Adoption of mobile payments in Kenyan businesses: A case study of small and medium enterprises (SME) in Kenya

Abstract

There has been a general increase in the usage of mobile phones in developed world countries and developing countries. The most significant trend however is the value added services of mobile telephony services such as mobile payment, mobile commerce, and mobile finance. Every player in the market is trying to express innovative moves in order that they are always ahead in their respective competitive markets. Small and Medium-sized Enterprises (SMEs) are not left behind in all these. With the advancement in e-commerce platforms and mobile commerce platforms, many SME are trying to employ user friendly payment systems A lot of studies have been done with regards to adoption of M-Pesa by individuals and merchants but very few of such studies have focused on SMEs, however, with these studies, we were able to identify various theories that have been used in formulating reasons or motivations towards these technological adoptions. Such theories include Technology Acceptance Theory (TAM), Innovation Diffusion theory (ID), Technology Organization and Environment theory (TOE) amongst others. In our study, we employed TOE to identify factors that motivate SME to adopt mobile payment methods in their business processes and e-commerce platforms. Our research design was cross-sectional survey design to enable us make generalizations and methodology was that of Case Study in order that we propose and validate any new theory of Technology adoption that may emerge. Adoption and Acceptance are terms that have been used interchangeably to mean one and the same thing in many literature. Our study also applied the two terms interchangeably within the context of Technology Acceptance to mean the same thing. The study sampled 317 SMEs from three strata Hotels and restaurants, Tours and travel and Supermarkets which have 1,584 registered SMEs. With a response rate of 73%, a justified analysis of the 232 responses received was done to test the hypotheses under TOE theory. The results of this study revealed that a majority of SMEs in Kenya are willing to invest in personnel and technology in order to provide convenient mobile payment options to clients irrespective of the SME annual revenue, number of employees, nature of business and years of operation. Further Structured Equation Model (SEM) analysis showed a significant and positive relationship between all indicators adopted for data collection and the three factors (latent variables), Technology, Organization and Environment that affect adoption of mobile payment systems by SMEs. We recommend further studies on this subject to focus on mixed of Technology Diffusion and TOE to find out how constructs derived from the two models would generate the concept of mobile payment technology adoption.