How Does Mobile Payment Processing Work?

The best way to understand how mobile payments work is to first get an idea of why people love this kind of method for buying goods and services. The other key fact that’s important to know what, exactly, a “mobile payment” is. After that, it’s possible to delve into the central question: how does mobile payment processing work? Let’s examine the question of popularity first.

Why is Mobile Payment Such a Popular Method?

Mobile payment is gaining in popularity every day not just because consumers prefer it but retailers do too. Why? Here are just a few of the reasons this incredibly rapid form of commerce is gaining new fans every minute of the day:

  • Diversity: Mobile payments add to the overall diversity of payment selections by giving consumers yet another option. While there are some merchants who do business exclusively with mobile payments, most brick-and-mortar retailers offer mobile, cash, credit card, and other kinds of more traditional methods for their customers to pay.
  • Convenience: Mobile paying is exceptionally convenient because it is paperless and fast. For anyone buying goods or services, whether in person or online, this rapid technique offers the most convenient way of conveying money to a seller.
  • Security: Today’s mobile payment systems are highly secure, which is just one of many reasons there has been so much worldwide growth for the technique. Sellers use secure, encrypted systems for taking credit card or other types of account data from consumers. Likewise, by using mobile wallet apps, consumers can rest easy that their mobile payments are as secure as any other way of doing business with a merchant.
  • Efficiency: For both merchants and consumers, efficiency is a big benefit. Not only is mobile paying convenient, as noted above, but the transaction cycle often takes just a few seconds or less. That means money moves from the buyer’s account to the seller’s at the speed of electricity.

What’s the Definition of “Mobile Payment”?

If you engage in a two-way financial transaction with someone else (either a customer or merchant) via a mobile device, using a tablet or smart-phone for example, and operate within a regulated framework, then you are making or receiving a “mobile payment.” That’s the technical definition. In short. anyone who uses their phone or tablet to buy something is typically doing a mobile payment. So, if you’re ever in doubt as to what the term means, just remember the four things that make a payment a mobile one:

  • A mobile device is used in the transaction: The central feature of a mobile payment is that no paper, coins, or currency are used. The activity is device-centered from beginning to end, which is what makes it such a convenient way to do business.
  • The payments are regulated by an institution: There is no single, global entity that regulates mobile payments nor is there likely to be one in the near future. That’s because each nation has its own set of rule and regulations about how these kinds of transactions can take place.

    For example, in China, the government regulates all device-centered buying and selling within the country. But in the U.S., there are several federal agencies that have the legal right to oversee at least some parts of commercial transactions. In short, it’s up to each country’s political authorities to regulate mobile commerce.
  • The transaction is entirely digital: Because the payment is done on a mobile device such as a smartphone or tablet (see above), the whole process, from beginning to end, is done via computerized devices. This also means that any “paper trail” of the sale is also stored in a digital format, a fact that is vastly important for accountants, regulators, merchants, and consumers who later might find a need to verify or dispute one or more parts of the transaction.
  • The payment is for goods, services, or to transfer funds: Often left out of the discussion of mobile “payments” are funds transfers. When individuals, buyers, sellers, corporations, or government agencies send money to someone, they can use mobile payment systems to do so. For instance, the U.S. taxing authority, the IRS, has switched to a mobile system for transmitting the majority of tax refunds to citizens each year.

How Does Mobile Payment Processing Work?

There are two basic ways that these kinds of payments work, but both utilize an important type of technology called NFC. Near-field communication, NFC for short, is at the center of what makes the whole mobile payment system work so efficiently.

The wireless tech, which is short-range by definition, lets multiple devices, like wearables, mobile phones, payment cards, computer tablets, and others work with payment portals quickly and seamlessly. The fact that no wires or physical contact are part of the transactions means super-fast buying and selling.

Even though it’s possible to use tablets and a few other types of devices, the vast majority of mobile payments originate with the consumer’s smartphone. How common are phone-based transactions like these? The numbers are staggering. Global use of smartphones is expected to reach four billion units by 2022, with well more than 100 million of those users located in the U.S.

In a large percentage of in-person transactions, sellers use a credit card terminal and buyers use phones or tablets to complete a transaction. Near-field communication, NFC, makes the process possible and is at the very core of how mobile paying came to be, and came to be so popular.

For consumers who purchase online, the use of mobile wallets is both fast and secure. A mobile wallet app stores all the relevant credit-card or bank account data needed to make a purchase from a merchant’s e-commerce website. The majority of modern smartphones have built-in apps for this very purpose.

There’s one more way for buyers who want to use a mobile payment method but don’t have a digital wallet, or simply don’t wish to use one. The QR code is the alternate way of mobile payment. It lets buyers create QR codes on their phones/devices. Merchants then scan the code via a point-of-sale device in order to finish the transaction.

From the merchant’s view, the way the process works is closely related to POS systems that can scan QR codes or other devices that can accept mobile wallet payments. For e-commerce sellers, there’s no faster, more secure, or more convenient way to do business. For buyers, the process begins with either a mobile wallet app or a QR code, both of which contain all the important data for initiating and consummating a financial transaction.

Where To Go From Here

If you’re a retailer who wants to stay ahead of the competition, it’s imperative to get your mobile payment processing situation up to speed. The Metro Payment Technologies team can do just that. Not only have they worked with thousands of retailers already, but the company offers a wide range of product and services in addition to mobile payment technology solutions.

If your company has a need for payment gateways, e-commerce solutions, payment terminals, point-of-sale (POS) systems, wireless terminals, e-check processing or other types of efficient, must-have merchant products, Metro Payment Technologies has the full-scale capability to get you up and running quickly. Additionally, for services like payroll, PCI compliance, customer support, chargeback/retrieval handling, merchant cash advances, leasing, installation, or more, check our website or contact us directly for more information.