The document discusses three main barriers to e-commerce adoption by consumers in the late 1990s and early 2000s: 1) lack of consumer confidence in making financial transactions online due to security and privacy concerns, 2) lack of a universally accessible payment system, and 3) lack of a cheap and universal fulfillment and delivery system. These barriers prevented e-commerce from becoming mainstream. However, over the following decade these barriers were overcome through the development of secure online payment methods, the emergence of debit cards and PayPal as universal payment systems, and improvements to global small parcel delivery networks led by postal services.

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Overcoming the Barriers to ECommerce Adoption by
Consumers
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Three main barriers to ecommerce adoption a decade
ago
In 1997 – which does indeed now seem like a
lifetime ago – I was responsible for establishing an
online financial services business as a subsidiary of
a large insurance and funds management group,
with an initial concentration on selling unsecured
loans, credit cards, and residential mortgages.
It was an opportunity, I reasoned (and managed to
persuade the CEO and Board) to establish a
beachhead in what would clearly (to me) become
one of the dominant sales and service channels of
the future.
I wasn’t alone in this belief and those were the days of the ‘tech bubble’ where
there was somewhat of a frenzy in investing in startup IT businesses, with
valuations bearing no relation to reality. So it is not a surprise, looking back,
that very quickly the ‘tech bubble’ became the ‘tech wreck’.
As is the pattern with many multinationals, I was to move to a new role in a
new country a year after this business was established, and without a
‘champion’ I could see from afar the business slowly wither and eventually be
sold to a bank.
This wasn’t a total failure, but nor was it a success, and the reasons for this
are many – including the simple inability of the group to get its mind around
the totally different cost/revenue profile and valuation process in this
category, compared with insurance, pensions and investment management.

2. But there was one over-arching reason the business didn’t take off like a
rocket – and this is echoed by the numerous other startups of a similar era in
financial services around the world. In a nutshell, that is because the market
just wasn’t ready to embrace the online world in terms of actually transacting
business (as opposed to using the internet as a research tool), and the
predictions of a rapid uptake in online transactions didn’t materialize – the
growth of e-commerce was slower than I had predicted.
What were the barriers to e-commerce
adoption by consumers?
As this particular experience and many
others around the world were analysed
and dissected over the succeeding few
years (at that time an important part of
my regional responsibility), it
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became clear that there were a number
of critical factors that were
clear barriers to e-commerce adoption
by consumers, leading me to conclude
by the early 2000’s that until these
barriers were overcome, e-commerce would not become ‘mainstream’ and
remain a niche within the broader economy.
I saw the following three issues as the most significant barriers to ecommerce adoption by consumers, and believed that all of these needed some
form of resolution as a basis for the serious development of e-commerce as a
viable business model.
1. Consumer confidence in making financial transactions
online
While the average consumer was comfortable using the internet as a means of
obtaining information, there was a lack of confidence and a lack of trust that
it would be possible to share confidential information online, and overcoming
this reticence would require the development of secure methods of data
transmission, as well as some years of experience as
early adopters gradually built confidence – which
would gradually trickle into the mass market.
2. A universally accessible payment

3. system
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A means of payment that was available to all
consumers and not just an elite was the second
item that I saw being a show-stopper until it was
resolved. There had to be a way the average
consumer could pay for goods and services, and
not just those with credit cards (and the necessary
available balance on their credit cards).
3. A cheap and universal fulfilment
and delivery system
I reasoned that for e-commerce to become commonplace it could not be
restricted to virtual products and had to be able to manage
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the delivery of physical items – furthermore that delivery mechanism had to
be inexpensive, highly efficient, and global.
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The early carriers to e-commerce adoption
are resolved - commerce comes of age
It is interesting to see the way these barriers to adoption of
online transactions have gradually been resolved and while
there was somewhat of a hiatus during the decade of the
2000’s, by the end of that decade the answers were in place.
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The IT and financial services industry were to a large extent able to
resolve security concerns relating to online
purchasing. This led to the gradual adoption of
online purchasing with some specific
categories (such as movie tickets and air travel)
and merchants (such as Amazon) leading the
way and providing a sufficiently positive
experience for consumers that gave them confidence to broaden their
use of online purchasing

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Two payment options emerged that provided most people with the
opportunity to transact online. Firstly the banking industry moved to
make
debit cards usable online, allowing people
to pay from their current/savings account and not
just credit cards. Secondly, and while it is my
personal bête-noir and my nomination as one of the
most poorly run companies of all time, PayPal has
emerged as a ‘catch-all’ parallel universal payment system
The answer to the final issue of a cheap, efficient, global fulfillment
system came from an unexpected source. For those in the US, Fedex,
UPS and DHL are perhaps what first come to mind however on a global
basis the true catalyst of change in this area came from the world’s Post
Offices, who remarkably seized the opportunity to establish not only a
cheap and efficient small parcel delivery system within most countries,
but also made this into a global entity through the EMS branding.
What lessons can we learn from this process
of addressing the barriers to e-commerce
adoption?
The three issues I identified at the time
were simply the items impeding ecommerce moving to the next level at
that time.
But as these barriers are overcome and
the market matures simple there are
more issues that emerge, like a series of
mountain ranges to be crossed on the
road to the future.
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However if we observe how these
particular hurdles were overcome it may
provide a glimpse into how future
barriers may be addressed.
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In a number of cases, the
solution came from an unexpected or
surprising source. Few would have
predicted the Post Offices of the world would manage to come up with a

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common approach that provided an
efficient, cheap and worldwide small
parcel delivery system
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Similarly, few would have taken
PayPal as a serious contender in the
global payments space let alone
emerging as the relatively
unchallenged leader
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A number of organisations have
realized they missed this opportunity and are now working overtime to
catch up – the logistics companies mentioned previously, for example,
and in the global payments space American Express and Western
Union, to name just two, have been conspicuously late to the party
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As we would expect (but can’t predict), as the answers have emerged,
the goalposts have continued to move, creating a new set of challenges
and barriers. I suspect a decade ago few would have predicted such
rapid growth in the uptake of mobile e-commerce, and few would have
been bold enough to have predicted the level of penetration of
smartphones globally – particularly in emerging markets
So as we keep these factors in mind, it will be interesting to revisit this
question in 5 or 10 years and once again look back to see how the various new
barriers to e-commerce adoption by consumers have been overcome; which
new entrants unexpectedly emerged to capture the high ground; and which of
the expected leaders are still working out exactly what happened and why
they dropped the ball so conclusively.
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http://inversionpoint.com/barriers-to-ecommerce-adoption/