Mobile payments are an extremely important segment of global payments. More than a quarter (25.7%) of people worldwide use them, and that number is only going to rise as more people get comfortable with them.
On the other side, there’s a disturbing trend, as 39% of all fraudulent transactions in 2021 in America were mobile payments. That’s a 31% surge from the year before.
Let’s dive in and find out exactly what mobile payments are and which ones are the most popular. But first, here are the types of mobile payments:
- Mobile Wallets
- Mobile P2P
- Mobile POS
- Mobile eCommerce
- SMS Payments
- QR Codes
- Payment links
What are Mobile Payments?
Mobile payments are defined as contactless payments via smartphones, tablets, wearables, or similar devicess. Mobile payment can be done via a dedicated app, digital wallet, or even SMS messages.
People pay in-store by scanning a QR code or tapping their phone on the payment terminal (POS) that supports mobile payments. Both the phone and the terminal must support near-field communication (NFC) technology, as this is the basis of in-person mobile payments.
Online mobile payments are done via dedicated mobile payment apps such as Cash App, Venmo, PayPal, Zelle, and others or directly via in-app or browser purchases.
In the developing world, SMS payments are an extremely popular and handy way of making mobile payments.
Let’s expand on each type of mobile payment further.
Types of Mobile Payments
Mobile wallets store your bank card information on your smartphone so you can use contactless payments in-store or pay online without typing in your details every time.
All that’s needed is a PIN, fingerprint, or Face ID verification as you tap or swipe over the POS machine in the store.
Mobile wallets are very secure as they have complex encryption and tokenization process happening in the background.
For instance, on Apple Pay, your card numbers are never stored on your device and aren’t shared by Apple Pay or even sent with your payment.
Rather, the app gives you a unique encrypted Device Account Number that’s stored in a secure part of your Apple devices like iPhone, iPad, or Apple Watch.
Digital or mobile wallets use NFC or near-field communication that’s similar to Bluetooth to process payments almost immediately. NFC has a much, much shorter range than Bluetooth and works by reading encrypted data, like card or bank details to process payments.
NFC is regarded as considerably more securer than normal card payments, especially contactless ones.
One of the reasons is the said distance of only a few centimeters for the transaction to work.
Other reasons include the fact that the feature has to be turned on first on the smartphone and needs to be verified by fingerprint or something similar.
Mobile P2P (peer-to-peer) payments are transactions via mobile payment platforms such as the immensely popular Cash App, Zelle, Venmo, and the evergreen PayPal.
Basically, all online or digital banks have peer-to-peer payments available so you can seamlessly transfer money to your friends or family. Some also include mobile wallet functionality to pay in-store by scanning a QR code or by tapping your phone.
PayPal, as we know, is widely accepted, not only online but also in-store, and is a good alternative for making payments or sending money to others unless you’re making a currency conversion, in that case, it’s too expensive.
The above-mentioned mobile payment apps offer instant transfers to other users on the same platform for free and offer free accounts that are extremely easy to open. These features boosted their popularity, especially with the younger crowd.
Zelle, on the other hand, is a product of major banks that they developed as an answer to the popularity of independent mobile payment apps. It’s used as a seamless way of transferring money between bank accounts for free.
Mobile point-of-sale (mPOS) systems use a retailer’s mobile device as a payment terminal. Typically, that would be a tablet and, less often, a smartphone.
However, merchants and retailers generally require more than that. They also need a barcode scanner, mobile card reader, cash register, and, of course, a receipt printer.
mPOS software runs on any iOS or Android system, so it has a low barrier to entry. It’s also special as it allows businesses to take payments anywhere in stores, not only at cash registers. They are also used for pop-up events and markets.
There are many mPOS providers, but some of the most popular ones are those from Square and Shopify.
Mobile commerce or m-commerce describes all transactions made from mobile phones. Any purchase from a merchant’s app or mobile device’s browser accounts for this type of mobile payments.
M-commerce sales should more than double to $728.28 billion by 2025 and account for almost half of all retail eCommerce sales in the US.
Driving those numbers is the awareness of m-commerce and even more smartphones in the hands of Americans and other countries. If you thought everyone already has a smartphone, think again.
M-commerce is a subgroup of eCommerce and differs in the way that eCommerce includes desktop shoppers and m-commerce excludes them and only counts payments from mobile devices.
SMS or Short Messaging Service refers to payments made using SMS text messages. Although this kind of mobile payment isn’t very popular in the western world, in some countries and territories in Africa and Asia, it is one of the most used types of mobile payments.
There’s no denying that SMS payments are practical and fast while giving access to mobile payments to people without bank accounts or cards and even without smartphones.
All you need is an account with telecom and any kind of phone that has SMS, which is literally any phone.
The only time I ever use SMS payments is when I’m paying for parking. If you’ve never done that, know that you only need to send your license plate number via SMS to the phone number indicated on the traffic sign or parking payment machine. The rest is taken care of by my mobile service provider.
QR codes, or quick response codes, are now ubiquitous and have gained even more popularity during the pandemic when they were used to look up menus at restaurants and even place orders.
1.5 billion people used QR code payments in 2020, and in China, there were payments worth $5.15 trillion completed in the same year. By 2025, there should be more than 2.2 billion people using QR codes for payments.
They are usually placed at cash register counters or displayed on POS to be scanned with a smartphone.
Because all the bank card information is already stored on your phone, there’s no need to enter these details once again manually. That gives QR payments an added layer of security.
Payment links are given to customers when they’re ready to pay or order something. A customer simply enters or taps on the link to be taken to the order or payment page.
They can be given to clients via the above-mentioned QR codes as well. Mobile payment apps also utilize them for money transfers between friends and family. One simply needs to click or tap on a link enclosed in an email or text, and it will facilitate transfer in a few clicks.
What are the Most Popular Mobile Payment Platforms?
I already mentioned some popular mobile payment apps. There are, however, many on the market to choose from.
The most popular mobile payment app is Apple Pay, or Apple Wallet, as it’s also known. The app is so popular that 92% of all mobile wallet payments in 2020 in the United States were made with Apple Pay.
Additionally, there are around 507 million Apple Pay accounts in the world, of which 45.4 million in the US. in the UK, for instance, 63% of the country’s mobile wallet owners are using it.
Google Pay is second, with hundreds of millions of users as well. In the US, it’s trailing behind Apple Pay and Starbucks.
In China and some other Asian countries, the most popular mobile payment apps are Alipay, WeChat Pay, UnionPay, JD Pay, and others. Combined, they have hundreds of millions of users.
Some retailers like Starbucks jumped on the mobile payment bandwagon even before there was Apple or Google Pay. The coffee chain launched its mobile payments and loyalty app in 2011 and was, for a long time, the most popular mobile payment option in the US.
In recent years, Walmart, Amazon, and Uber all overtook Starbucks and have more users than Apple Pay – 58.5, 54.4, and 52.1 million, respectively.
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Mobile payments are here to stay and will, in fact, be the preferred mode of payment in the future. Already, more than a quarter of the world is using them to make everyday purchases and money transfers more practical and faster.
The pandemic, of course, did accelerate the adoption of mobile payments to a great extent as more and more people wanted nothing to do with cash.