How to accept mobile payments

The mobile payments market has witnessed a staggering growth trajectory thanks to smartphone penetration and shifts in customer payments preferences.

NFC technology allows merchants to accept contactless payments, enabling customers to use mobile wallet apps like Apple Pay, Google Pay, and Cash App to send payment information through a tapping or waving motion using either a smartphone or an NFC-enabled card.

Grand View Research’s mobile payments report forecasts the market to reach $587.52 billion by 2030.

In this blog, we look at the benefits and types of accepting mobile credit card payments for merchants and how they work.

What are mobile payments exactly?

Mobile payments are transactions conducted via smartphones and other mobile devices. They offer alternatives to traditional cash, cheques, or physical cards with secure digital methods for your business.

Mobile payments use apps or mobile browsers and methods like NFC, QR codes, or mobile wallets (Apple Pay, Google Pay, Samsung Pay). Customers can store their own card payment details in these apps for convenient and secure transactions.

Transactions can be contactless at POS systems or remote payments online.

How do mobile payments work?

How a mobile payment works depends on the transaction method and the purchase channel, whether in-store or online.

Mobile credit card processing offers numerous benefits, including ease of use and cost-effectiveness, allowing businesses to expand their opportunities by accepting credit card payments through mobile devices.

Mobile payments taken in-store

Accepting credit card payments via mobile phone is simple and requires a payment processor along with dedicated hardware/software. The customer holds their device close to the NFC-enabled POS terminal, initiating the transaction.

Both devices use RFID technology to pass encrypted payment information through, processing the payment in seconds.

The consumer then enters a passcode or uses biometric authentication, such as face recognition, to authorize the transaction.

A secure element (SE) chip authorizes the mobile card reader for the payment, passing it to the NFC modem.

App and online mobile payments

When customers make a mobile payment online or through an app, they choose their preferred method (e.g., Apple Pay, PayPal). The credit card reader authorizes it, and the transaction is completed without entering card details.

Your customers may need to make mobile card readers use biometric authentication or pin. After initiating a mobile payment, it follows the standard process: authorization, clearing, and settlement.

Types of mobile payments

Mobile payments with NFC

Near-field communication (NFC), also known as contactless pay or mobile wallet payments, allows wireless payment data transmission from mobile credit card readers to a customer’s phone to a mobile credit card reader.

NFC data is continuously encrypted and changes with every transaction, ensuring high security. Customers must enter a PIN or scan their fingerprint to approve transactions, adding extra security. NFC transactions are processed almost instantly.

Mobile point of sale (mPOS)

These portable POS systems let businesses accept and process credit card payments anywhere, using a mobile device connected to a virtual terminal with a card reader.

Mobile wallets

A mobile wallet stores credit or debit card details in an app on a smart device, enabling mobile payments. Popular options include Google Pay, Apple Pay and Samsung Pay.

Users install a mobile wallet app or use built-in features on iPhones and Androids, then add their credit card information and details. The card issuer authorizes the connection, often requiring additional verification.

Mobile wallets enhance security by using tokenization, replacing the 16-digit card number with a random alphanumeric ID. To pay, users hold their phone near an NFC-enabled POS device to complete the transaction.

Bank-based apps

Bank-based apps function like mobile wallets but are provided by banks, allowing customers to make payments directly from their bank accounts.

Mobile commerce (mCommerce)

mCommerce, a category of eCommerce, involves online transactions via wireless devices like smartphones and smartwatches.

In order for this to take place, businesses must provide a user-friendly mobile application or optimized mobile website that supports mCommerce.

Further to this, it’s important for businesses to ensure they have fast-loading webpages and frictionless payment options like mobile wallets, to support a smooth checkout experience.

Payments with SMS

SMS payments are simple and can be done in various ways:

Pay by Link allows businesses to send a secure payment link via text, email, or direct link. Customers click the link and are redirected to a secure payment page to complete the transaction.

Direct carrier billing adds the cost of goods or services to the customer's mobile phone bill. The mobile operator deducts their share before sending the rest to the payment provider.

QR code payments on your phone

When a QR code is scanned, the smartphone decodes its matrix patterns into a string of characters. The phone then processes this information, which can open a browser link, confirm payment details, or verify geolocation.

How to accept mobile payments

Once you decide to accept mobile payments, the process of accepting payments is straightforward.

For online businesses:

1. Sign up with a payment services provider that supports mobile payments.
2. Set up the payment infrastructure on your website using a simple setup process.
3. Connect your business bank account to receive payments.

For physical stores or in-person services:

1. Follow the same steps as online businesses.
2. Purchase a card reader that can accept card payments and contactless payments.
3. Inform customers about the new payment options through your website, social media, or email.

Merchant account and payment processors

Regardless of how businesses accept credit card payments, whether online, via mobile devices, over the phone, or at a physical store, they will need a merchant account.

Businesses will also need a payment processing provider. This payment processor typically supplies the credit card reader and POS software, and it is crucial to ensure that the payment processor supports data encryption, tokenization, and PCI compliance.

How secure are mobile payments?

Mobile payment apps and other card readers and devices use encryption to protect sensitive data like card numbers and customer data during transmission, ensuring it's unreadable to unauthorized parties. This safeguards both businesses and customers against potential risks.

The devices don't store personal data. They use radio waves to communicate with contactless, accept credit cards, or mobile phones, working only when in close proximity.

Customers using digital wallets such as Google Pay add security by accepting card payments without requiring biometric verification or a password, ensuring the payer's identity and protecting businesses from fraud.

Digital payments mitigate risks linked to traditional methods like cheques, ensuring all transactions are instantly approved and processed at the point of purchase.

This provides businesses with assurance that funds are secure and includes a comprehensive audit trail for transparency.

Pros of accepting mobile payments for businesses

1. Increased sales

Using a mobile payment system cuts costs and enhances sales by offering a seamless payment experience that boosts consumer engagement. This competitive advantage helps attract target audiences and boosts conversions.

2. Better customer experience

Mobile credit card payments streamline checkouts, making transactions quicker and reducing queues. This convenience enhances satisfaction and fosters greater customer loyalty.

3. Added security

Outdated payment methods pose high risks of data breaches and fraud, whereas mobile payments provide robust security for small businesses.

They lead in security features among top payment methods, continuously updating with new tools to prevent fraud and protect businesses.

4. Integration within the wider payments ecosystem

Mobile payment systems are straightforward to integrate into small businesses. With many third-party plugins available, they can be installed and used for seamless transactions.

5. Access to payment analytics

Mobile payments offer valuable data insights that help businesses understand customer behavior. This data can be used to customize marketing strategies, optimize inventory, and improve overall customer satisfaction.

6. Accept mobile payments anytime, anywhere

Mobile payment solutions enable organizations to accept payments anytime and anywhere, whether in-person, online, or on the go. It's important to cater to customers' preferred payment methods to enhance convenience and satisfaction.

Conclusion

Embracing mobile payments offers businesses unparalleled flexibility and security. Mobile payments have changed the transaction process by offering secure, digital alternatives to traditional payment methods.

Utilizing apps, mobile browsers, NFC, QR codes, and mobile wallets offers seamless mobile transactions for businesses and customers alike.

By integrating these solutions, businesses can enhance sales, improve customer satisfaction, and gain valuable insights into consumer behavior.

With robust encryption and convenient transaction methods, mobile payments ensure safe and efficient transactions, both online and in-person, meeting the preferences of today's digital consumers.

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