3 minute read
“Mobile payments” are one of the most important and highly discussed aspects of ecommerce today. But what exactly is a mobile payment? Is it paying on a phone, paying with a phone, using a mobile point-of-sale system, or something else entirely?
All the above, actually.
Broadly speaking, mobile payments can be broken into three kinds: in-store, in-app, and online. Let’s take a look at the different types.
Mobile In-store – In-store mobile payments are by far the most talked about form of mobile commerce at the moment. These payments require the user to download a mobile wallet app such as Apple Pay or Android Pay and then to simply scan their smartphone near a reader at the point of sale. There are numerous mobile wallets available today, each of which has its own unique benefits. Apple Pay for example uses a process called tokenization to make transactions more secure. Android Pay uses a process called host card emulation to expand the variety of cards they accept, which allows shoppers to not only upload credit cards but also prepaid cards, loyalty cards, and other payment cards.
Some retailers have even created their own proprietary mobile wallet and payment platform to accept mobile payments. The best example of this payment system is Starbucks, who now has 21% of their sales come through a mobile device. Starbucks customers simply download the Starbucks wallet app and can either add funds to it with a debit card or upload a credit card, which can be used continuously.
Mobile Website Purchases – Shoppers wanting to make a purchase from an ecommerce site using their mobile phone can do so with a credit card, online wallet, or carrier billing. Much like on a desktop computer, with mobile checkout the user inputs their credit card number and relevant payment information in order to complete the purchase. One drawback of this payment method is that asking customers to input their name and credit card number on a mobile device typically leads to a significant cart abandonment rate. However, retailers can reduce this abandonment by saving customer credit card information and simplifying return purchases, or by offering a streamlined and mobile-friendly payment option such as FuturePay which doesn’t require a credit card.
Mobile Wallet – With mobile wallets the user enters their credit card number, personal information, and their phone number and then receives a PIN via text message, which is used to complete the purchase. For subsequent purchases, shoppers only need to enter their PIN to complete the transaction. The advantage of an online wallet is that future transactions are simplified, however like credit card billing, they still require users to enter a large amount of information, which leads to a high abandonment rate.
Mobile Carrier Billing – Carrier billing works very much like other mobile payment options but customers select to “pay by mobile” rather than to pay with a credit card. In this case the transaction is completed once the user presses a purchase confirmation button, and the dollar amount is charged to their phone bill.
Mobile P2P – Peer-to-Peer payments are a newer area of mobile payments. It refers to the ability to send payments from person-to-person or person-to-business by using a mobile device as a proxy. In this case both the sender and receiver enter a unique code and the payment is sent via text message or an app such as Venmo. P2P payments are becoming a more prominent method of transferring funds, especially considering that Venmo reportedly hitting $1 billion in payments for the month of January.
In-App – In-app mobile payments are another interesting aspect of mobile payments. This is because in-app payments can leverage the native functionality on smart phones in order to improve the user experience. One such functionality is the ability to use one-click checkouts to quickly and easily complete transactions. For example, with Uber users simply drop a pin on their location and press one button, which both schedules and pays for their ride.
With mobile commerce becoming more important to both physical and online retailers, all retailers need to consider offering a mobile-friendly payment option.
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