What You Need to Know About Mobile Payments

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The following is a guest post. Enjoy!  

What You Need to Know About Mobile Payments

Mobile payments are quickly becoming a very popular way for retail stores and service providers to accept payments from their customers. Because mobile payment technology is so new to the market, however, few business owners really understand what options are available and how these options can help their business. 

Types of Mobile Payments

The best place to begin to learn about this technology is by learning about the different types of mobile payment systems that are available. Generally speaking, mobile payment processing is defined as any system that allows a customer or business to use a smartphone, tablet computer, or other mobile device to receive and process credit card transactions. The method is commonly referred to as phone credit card processing. In general, there are four common types of mobile payment processing.

Person to Person (P2P) Mobile Payments

One of the best known methods of mobile payments are P2P payments, also called person to person mobile payments. In order to use this method of payment, the two users (customer and business) must first download an app onto their respective mobile devices. These apps are designed to process payment data and transmit it to the other mobile device. In general, these apps are provided by so-called third-party services, like PayPal, and fees for these types of transaction can be high.

The main advantage to using P2P payments is that neither mobile device has to have a mobile card reader connected to it. Most of the apps that perform P2P payments store the customer’s credit card information after he or she manually enters it, so their actual credit card doesn’t have to be swiped.

Closed Loop Mobile Payments

Another type of mobile payment, closed loop mobile payments, were one of the first mobile payment systems made available to individuals and retailers. The method depends on the retailer to create and operate its own payment system. Typically, a store or service provide, creates, and offers an app to its customers. This app links the customer’s credit card or bank account information to the store or service provider. Then, customers place their orders and make payments through the company’s app. These systems are typically popular among large retailers who can afford to create and administer their own app.

Mobile Wallet

A much newer method of mobile payments is called mobile wallet. To use this payment method, a customer downloads a so-called “general payment app” on his or her mobile device. Then the customer pays a store or service provider by opening the app and telling it to send payment from his or her bank account or his or her credit card information to the store or service provider. While relatively new, many people see potential for this technology to make carrying a wallet obsolete.

Direct Billing

Finally, it’s important to know and consider direct billing. This method was one of the very first mobile payment methods introduced to the market. This method allows someone to purchase items or services directly through their mobile phone company. Common examples include in-app purchases. Customers see the charge on their phone bill.

How about you all? Do you use these (or other) mobile payment options very often? Do you pay merchants who swipe your credit card on their smart phone reader very often? Do you worry about security with these types of transactions at all?

Share your experiences by commenting below!

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