Mobile payments are becoming a popular way for new and established merchants to accept payment from their customers. Because this technology is so new, however, very few people understand all of the different options available. Fortunately, it’s easy for a business owner to learn about this technology.
Mobile Payment Processing is anything that requires a customer or business to use their smartphone or tablet computer to process credit card transactions. There are four main types of mobile payment processing.
P2P Payments, also known as person to person mobile payments, are one of the most well-known ways of processing cards by phone. This method requires two users to download an app on their phones or tablets that process payment data to other mobile devices. This allows a person to transfer money to another person via a third party service such as PayPal or Serve.
It should be noted that any business that uses P2P payments does not have to have a mobile card reader installed on its mobile device. The applications that allow P2P payments typically store a customer’s credit card information, so a card does not have to be swiped. Furthermore, the money in these transactions is usually placed in a third party account, so bank information does not need to be shown to the parties conducting the transaction.
Closed Loop Mobile Payments were among some of the first types of mobile payments introduced to the market. This method relies on a payment system that is created and operated by the company that is accepting payments. Typically, a retail establishment offers an app to its customers that links to a customer’s credit card or bank account. Customers can then place orders and pay through the company’s app. The most well-known example of one of these systems is the one created by the coffee chain Starbucks.
Mobile Wallet is one of the newest types of mobile payments available to merchants, but it is also one of the most publicized. To use this method of payment, a customer starts by downloading a general payment app onto his or her mobile device. The customer can pay a merchant by either opening the app and directing it to send payment to the merchant, or by directing the app to send his or her credit card information to the merchant.
The future of this technology is why so many companies have become so excited about it. Ideally, people will be able to use their cell phones to pay for anything that they need, essentially eliminating the need for people to carry a wallet. All transactions are secured, making it next to impossible for someone to have their identity or money stolen.
Finally, direct billing was one of the first types of mobile payment. With this method, items are purchased directly from the company that is providing the cell phone service. The charge for the item them appears on the mobile user’s phone bill at the end of the month. In general, this method is used to pay for things such as ring tones, music and video files, and phone applications.