Almost everyone you know has a smartphone. The global adoption rate of smartphones around the world is very high. According to statista the adoption rate in North America in 2021 was 82%, with Europe not far behind at 79%. And the adoption rate globally is expected to increase over the next few years.
ith these devices being so prolific, it makes sense that the payments industry looks to these pieces of hardware to facilitate payments, in both online and in brick-and-mortar environments.
A mobile payment is a method of paying for a purchase that involves the use of a mobile device such as a smartphone, tablet, or even a smartwatch.
There are several different types of mobile payments:
Browser Based Payments
Cardholders enter their payment details into a checkout form on a mobile version of a website or app. This is very similar to what the user would experience when shopping online on their desktop or laptop computers, only the process should be optimised for mobile devices.
Mobile Wallet Apps
Mobile wallets are apps that securely store digital versions of the customer’s payment information, such as credit and debit cards, bank accounts, or even gift cards. Once these apps are set up, the user can use these devices in the same way that they would use their credit cards. In a physical store, the user could tap their device on a compatible payment terminal to action a payment, or present a barcode or QR code generated by the app to be scanned at the terminal. Or if the user is shopping online, they could choose the mobile wallet option as a method of payment at checkout and then follow the relevant instructions. Apple Pay, Google Pay, and Samsung Pay are all examples of mobile wallet apps.
Mobile Peer-To-Peer Apps
These apps, such as PayPal, CashApp and Venmo, allow users to transfer money to other users. Some of these services, in particular PayPal, are widely accepted by merchants and can be used as methods of payment. These apps are very popular for sending money to friends and family as well as making payments for purchases.
Although not popular in North America, SMS payments are prevalent in many emerging markets around the world, due to their low cost and the fact that high-capacity data networks are not required for SMS – only cellphone carrier signals. Payment is made by sending an SMS to a specific number. When the transaction is cleared the funds will be deducted from either a bank account or even added to the user’s cellphone bill.
What are the advantages of mobile payments?
Mobile payment systems offer several benefits for both merchants and customers, such as:
They are convenient
Customers have their mobile devices to hand almost constantly, so it is very easy to make payments this way. They may leave their wallet at home but they rarely leave their phones behind.
They are fast
Mobile payments are processed very quickly, as fast as, if not faster, than credit card transactions.
They can be very secure
For the most part, mobile device apps require some form of authentication, typically fingerprint, passcode, or even facial recognition. In addition, the majority of smartphone users have some sort of authentication to unlock the device itself. Transmissions are also encrypted, making it hard for data to be intercepted.
They can offer greater privacy
A benefit of mobile wallets is that it is not obvious what type of card the user has, or any associated data, such as in whose name the card is. Whereas if you present the actual card, or enter the details into an online form, it is obvious what kind of card it is.
They can be hygienic
In a post-pandemic world, the general public is far more conscious of the fact that anything that they touch in a store has also been touched by a great many other people. This is particularly true of point-of-sale terminals with keypads for PINs. Using a phone to pay usually means that the device is either tapped against the terminal, or a barcode or QR code on the device is scanned at the point-of-sale. In both cases, the customer does not have to touch anything.
What are the disadvantages of mobile payments?
There is no doubt that mobile payments are beneficial to both customers and merchants. As with anything, however, there are some downsides to the technology:
Many peer-to-peer apps have limits on transactions, so it may not be possible to make a payment over a certain amount.
In brick-and-mortar stores, merchants need specific modern hardware to deal with the various types of mobile payment options, such as scanners or tap-to-pay enabled devices. This can be expensive.
Merchants who accept mobile payments online will need to ensure that their payment processor and payment gateway have the technology to accept these types of payments. Integration costs may increase with more payment methods required.
Updates and outages
Users of mobile wallets and peer-to-peer apps need to ensure that they are using the latest versions of the apps, and be aware of updates relating to the operating system of their devices, or even the devices themselves. It is not uncommon for apps to not be supported in older hardware. And of course, apps are subject to occasional outages and downtime, and should these occur it will not be possible to use them to make payments of any sort.
If you would like to know more about mobile payment options for your business, talk to us at Baer’s Crest about our payment offerings, and let us find the right solution for you.