3 Types of Mobile Payments Explained Travis Arnold By Kristen Gramigna, Chief Marketing Officer at BluePay Can accepting mobile payments give your business an edge with consumers? Mobile payments give both customers and business owners more flexibility in how transactions are handled. According to data from ChangeWave Research, consumer interest in mobile payments has increased over the last six months. In it, a quarter of respondents said that they are “very” or “somewhat” likely to give mobile payments a try within the next 90 days. According to experts at Accenture, one try may be it all it takes to convert curious customers into mobile payment devotees. Though “mobile payments” has become a buzzword of sorts, many consumers and businesses do not realize that the industry remains fragmented. In fact, there are three types of payment technologies with unique features and benefits, despite that they are often described under the generic term “mobile payments.” Can mobile payments work for your business? Here’s a look at how the three types of mobile payments work, and the conveniences they can offer both small businesses and their customers: Mobile payments with a credit card. Mobile payments that involve swiping or inputting credit card information into a mobile device (like a smartphone or tablet) or small card reader (called a dongle) that plugs into the headphone jack of a mobile device are particularly cost-efficient options for small-business owners. Not only might the business owner already own the mobile device required to process credit or debit card transactions (once he/she has established a merchant account with a payment provider), fees tend to be nominal, and flexible based on the business’s transaction frequency. The technology is simple to use, and doesn’t require an investment in point of sale terminals, or that a business have a sophisticated infrastructure. Businesses that choose a mobile payment processor that guarantees payment card industry (PCI) compliance can manage the risk associated with handling sensitive customer data to ensure it is appropriately encrypted during transaction processing. This form of mobile payment options also gives customers the added convenience of paying with a credit card at a business’s physical storefront, or at remote events like trade shows, festivals, or even, at the client’s home or place of business. Despite the point of sale conveniences, the customer must still carry a wallet or card in order to pay. Mobile wallets. Mobile wallets, by contrast, empower customers to leave their physical wallets and cards at home. Once the customer has established a mobile wallet and uploaded the forms of payment he/she wants to keep securely stored in it, the customer can access the mobile wallet’s app to pay at the point of sale, using a mobile device. While the merchants who are now equipped with the near-field communications (NFC) readers at point of sale terminal required to use the technology are on the rise (thanks in part to the recent launch of mobile wallet technologies like ApplePay), mobile wallet acceptance is still inconsistent. If a merchant isn’t equipped with a NFC terminal, consumers may not be able to use their mobile wallet to pay. Digital wallets. Similar to mobile wallets, digital wallets securely store a registered user’s financial and credit card information, negating the need to enter card information or present a physical card to a merchant. (PayPal was one of the first versions of digital wallet technology). Digital wallet technology could be considered the “forefather” of the mobile payments movement, however they are not inherently designed for use on mobile devices. However, some are now accessible on a mobile device, if the customer has downloaded the provider’s mobile app. Unlike a mobile payment transaction that involves the merchant entering the customer’s card information into a reader, both digital and mobile wallet transactions empower customers. Customers (not the merchant) initiate the transaction, and choose the payment processor. Subsequently, digital and mobile wallets lower the risk merchants absorb when customers use credit or debit cards to pay: Merchants do not handle any aspect of processing, handling or storing customer’s sensitive financial data when a mobile or digital wallet is used to pay. Though mobile payment technology can provide value to businesses and customers, there are subtle differences to the technology’s purpose and capabilities that can have significant impact on ease of use and benefits. By identifying the type of mobile payment that will best suit your business model and your customers, you can determine which type or types of mobile payment technology stand to deliver optimal results. About the Author Kristen Gramigna is Chief Marketing Officer for BluePay, a credit card processing firm. She has more than 20 years experience in the bankcard industry in direct sales, sales management and marketing. Check Kristen out on Twitter at @BluePay_CMO.