As a small business owner, you naturally try to meet your customers where they are – be it through the right product range or through convenient payment options. Processing mobile payments is relatively easy for a merchant, but requires some preliminary work. This includes investing in a point-of-sale system that can process contactless payments and digital wallet transactions.
What is mobile payment?
A mobile payment is a digital transaction method that uses smartphones or other mobile devices to pay for goods or services. It offers a convenient and quick payment option.
A mobile POS system is a great way to accept contactless payments.
These devices can run mobile wallet apps or peer-to-peer payment apps. Alternatively, they can enable transactions via SMS. Consumers can use mobile payment apps or use their credit card to pay on mobile e-commerce sites.
Popular mobile wallet apps include Apple Pay and Google Pay, as well as accelerated checkout apps like Shop Pay. Popular peer-to-peer payment apps include Venmo, PayPal, CashApp, and Zelle.
5 types of mobile payments
Mobile payments are made using one of the five methods described here. Each has its own features, but all allow for near-instant transfers of funds from one account to another.
1. Mobile Wallet
Mobile wallet services include apps such as Google Pay, Apple Pay and Samsung Pay. These services run on computers, smartphones, tablets and smartwatches and are linked to a customer’s credit card, debit card or bank account.
Once a person has their mobile wallet account set up, they can use it similar to a credit card. In a brick-and-mortar store, she can connect her mobile device to a payment terminal with NFC (Near Field Communication). Online, she can use her mobile wallet account on many merchants’ checkout pages by selecting a mobile wallet icon (like Apple Pay) from the payment options.
Shopify’s own Shop Pay is an accelerated checkout that stores customer information to facilitate payments on both mobile and desktop computers. This works similarly to a mobile wallet in that it allows for quick mobile payments when shopping online.
2. Mobile E-Commerce
This category, also known as m-Commerce, describes any type of transaction carried out on a mobile device. When shoppers make a purchase through their mobile device browser or through merchants’ proprietary app, it is considered a mobile e-commerce payment. Mobile payments in eCommerce stores can be completed with a credit card, mobile wallet, or an expedited checkout like Shop Pay.
Customers can make online purchases with credit cards via mobile commerce.
3. Mobile Peer-to-Peer
This type of transaction, processed through mobile payment apps such as Zelle, PayPal, Venmo and CashApp, allows individuals to transfer money to other people via a mobile app or a website. Some of these services – particularly PayPal – are widely accepted by small retailers. This means that many business owners will allow you to pay with PayPal instead of using a credit card.
4. SMS payments
SMS payments allow people without a smartphone to make payments by sending an SMS to a specific phone number. In Germany, where many people have smartphones, SMS payments are rarely used. However, in parts of the developing world, SMS payments are widespread and largely trusted.
5. Mobile payments at the point of sale
In a mobile point of sale (mPOS) scenario, a customer uses a credit card or mobile device to pay at a mobile payment terminal, usually connected to a mobile device such as a tablet. Customers can also insert a credit card into the chip reader or swipe on the mobile POS for an NFC transaction. At this point, your POS software takes over, transfers the mobile payment data to financial institutions and transfers the money to your account.
Customers can use a credit card to make mobile payments for retail purchases with Shopify’s POS Go.
Shopify offers a mobile POS called POS Go that allows you to step away from the checkout and complete sales in-store or curbside. To use Shopify for mobile payments, you must enable Shopify Payments in your store and install the Point of Sale channel.
💡 Learn more about POS systems for mobile payments:
Advantages of mobile payments
Whether you accept mobile payments online, contactless payments at the point of sale, or use apps like Apple Pay and Google Pay, there are several benefits for both you and your customers. The benefits of accepting mobile payment methods include:
Convenience for customers
Mobile payments remove a barrier to completing purchases. Customers can conveniently pay by placing their phone or credit card at a point of sale or by making online transactions using their credit card or other payment apps such as Google Pay, Shop Pay or Apple Pay.
A secure payment method
Mobile payments are among the safest forms of commerce. This is because they are carried out on mobile devices, which typically require some form of authentication, typically in the form of a fingerprint, facial recognition or password. The devices also encrypt their transmissions, leaving thieves with very little chance of intercepting customer data.
Shop Pay offers free fraud protection on eligible orders
Fast transaction
Financial institutions process mobile payments in a snap. This makes mobile checkout as fast as a credit card transaction – if not faster. When you accept mobile payments, you eliminate friction and barriers for your customers.
Popular with consumers
More and more customers are spending more money with mobile payments. By 2027, global consumers are expected to spend $6,007 billion annually using mobile payments. Financial analysts expect this amount to more than triple in the next five years.
Accept mobile payments for your business
Apple Pay is an example of a mobile wallet app that allows users to make a mobile payment at a brick-and-mortar store.
As more and more purchases move to mobile platforms, payment systems will also undergo a similar transformation. Customers who are always looking for convenience and flexibility are increasingly adopting mobile payments – especially given the high level of security they offer.
Retailers also benefit. Some mobile payment apps like Venmo and Square charge fees that are very similar to credit card fees. Other apps like Apple Pay don’t charge merchants any fees at all. This allows business owners to benefit from the convenience and security of mobile payments without experiencing undue financial burden. Small business owners who enable their business to accept mobile payment methods can reap the benefits that come with it.
Frequently asked questions about mobile payments
What is mobile payment and how does it work?
A mobile payment is a contactless payment method that involves a mobile device such as a cell phone, smartwatch or tablet. Mobile payments are typically processed through a digital wallet or mobile app and can be linked to bank accounts, credit cards, debit cards and other payment methods. The payment process typically involves scanning a QR code or attaching a mobile device to an NFC reader to securely initiate the payment.
What are the three types of mobile payments?
The three types of mobile payments are:
- NFC (Near Field Communication) Payments: These payments are made by presenting a credit card or mobile device to a point-of-sale (POS) terminal. Examples include Apple Pay, Google Pay and Samsung Pay.
- Direct billing via the mobile provider: This payment method allows customers to pay for their purchases via their mobile phone bill.
- Mobile Wallets: These are digital wallets that store payment information and can be used at participating stores via an app or website. Examples include PayPal, Venmo and Cash App.
How to use mobile payments?
Mobile payments can be used to purchase goods and services in person or online. In person, a customer can pay with a mobile wallet app or mobile payment service on their smartphone by scanning a QR code or by attaching the phone to an NFC-enabled smartwatch or tablet at a payment terminal. Online payments can be made by entering payment information on a website or app. You can also use mobile payments to send money to friends and family or pay bills.
