A Mobile Payment: What Is It?
A mobile payment is a financial transaction done using a portable electronic device, like a tablet or smartphone, to purchase a good or service. Using apps like PayPal and Venmo, mobile payment technologies may also be used to send money to friends and family.
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Awareness of Mobile Payments
Customers may now send money instantaneously to friends and family members straight from their bank accounts thanks to technology that several banks have lately included into their banking applications. Convenience stores and big, international merchants allow mobile payments, which may also be performed in-store by scanning a barcode on an app on your phone.
The purchase price can be paid using a credit or debit card, or it can be subtracted from a pre-loaded amount on the account linked to the specific retailer. It is seen as a safer payment option than using a debit or credit card since payment information is encrypted during transmission.
Prior to gaining traction in the US and Canada, mobile payments were initially widely used in Asia and Europe. Initially, text messages were used to send mobile payments. Later, technology made it possible to send images of checks to the person who received the money using the camera of a cell phone. Eventually, this technology evolved into mobile check deposit features for banking applications.
Since 2014, applications like Apple Pay and PayPal have been created that enable payment by scanning a unique barcode on a smartphone screen and scanning it with a barcode scanner at a store. Additionally, they let users pay instantly by only tapping their phone against a contactless credit card terminal.
Following the popularity of Apple Pay, other businesses like Google and Samsung quickly developed their own mobile payment programs.
Mobile Payments’ Advantages
The removal of a physical wallet is the most evident advantage of mobile payments. In addition to saving time, not reaching for and taking out cash is safer because no one can see what’s in your wallet or bag.
Mobile payments are safer than using a traditional credit card thanks to Touch ID, which is a fingerprint scan or PIN entry. This payment option is much secure than using a real card since the mobile service generates unique security codes for every transaction. Accepting mobile payments is a wise decision for merchants as well, as they won’t have to deal with fraudulent behavior as much because they often don’t check identity.
The fact that other people cannot identify what card you have when you are with them is an extra advantage, albeit a little one for most individuals. Mobile payments provide an extra degree of anonymity for users who may not want, for example, a date or interviewer to know that they have bad credit scores and credit cards with low limits and high annual percentage rates.
How do payments on mobile devices operate?
The channel being utilized to make a purchase—such as online or in-store—will determine how a mobile payment operates.
Mobile payments in-store
Using a mobile device to accept credit card payments is simple. The transaction is started when the consumer brings their mobile within two inches of the NFC-enabled point-of-sale terminal. In order to complete the payment, which takes only a few seconds, both devices exchange encrypted data using RFID technology (NFC is a subset of this technology). At this stage, the customer is asked to validate the purchase by scanning their finger or entering a password. After then, a different chip known as the Secure Element (SE) authorizes the transaction and transmits that authorization to the NFC modem.
Mobile payments made online and within apps
Customers will, on the other hand, choose their preferred mobile payment method (such as a mobile wallet like Apple Pay or a third-party payment app like PayPal or SMS payments), authorize the transaction, and finish it without entering any card information when they pay with their phone online or through an app. In order to validate the online purchase, customers could additionally be asked to input a PIN or biometric data.
The standard payment procedure, which entails authorization, clearing, and settlement, will be followed once a consumer initiates an online or in-store mobile payment.