Mobile phones no longer function exclusively as communication devices. From alarm clocks to GPS tools to exercise apps, we've grown to rely on our smartphones for everything under the sun.
We even use our mobile devices to make everyday purchases at retail shops and on e-commerce sites. And the range of mobile payment options continues to expand every day.
Below are some of the most common ways in which we use our smartphones to send and receive payments.
1. Mobile Browser-Based Payments
The earliest mobile payment solution was through browser-based shopping within the phone itself. Similar to desktop-based e-commerce shopping, this option allows users to make purchases without having to rely on physical credit cards. The downside, however, is that mobile browsers are limited to e-commerce shopping (i.e. you can’t rely on this solution for retail purchases).
2. In-App Mobile Payments
With the rise of iTunes and Google Play, users benefited from a range of in-app mobile stores that allow them to buy select products and services within closed ecosystems. Simply register your credit card information once, and then you can download any number of apps or multimedia files with a few clicks.
In-app purchasing has certain limitations (e.g. you can only buy within proprietary stores, and most apps are ill-suited for retail environments). But the technology helped to make mobile payments mainstream — users became more accustomed to relying on their smartphones to securely shop for the products and services they desired.
3. Mobile Credit Card Readers
Mobile credit card readers represented the next evolutionary leap in smartphone payment technology. Rather than rely exclusively on stationary credit card terminals, retailers could invest in add-on hardware that fit into pre-existing headphone jacks. With these mobile readers, merchants simply swipe credit card plastic (just as they would with normal terminals) and accept payments on the spot.
The benefit of this mobile payment solution is that retailers can process transactions anywhere — including at off-site events like fundraisers, trade shows and conferences. These readers also allowed physical stores to harness the convenience of mobile payments — a technology that had been traditionally reserved for the e-commerce world.
The only limitation is that shoppers must physically carry around their credit cards in order for transactions to go through. But this restriction disappeared with the next leap forward in mobile payment technology (see below).
4. Contactless Mobile Payments
With recent developments in Bluetooth and similar technologies, shoppers and merchants can authorize transactions without having to physically swipe any plastic at all. In order to complete a purchase, one simply has to wave his or her mobile device across a contactless reader that wirelessly (and securely) captures the relevant payment information.
Near field communication (NFC) is one of the latest innovations in contactless payments. It's similar to Bluetooth technology, but data transfers require closer proximity and offer even greater security benefits.
NFC mobile payments were already standard with most Android devices, but very few retail stores had invested in contactless readers. However, when launching the iPhone 6 and iOS 8, Apple wisely secured agreements with more than 220,000 retailers and restaurants to ensure speedier adoption of contactless payment technology.
Which Mobile Payment Option Is Right for You?
The mobile payment technology you use ultimately depends on your business. If running an e-commerce store, you probably don't have to make major changes to your existing gateway or hosted payment form. If you operate a retail environment, consider adding both NFC and mobile readers to your payment infrastructure.
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