turning standardization and interoperability as a crucial factor with regards to conserving consumer attractiveness and scale advantages.
  • Merchants in UK have to bring their wide experience with cashless payment structures into play to provide an impetus to further cost reductions that ensue from cash-free transactions, and to counterbalance POS infrastructure upgrade expenses.
  • Finally, mobile phone users in UK have to be interacted with in a manner such that they understand that mobile payment is a much more viable alternative to other conventional payment structures. The package of expediency issues (safety, security, availability / accessibility, speed, transparency, etc.) is required to be put together and put on the market such that it reaches the target groups effectively. (Dahlberg, 56-79)

Even though measuring up to all these decisive success issue constitutes a balanced act not easy to live up to, but is definitely worth an attempt.

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