Mobile Payments – Types, Benefits and Smartphone Apps
June 15, 2022
Mobile payments refer to any payment made using a mobile device. Due to our growing dependence on smartphones, various ways have been developed to allow consumers to easily pay through a phone.
Digital payment methods continue to evolve with each new technology introduced and the hottest trend today is mobile payment. The idea of using your cell phone to make payments is especially appealing to today’s connected customers.
Today we will talk about mobile payments and their importance. We will also talk about how you can quickly implement this in your daily routine by spending less time on your monthly payments.
Mobile payment is payment without money, usually through mobile devices such as smartphones or tablets, but also in fitness trackers, smart watches or smart rings. In conjunction with mobile internet, these devices enable a new way of paying for things that is convenient, flexible and also saves time. Therefore, mobile payment is just as attractive to financial service providers, retailers and consumers.
Mobile payment is a global trend. Many countries are promoting this online payment method, with smartphones already used in everyday life for mobile payments. Payment methods are becoming more and more digital. There is a lot of data to support the trend as well.
Mobile payments refer to any transaction performed with a mobile device such as mobile wallets, NFC payments, and more. Mobile payment technology is very important for your physical store. Whether online or offline, businesses that have successfully integrated, localized and personalized mobile payments into their payment infrastructure have gained a competitive advantage as a result.
What is a Mobile Wallet?
A mobile wallet is an app that stores your debit and credit card details so that you can pay for things digitally using a mobile device. To use a mobile wallet, a consumer can download a mobile wallet app on their phone and add debit or credit card information which will be stored securely. Most mobile wallets require thumbprint authorization, facial recognition authorization or other security measures in order to access the mobile wallet and pay.
All the major smartphone players have their own mobile wallet systems. Examples include Apple Pay for iOS users, Google Pay for Android users, and Samsung Pay for Samsung smartphones.
You also have other third party digital wallets available to choose from, but the first three are the most common. If you are looking to accept mobile payments in your business, make sure it covers these three.
Like a wallet, you must first deposit funds into your mobile wallet. You can do this through bank transfers, or by adding funds with your credit card as you do with PayPal.
Alternatively, you can link your credit card directly to your wallet, so that it can be charged every time you use your mobile payment. An example of this is Apple Pay, where you can sync and use your credit card information in the iTunes Store.
All payment transactions, upon receipt, are handled using the mobile wallet application. This is why it is extremely important to choose a reliable and secure mobile wallet provider.
How Mobile Payments Works?
The majority of mobile payment processes are built on Near Field Communication or NFC technology. Essentially, NFC allows two devices that are in close proximity to exchange information. In the case of mobile payments, transactions can be completed using consumer devices such as smartphones or tablets and a merchant device like a credit card terminal.
Most consumers will access this feature through the built-in mobile wallets on their smartphone devices. A mobile wallet is an app that stores debit and credit card details so users can pay for items digitally. To use a mobile wallet, a consumer can securely add their debit or credit card information to a mobile wallet app. Most mobile wallets will require thumbprint or facial recognition authorization to prevent fraudulent transactions.
Alternatively, mobile payments can be accepted through the use of customized QR codes. In these scenarios, it is the customer’s device that creates a QR code with key payment information. The merchant simply uses their POS system to scan the code and complete the payment.
Tokenization is another piece of the puzzle when it comes to enabling mobile transactions and payments. When you set up a mobile wallet, details are sent to your issuing bank. The bank replaces these details with a token, a set of randomly generated numbers. This keeps your account details completely encrypted and protected from fraud.
Types of Mobile Payments
Mobile payments refer to any payment made using a mobile device. Due to our ever-increasing smartphone dependence, various ways have been developed to allow consumers to pay conveniently through a phone.
there are more types of mobile payments than contactless phone payments, both for remote or face-to-face payments. Let’s look at the different ways you can pay with a mobile phone.
(NFC) Near-field Communication Payments
Use of near-field communication (NFC) payments is growing rapidly in the UK. Digital wallets using NFC for contactless card machines include Apple Pay, Samsung Pay and Google Pay. But how does it work?
NFC phones communicate with with NFC-enabled card machines using close-proximity radio frequency identification. The mobile phones do not have to touch the point of sale to transfer information, i.e. money, but they have to be within a few inches of the terminal.
NFC involves a direct, almost instantaneous transfer of encrypted data to point-of-sale devices, as opposed to chip and PIN technology that takes longer to process. Many mobile phone operators are looking at ways to further develop this technology.
Sound waves-based Payments
Voice-based (or voice-based) mobile payments represent a newer, more advanced solution that works for most cell phones. Transactions are processed without the need for internet through unique sound waves containing encrypted payment data.
