Towards a Mobile App Diffusion of Innovations model: A multinational study of mobile wallet adoption

Abstract

Demand for contactless payments has increased worldwide, but adoption varies by country. We propose a more parsimonious Diffusion of Innovations model (i.e., complexity is dropped and compatible advantage replaces relative advantage and compatibility) to investigate mobile wallet adoption, but with context-relevant extensions of security, privacy and ubiquity. The model is empirically tested for Canada, Germany and the United States. The findings support the proposed model. Furthermore, we find ubiquity, privacy concerns and security risks vary by country, and ubiquity plays a mediating role. This model can be utilized in future mobile app studies and provides country-specific guidance to practitioners.

Introduction

COVID-19 has accelerated the move to contactless payments. Not only are credit cards waved over payment terminals, but smartphones with a mobile wallet app are performing the same task. Consumers are using their smartphones and even their smartwatches to pay in store. These proximity payments are convenient, fast and, during this time of the pandemic, increasingly being adopted (globalpayments, 2021), yet with rates of diffusion that differ between countries (Brem et al., 2021).

In wealthier countries, such as those belonging to the Organization of Economic Development (OECD), over 94% of residents have bank accounts (Demirguc-Kunt et al., 2017). Linked to these accounts are plastic payment cards often used in stores as an alternative to cash. To reduce fraud, the major payment card companies have introduced security via an embedded chip, which has Near Field Communications (NFC) capability (Smart Card Alliance, 2015), allowing credit cards to be waved over the terminal to finalize payment (Olsen, 2007; van den Breekel et al., 2016). The smartphone can act as a substitute and be waved over the NFC-enabled payment terminal, when loaded with a mobile wallet app which stores payment card details with strong encryption (Sajid and Haddara, 2016).

Ng et al. (2021) suggests that payment solutions are specific to a country: the infrastructure is a major factor and attitudes towards security and privacy will differ. However, there have been limited studies of mobile payment adoption across countries (Ashraf et al., 2017; Zhang et al., 2012, 2018) and multinational research on mobile wallets is still lacking. In their meta-analysis of mobile payment literature, Liu et al. (2019) found 61 articles relevant to mobile payment research, but only four were multinational. In their critical review of mobile payment research, Dahlberg et al. (2015) suggest that there should be research investigating the differences in the ecosystems among different countries. Similarly, from a review of the literature, Dennehy and Sammon (2015) recommend that there should be more multi-country research. We address these gaps in the literature and follow these suggestions by investigating the differences among high-income countries, which have similar payment infrastructures and strong banking sectors, yet consumer attitudes and the country ecosystems differ. In our study, we focus on three OECD countries with the following mobile wallet adoption rates in 2020: Canada 21%, USA 16%, and Germany 9% (Briggs, 2019; Zavialova, 2021).

To provide a greater understanding of adoption, we leverage DOI theory (Rogers, 1983). Five factors are proposed to impact the rate of diffusion: relative advantage, complexity, compatibility, observability, and trialability (Rogers, 2003). In the context of mobile wallets, consumers are also concerned with security and privacy (Mombeuil, 2020) and we, therefore, extend DOI with these constructs. In addition, we explore the construct of ubiquity so consumers are confident that their mobile wallet will be widely accepted.

The research questions proposed are: What are the factors that influence the adoption of mobile wallets? Does ubiquity mediate the influence of compatible advantage on adoption intentions? Does the jurisdiction of the country (represented by Germany, USA and Canada) moderate the influence of the exogenous constructs?

This paper is organized as follows. First, we provide a definition of mobile wallets to focus the context of our study. Second, we provide a literature review over extant studies in the context of mobile wallets with a special focus on the underlying theoretical frameworks. Based on these insights, we propose our research model and then examine it within each country. After discussing the results, we derive theoretical and practical implications, as well as avenues for future research.