What Is a Mobile Payment?
A mobile payment is a money payment made for a product or service through a portable electronic device such as a tablet or cell phone. Mobile payment technology can also be used to send money to friends or family members, such as with the applications PayPal and Venmo.
Key Takeaways
- Initially more popular in Asia and Europe, mobile payments spread to North America and experienced considerable growth.
- Merchants unwilling to retool existing terminals have contributed to the slow growth of mobile pay compared to physical credit cards.
- Mobile payments offer additional privacy and security benefits compared to physical cards.
- There are mobile payment apps for both Apple and Android (Apple Pay and Google Pay).
Understanding Mobile Payments
Many banks have recently adopted technology into their banking apps that allow customers to send money instantly to friends and family members directly from their bank accounts. Mobile payments are also made on site at stores by scanning a barcode on an app on your phone, accepting payments from convenience stores to large, multi-national retailers.
The cost of the purchase may be deducted from a pre-loaded value on the account associated with the particular store, or paid by credit or debit card. Payment information is encrypted during transmission, so it is thought of as being a safer payment method than paying with a debit or credit card.
Mobile payments work much the same as credit cards, without needing to reach for your wallet or purse.
Mobile payments first became popular in Asia and Europe before becoming more common in the United States and Canada. Early on, mobile payments were sent by text message. Later, technology allowed for pictures of checks to be taken via cell phone camera and sent to the payment recipient. This technology eventually morphed into mobile check deposit capabilities for banking apps.
Since 2014, apps such as PayPal and Apple Pay were developed that allow payment by passing a smartphone screen displaying a special barcode under a store's barcode scanner. They also allow the user to simply tap their phone against a contactless credit card terminal, paying instantaneously.
Soon to develop applications were competitors to Apple, companies like Google and Samsung, who released their respective mobile payment apps in the wake of Apple pay's success.
Benefits of Mobile Payments
The most obvious benefit of mobile payments is the elimination of a physical wallet. Not reaching and pulling out cash not only saves time but is safer as well as nobody is able to see the contents of your wallet or purse.
Touch ID in the form of a fingerprint scan or PIN input makes mobile payments more secure than a physical credit card. Since individual security codes are generated by the mobile service for each transaction, this method of payment is significantly safer than using a physical card. Merchants will usually not check identification, so accepting mobile payments is a smart move for them as well, as they will not have to deal with fraudulent activity as much.
An additional benefit—though a minor one for most people—is that when you are with other people they are not able to tell what card you have. Users with low credit scores and credit cards with low limits and high APRs might not want, say, an interviewer or date to know these things, and mobile payments offer an additional level of personal privacy.
FAQs
A mobile payment is a money payment made for a product or service through a portable electronic device such as a tablet or cell phone. Mobile payment technology can also be used to send money to friends or family members, such as with the applications PayPal and Venmo.
What are mobile payments called? ›
Mobile payment, also referred to as mobile money, mobile money transfer and mobile wallet, is any of various payment processing services operated under financial regulations and performed from or via a mobile device.
What is the mobile phone payment method? ›
This payment method allows consumers to pay for goods or services online by charging the bill to their mobile phone bill. The consumer doesn't have to struggle to enter their credit card details on their small phone screen to make a purchase.
What technology is used in mobile payments? ›
Mobile payments use NFC, or near field communication technology. This is a contactless technology that uses radio waves to send small bursts of data quickly and easily.
What is the most popular mobile payment service? ›
Our Top 7 Picks
- Google Pay. Best for Android Users. Jump To Details. ...
- Cash App. Best for Buying Stocks and Bitcoin. ...
- PayPal. Best for Shopping Online. ...
- Zelle. Best for Instant Bank-to-Bank Transfers. ...
- Apple Pay. Best for Purchases iOS and Mac Users. ...
- Samsung Pay. Best for Contactless in-Store Purchases. ...
- Venmo. Best for Paying Friends.
What is a digital payment system? ›
Defining digital payments
A digital payment, sometimes called an electronic payment, is the transfer of value from one payment account to another using a digital device or channel.
What is a device payment contract? ›
A DPC lets you pay off your eligible mobile or tablet in interest-free monthly repayments over 12, 24 or, for eligible devices, 36 months. Some devices may not have a 36-month repayment option. A DPC can only be used to pay off your phone or tablet; your plan is billed separately.
What is the first electronic payment system? ›
Digital Payments in Their Early Days
In 1994, a company called First Virtual Holdings created the first online payment system. Customers could use their credit cards to safely transfer payments online utilizing this technique. PayPal sprang to prominence as a significant online payment system in the early 2000s.
What was the first mobile payment system? ›
Over the years, card payments have evolved to include magnetic stripes, chips and Near-Field Communication (NFC), which enables contactless payments. In 1997, the first mobile payment transaction was conducted by Coca-Cola.
What is the most used digital payment? ›
We asked U.S. consumers about "Most used online payments by brand" and found that "PayPal" takes the top spot, while "Skrill" is at the other end of the ranking. Find this and more survey data on most used online payments by brand in our Consumer Insights tool.
PayPal is the world's most widely used payment acquirer, processing over 22,3 billion payments in 2022. More than 30 million merchants and 400 million active customers use PayPal.
What is the largest payment processing platform? ›
With an impressive transaction volume, PayPal is one of the biggest payment processors globally. In 2020 alone, PayPal processed a total of 15.4 billion in transactions, showcasing its widespread usage and popularity among consumers and businesses alike.
What types of mobile payments are NFC? ›
NFC wirelessly transfers data via a smartphone, laptop, tablet, or other device by sharing it with another device. This technology is behind contactless payments through a mobile payment option, which includes Apple Pay, Samsung Pay, Google Pay, and contactless cards.
What are the three types of mobile payments How do they differ? ›
The three types of mobile payments are proximity payment systems, branded proximity payment systems and P2P payments. They differ in that proximity payment systems such as Apple Pay, Google Pay and Samsung Pay can be used at participating merchants as a point-of-sale payment.
What are NFC mobile payments? ›
NFC mobile payments are contactless digital payments where mobile wallets or NFC-enabled credit cards communicate with special card readers. NFC technology allows businesses to accept customer payments quickly and conveniently without requiring employees to handle cards.
What is NFC and payment on cell phone? ›
NFC contactless payments are digital transactions that use near-field communication technology to facilitate payments through mobile devices like smartphones and tablets. Examples of NFC payments include Apple Pay and Android Pay.