The sound waves are sent from a terminal to the mobile phone to convey the payment details, where after the customer’s phone converts that data into analog signals that finalize the transaction. This makes it an affordable solution especially in areas and places where people can not buy the latest smartphones but rely on the most basic technology to process payments.
Magnetic Secure Transmission (MST) Payments
A third way to pay with a mobile phone at a card terminal is through magnetic secure transmission (MST). MST is when a phone emits a magnetic signal imitating the magnetic strip on the payer’s credit card, which the card terminal picks up and processes as if a physical card was swiped through the machine. Some card machines may require a software update to accept MST, but most new terminals accept it already. Secure magnetic transmission is just as secure as NFC because both use a secure tokenization system.
(QR) Quick Response Code Payments
QR (quick response) codes have many uses and are often found in advertisements, product labels and in what appear to be the most random places. Not everyone knows that they can be used to pay for things too. It works through some banking applications where your cards are already linked, and other applications from stores and providers where your card details can be linked.
In all cases, you need to point the camera carefully to match the indicators on your phone screen before the application can scan the code.
Some E-Commerce businesses use QR codes in the cash register of their website as an alternative to manually entering card details. For transactions that are not present with the card, this is more secure because your phone, to which your card details are securely linked, confirms that you are the cardholder and because you are not entering the card details. your unencrypted on the device screen.
QR payments can be processed in the following ways:
The user scans the QR code: The user scans the QR code on his smartphone with an app allowing QR code payments. They confirm the price, if required, before tapping to finalize the payment.
The merchant scans the customer’s QR code: When the total transaction amount is set by the merchant, the user opens the app allowing QR code payments. The app displays a unique QR code identifying the user’s card details. The merchant scans this code with a QR code scanner, finalizing the transaction
In some countries mobile banking is popular for transferring money between private individuals or for paying bills.
Mobile banking is simply an app provided by the user’s bank, through which you can conduct financial transactions directly from your bank account. This is usually used for peer-to-peer transfers and payments to other people, but bills can also be paid this way.
Each bank has their own sign-up procedures for their app to verify you are the owner of the bank account. But once signed up, it is usually easy to log in on your phone and view your account balance and transaction history, make bank transfers, and anything else that your bank allows. Every bank has their own limits for what you can do through the app.
Direct Carrier Billing
Direct carrier billing (DCB) – also called direct operator billing – is a way to pay through your mobile carrier instead of using bank or card details. A way to do this is to enter your phone number on a payment page or in an app, where after you go through a few authentication steps to confirm you’re the owner of that number (for instance, by confirming a text message). The payment will then be deducted from your phone bill or prepaid SIM card as with SMS payments.
SMS payments also called premium SMS simply means paying for products or services via a text message. Once you’ve submitted a text message with the relevant information to the right payee phone number, the payment amount is added to your mobile phone bill. So in effect, you’re paying through your phone network provider, perhaps through direct debit or pay as you go the way you usually pay for your phone use.
SMS payments were one of the most popular methods of using mobile phones to pay for goods or services (even for person-to-person payments) or donate to charity, and for good reason due to its simplicity all the user needs is a phone with text capability and prepaid SIM card or phone contract. With the increase in more advanced smartphones, however, other modes of mobile payments have seen faster growth.
Why Use Mobile Payments?
Mobile payments are fast
We all want to get paid faster. Accepting mobile payments is a way to receive money in real-time. Depending on the app you use, money can be in your account within seconds. The customer will also feel more at ease as they’ll get an instant notification and receipt once the payment is processed. Win-win!
Mobile payments are secure
Because there is no physical wallet to carry around, the chance of theft is much lower. Smartphone manufacturers have made it their business to make the modern mobile nigh on impenetrable. Many people prefer paying with their smartphones because of the security benefits. They have fingerprint readers, voice recognition, and even face scanners. Smartphones are practically fortresses for your money.
The Benefits of Using a Mobile Payments
Security is one of the significant advantages of mobile payments, mainly when used with NFC technology. In fact, when combined with other security features already present in mobile phones, NFC offers a significant improvement over EMV.
One key aspect that makes NFC payments so attractive is tokenization. This is an encryption method that scrambles the credit card information data while being transmitted and stored. Your bank does this with a unique process and then sends it to your Apple Pay wallet for storage.
If hackers were to steal this data, all they would get is useless, meaningless gibberish. This data is also dynamic, which makes it impossible for thieves to try and decipher it.
Most mobile wallets also have layers of security to ensure that you’re the one who’s making a transaction. For example, Apple Pay requires that you provide your fingerprint scan using Touch ID whenever you make payments. Since it’s impossible to replicate your fingerprint, thieves can’t access your mobile wallet even if they steal your mobile phone.
