What is mobile payment?
Mobile payment is a transaction made using a portable device — a mobile phone or tablet. There are plenty of technologies that make mobile payments possible, from SMS and mobile billing to NFC and QR codes. You can pay for goods or services online and in-store relying on mobile payments, as well as send funds or receive money. Regardless of the technology in use, mobile payments are alternative payment methods. They are also called m-payments.
Why are mobile payments popular?
According to the latest estimations, the global mobile payment market valued at $1.4 trillion in 2020 is about to show an annual growth rate of 23,8% from 2021 to 2026. It is a staggering figure, and we witness this forecast coming true in our daily life — every day, the number of people using this way of making purchases and money transfers grows. But why are mobile payments so popular? The list of pros below is the answer!
Advantages of mobile payments
- Convenience and speed. It is probably the key to mobile payments popularity. All you need is your device that you’re most likely always carrying with you. No cash, wallet, or plastic card is necessary. Just tap your device to the terminal, pass the quick authentication, and make the payment. Transfers using mobile payment services are also a piece of cake, especially when you get used to them.
- Security. Today, most mobile payment systems use tokenisation to protect clients’ data and funds. It means that your payment details aren’t stored or transferred as-is: when you initially enter and verify them, they are replaced with a token that can’t be decrypted by fraudsters and bears no value. It is much safer than carrying cash around.
- Variety of vendors and technologies. Demand drives the supply, so there are currently plenty of technologies and mobile payment systems. It gives anyone with a tablet, smartphone, or smartwatch a rich choice of payment solutions to better meet their needs. Regardless of the location, device type, or OS, there’s a mobile payment solution for everyone, making digital payments widely accessible.
Like everything in this life, mobile payments have their flaws. Though some might say the benefits greatly outweigh the shortcomings, it’s worth knowing that they exist.
- Lack of acceptance. Though mobile payments keep gaining traction, not every retailer supports them yet. It is especially noticeable in countries where cash dominates the payment landscape, such as Romania, Bulgaria, Egypt, Kazakhstan, and others.
- Not every phone supports them. You can use SMS to make payments with any mobile phone, but for contactless payments and mobile wallets, you need a smartphone supporting these technologies.
- Dependance on the device. Captain Obvious hastens to warn you: if your battery dies or some malfunction occurs, you won’t be able to make a payment. Besides, your phone or tablet may get stolen. That’s why it is vital to have all possible authentication and security levels enacted on your mobile payment devices.
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How do mobile payments work?
The way mobile payment works and how mobile payment processing happens directly depend on the technology used, so let’s elaborate on it.
Mobile wallets usually exist in the form of apps that enable users to pay and accept payments. As one can guess from the name, this is a virtual analogue of a traditional wallet. Similarly, mobile wallets often offer support for loyalty or reward cards. We’ve covered mobile wallets in the Glossary earlier, so take a look to learn more about this option.
QR code payments
This option is prevalent in China, where solutions like Alipay and WeChat Pay account for the largest share of digital payments. To use them, a merchant displays a QR code at the point of sale. By scanning it with the app on their phone, buyers can easily make purchases.
This option was quite popular in the 00s, allowing a person to send a text message on a paid number to order digital services, like ring tones or games. The price can be taken out of the user’s mobile balance, prepaid card, or added to their bill. These days, shoppers can buy goods from vending machines or pay for parking or public transportation via SMS.
Besides, SMS payments are a financial inclusion remedy for the economies with a large share of the unbanked population. For example, in Kenya, the most popular payment method is M-PESA, powered by a network of agents and text messages.
Similar to the previous option, direct billing is when you provide your phone number to the vendor, make purchases and have the cost taken out of your prepaid card or added to your mobile phone bill. It is mainly used to pay for digital goods.
If your bank provides a mobile banking app, you can use it to make online payments. For instance, the users of Ukrainian neobank monobank can pay their utility bills and fines, top up mobile balances or donate to charities inside the mobile banking app. And, of course, mobile banking allows for making money transfers.
MST stands for magnetic secure transmission. It means the technology that enables the mobile device to imitate the signal that the magnetic stripe on a bank card emits. It is not very widespread, but Samsung flagship devices support it. The owners can hold their devices next to the POS terminal, and the effect will be the same as if they swiped their plastic cards.
Contactless or NFC payments are made when supporting devices — let’s say, a smartphone and a POS terminal, are nearing one another. The NFC technology allows for encrypted payment data to be exchanged between the devices instantly. Nowadays, this is one of the most popular mobile payment methods.
Let’s not forget that you can open a browser on your device, visit a retailer’s website, add something to your cart and go to the payment page to fill in your payment details and make a purchase. It is a typical online transaction, but it’s mobile payment, too.
Which mobile payment app is the best?
There are hundreds of mobile payment systems worldwide, each with pros and cons. Which is the best is up to you, but to lend you a hand, we’ve compiled a list of ten of the most popular and loved ones.
- Google Pay — a solution enabling frictionless online and contactless payments on Android devices, though it also works on iOS and the web. It has over 220 million users worldwide, making 15 billion transactions annually. Corefy offers direct ready-made integration with this in-demand solution. Learn how to benefit from it!
- Alipay — the world’s largest mobile payments platform, though China is its top market. It is a QR code payments solution with around 640 million monthly active users.
- Apple Pay — a payment service for iOS that accounts for a 43.9% share of the US mobile payment market. It works similarly to Google Pay but comes hand in hand with Apple Card and Apple Cash services.
- PayPal — everyone interested in payments has heard this pioneer’s name at least once. It is a ubiquitous payment platform with 426 million users and vast geography.
- Samsung Pay — though being far behind Apple and Google Pay in terms of popularity, Samsung Pay is the only service that supports both NFC and MST, allowing its users to make payments at any POS terminal. Unfortunately, its coverage is limited to a few markets, and it doesn’t support money transfers.
- WeChat Pay — the default payment method of China’s viral super app WeChat. It had 900 million active users in 2021.
- Cash App — this is the only app from the list that allows its users to buy and sell Bitcoins. Other than that, it is a user-friendly multifunctional payment app available in the US and the UK.
- Zelle — American solution launched by the Bank of America, Truist, Capital One, JPMorgan Chase, PNC Bank, US Bank, and Wells Fargo. It connects to users’ bank accounts and enables easy electronic transfers to and from them.
- Venmo — PayPal’s subsidiary that uses peer-to-peer technology to send money online. It is a go-to option in the USA, supported by more than 2 million merchants.
- Paytm — one of India’s most popular payments platforms offers mobile payment services and allows merchants to receive QR, POS, and online payments. Over 7 million Indian merchants use its QR code solution.
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