Globally, more and more people are choosing mobile payments as their preferred transaction method. It is expected that in 20201, 33% of e-commerce transactions in North America will be processed with e-wallets. In Asia, this number is projected to rise to 66%! This shows just how much mobile payments are increasingly becoming part of our consumption habits.
Having a mobile payment solution often requires a significant initial investment. For this reason, many smaller businesses cannot afford to add it to their payment process. In fact, point-of-Sale (POS) terminals in these businesses are sometimes not even equipped with contactless payment technologies. Mobile payment technologies offer an inexpensive alternative since they don’t require new equipment.
The main focus of this blog post will be to describe different technologies that are used for mobile payments and explain their benefits.
There are many technologies available for businesses looking to offer a mobile payment option to their customers. To learn more on these different technologies, read our blog post Mobile Payment Terms and Concepts Explained.
Before going further, let’s define a few terms:
Mobile payment refers to payments that are made with a mobile device in order to pay for a good or service. Mobile devices include smartphones, tablets and smartwatches. This type of payment replaces paying with cash or a bank card.
Near-field communication (NFC) and radio-frequency identification (RFID) are contactless technologies. These types of technologies work with POS terminals that can read chip cards, smartphones, and other objects that have microchips.
NFC is a contactless technology used for e-wallet apps. It has a 4-5cm range limitation to prevent it from being captured by other nearby devices. There are a variety of terminals available that are compatible with NFC.
Bluetooth technology allows communication between wireless terminals and fixed payment systems. For example, restaurants will often offer their customers the opportunity of paying directly at their table so that they don’t have to head to the reception desk. In this case, the wireless terminal communicates via Bluetooth with the fixed payment system to send the payment information. These wireless devices need to be compatible with NFC technology in order for the transaction to be processed with a smartphone. Bluetooth has a range of approximately 10 to 100 meters.
Traditional terminals are similar to bluetooth terminals except that they are physically connected by a cable to the payment system.
Mobile terminals allow businesses to request and accept payments with a mobile phone. This type of terminal is useful for businesses that are on the move, such as taxi drivers, delivery carriers and other mobile vendors.
Many options are available:
We often find this type of payment in trade fairs, public markets and food trucks. For a complete list of the solutions available to mobile vendors, read our blog post.
Customers need to tap their cell phones a few centimeters over a POS terminal. They will then need to confirm their identities to validate transactions by entering a confidential code on their smartphones.
To use this payment method, customers’ smartphones need to be equipped with an NFC chip. The majority of newer smartphones in North America will have this chip. Their smartphones will also need to have an e-wallet app. This type of payment can only work if the smartphones are turned on.
Vendors need to be equipped with NFC-compatible devices that can process mobile payment transactions. Terminals that are compatible with contactless payments for bank cards can also be used for smartphones.
This type of payment facilitates and accelerates checkouts. It is particularly valued by higher-volume businesses that want to reduce the time customers spend at the checkout. Businesses, such as car dealerships, grocery stores and fast-food restaurants, can greatly benefit from fast checkout processes.
Financial institutions can limit the amount per transaction for this type of payment. In Canada, the limit is usually of 100$ per transaction. In the United States, there is no limit. In some cases, a signature can be required for bigger amounts in the United States.
QR codes can be processed in person or online. A QR code is a 2D barcode made up of black and white squares.
QR codes can be read using a barcode reader or a smartphone. Starbucks customers use this technology when they pay for their orders with the mobile app.
Customers need to show their QR code to the vendor so the vendor can scan it. A QR code can be generated through the vendor’s app. It can also be generated by downloading a payment app for QR codes. This type of app allows customers to open and refill accounts by linking them to personal bank cards. These accounts can usually be automatically or manually refilled.
This solution can easily be integrated to any payment system since it only requires the addition of a barcode reader. Some terminals are already equipped with one.
QR codes are often paired with loyalty programs, making it an effective two-in-one solution. When customers pay for their transactions by scanning a QR code, information related to the purchases will automatically be added to their loyalty accounts. Customers can therefore simultaneously redeem loyalty points and pay for their purchases.
Mobile SMS payments are processed when a good or a service is purchased through a text message. These text messages can be sent from a mobile phone, tablet or computer. This payment method can be processed remotely and is available for all smartphones.
The vendor sends a text message (SMS) to a customer with the invoice. The customer then receives a clickable link that leads to an online payment form. The customer can then remotely process the payment by simply filling the form. One the payment has been processed, the customer will receive a notification confirming the transaction went through. The confirmation may also include the transaction’s receipt.
Customers need to enter their payment information. They can choose to process the payment with a credit card, e-wallet, or another type of online payment.
Managing a mobile SMS payment does not require any investments in equipment. However, the vendor will likely need to pay a fixed or variable fee for the text messaging platform.
This payment method is simple, easy-to-use and efficient for both parties. For one, SMS payments are easily available for all smartphones. These payments are usually sent through a text messaging platform that provides businesses with the ability of having one-on-one conversations with their customers and send personalized offers based on preferences and past events.
SMS mobile payments let you:
Are mobile payment solutions adapted to your business needs? Try our calculator to find out: which mobile payment solution is right for you.
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