Then there’s the fact that using NFC contactless payments require that you’re physically present to make the transaction. Compared to paying over the Internet, this is a much more secure method.
Speed is the best feature of mobile payments using NFC, and it’s light years ahead of magnetic stripes or even EMV. That’s significant because EMV is already a substantial improvement over previous payment technologies.
NFC allows you to easily tap and pay in fractions of a second. In retail stores or restaurants where there’s a large volume of transactions, this is especially handy in speeding up your turnover, therefore increasing your sales.
Using mobile pay is not just convenient for you as a business, but also for your customers.
Mobile pay doesn’t require people to bring loads of cash when going out, which in itself can be a security issue. And for people who have multiple credit cards, mobile wallets provide a convenient way to consolidate them into one payment system.
Most people nowadays already have their phones at their side at all times, so mobile pay essentially becomes a payment method that’s available 24/7. They also don’t need to buy any additional devices. As long as they have the newer smartphones, mobile payment is built into them.
It’s also much easier to send payments to other people straight to their phone, as opposed to having to withdraw it in an ATM and then sending it to them physically. In times of crisis where you can’t go out as much, mobile payments are also incredibly fantastic solutions.
Easily Integrate Loyalty Programs
Since customer information is stored in mobile payment apps, coupons or discounts can quickly and easily be sent out to specific customers to reward repeat purchases.
These loyalty programs can include:
Points loyalty programs. Customers get points for each transaction and can put them toward discounts or free products.
Tiered loyalty programs. A certain amount of purchases unlocks a new tier of reward points or discounts once the specified number of purchases has been made.
Hybrid loyalty programs. Combine two types of loyalty programs for greater incentives.
Opting for mobile payments can help you reduce expenses in a few ways. You don’t need to buy expensive point of sale (POS) equipment or paper and ink due to the ability to email receipts. And because you can use a tablet or smartphone as your mobile point of sale terminal, the only external cost you’ll need to set it up is a card reader.
The cloud-based subscription models that POS systems have also generally mean low sign up and monthly maintenance expenses.
Improve Cash Flow
When using mobile payments, customer funds are transferred to your account either instantly or within a few days.
This means you get money faster and, because customers can pay as long as they have their personal mobile device on hand, you’re more likely to receive payments from customers who prefer paying with their mobile wallets.
Considering over one-third of mobile wallet users now have three or more mobile wallets like Google Pay and Apple Pay installed on their smartphones, accepting these alternative payment methods is crucial in today’s retail landscape.
In short, with mobile payments, you increase your chances of getting more money from more customers faster than you would with traditional payment methods.
How can I accept mobile payments at my store?
Listed below are a few typical requirements for accepting mobile payments at your store.
The equipment to accept mobile payments. Your payment service provider should have a variety of options for different budgets to match the way your business works. Most POS terminals are ready to accept mobile payments with little configuration.
The technology to accept mobile payments. The POS terminal you chose will need to be equipped with NFC technology. Encryption and tokenization are solutions that will be already working in the background to help protect your business against fraud.
A trusted payment service provider. Your card processor and merchant service provider can work with you to help you implement a mobile payments strategy that will help maximizes your revenue and increase your sales.
Are Mobile Payments Secure?
The good news is that mobile payment processing with NFC technology is one of the safest ways individuals can shop. When a customer swipes their credit or debit cards, the banking details are stored and transmitted over a network. However, NFC technology based mobile payments rely on tokenization to reduce the risk of data theft.
This means that when a customer uses their mobile device to make a payment, the device creates a single-use card number for the purchase. This unique number is then passed on to the merchant’s POS system for the transaction. As a result, merchants do not have to directly handle and manage sensitive customer information.
Additionally, the mobile device does not usually store the transaction information on the CPU. Rather, the single-use credit card number is created by a secure chip on the device and is separate from the smartphone or tablet’s CPU. Instead, the card information is stored in the cloud and can also be erased remotely, if necessary.
As an added level of security, mobile wallets require shoppers to verify their identities before completing the transaction. This can be done through biometric data recognition such as a fingerprint scan or by unlocking the device using a specific numeric code. While no payment method is completely risk-proof, mobile payments remain one of the most secure methods of payments for consumers and merchants due to the multi-layer security measures.
Best Apps for Mobile Payments
Google Pay popularly known was GPAY is one of the best mobile payment apps. Using it you can make online payments easily.
Mobile payments have revolutionized the way businesses get paid. With the use of mobile devices by consumers on the rise, every merchant needs to ensure that their business provides an enjoyable experience, where the customer can easily checkout and pay for their purchase. Online businesses should ensure that their website is mobile-friendly. The payment page should follow this hassle-free concept and handle sensitive data appropriately while providing frictionless and seamless payments.
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