Three things make mobile payment processing possible: a mobile payment method, such as an e-wallet or a credit card, a mobile payment gateway (for processing the payment, and hardware that connects the payment method with the gateway, such as a smartphone or a point-of-sale (POS) scanner.
Mobile payment processing operates on five basic models: mobile wallets, card-based payments, carrier billing, POS contactless payments that use Near Field Communication (NFC), and payer/payee direct account transfers. Add them together, and you have a form of payment processing that is evolving, but has already made a significant impact on the world.
We often examine the impact microcosmically, such as studying how mobile payment affects a particular industry or by spotlighting a facet of mobile commerce that concerns consumers. To appreciate its true importance, it’s also essential to look at mobile payment from a macro perspective. When we do, we see it has three sweeping effects that make it important to life as we know it.
1. Promotes Economic Growth
Mobile payment processing makes a major mark on the economic landscape.Thirty-two percent of consumers made at least one mobile purchase in 2016, and the total revenue for in-store mobile purchases alone was nearly $75 billion in the same year, according to The Pew Charitable Trusts. In-store revenue from mobile payments is predicted to reach $503 billion by 2020.
One of the key revenue drivers is online purchases with smartphones, especially for non-essentials. When we can order instantaneously with a smartphone, gone is the wait time to make the purchase in store, from a desktop at home, or through the mail — time in which we could easily change our mind about a Harry & David fruit tray or a Picasso print. Merchants talk about “capturing” sales; mobile payment processing helps them do it.
In addition to helping consumers spend, the mobile payment industry helps them earn. The industry’s expansion creates jobs, from software programming to development payment apps to positions in customer service at e-wallet providers. Mobile payment has largely evolved without making other payment methods obsolete. It’s helped create new jobs without eradicating jobs connected with other payment technologies.
2. Helps During Emergencies
Mobile payment options are prized for convenience, but they’re never handier than when they bail us out of tough situations we aren’t carrying enough cash to address.
Imagine you’re on a road trip and your car overheats. Say it’s a $550 repair, and you wouldn’t have enough funds to finish the trip if you payed with vacation money. If a payment card or a mobile app could cover some or all of the cost, both your adventure and your car could be spared.
Emergency room copays, vehicle towing fees, and airline tickets to visit an ailing loved one are other common emergency expenses mobile payments help us manage. By increasing our purchasing power beyond the amount of cash we carry, mobile payment options can literally pay our way out of tough situations.
3. Makes Money More Secure
In recent years, cyber security breaches that exposed customer payment information to identity thieves have cast a pall over the security of electronic payments. But the breaches are more accurately the problem of the companies they befell. Their databases — not the databases of payment providers — were hacked, and thieves found information ready and waiting. The businesses could have deleted the data instead of saving it, as many now do.
Overall, mobile payment processing makes our money more secure instead of less so. If we carry a big roll of cash, and it’s stolen, the bank doesn’t replace it. If funds from a payment card or a smartphone app are fraudulently spent, the service provider replenishes them; albeit, the process can be slow.
Getting cash stolen is like being held responsible for what the thief purchases with the money. Keeping some 20s in your wallet is a good idea; some businesses still operate on the cash model. But when you need to spend big, digital cash is safer than paper.
The Future of Mobile Payments
Mobile payment processing has come a long way since the early 1980s, when American cryptographer David Chaum set out to create digital cash and pioneered the use of cryptocurrencies, but there’s plenty of room for growth. Statistics show that, among consumers, mobile payment technology has advanced faster than it has been embraced.
For the mobile payment industry to enjoy the rich future researchers predict, barriers in consumer thinking must be demolished, particularly fears about mobile payment security. Addressing the lag in compatibility between mobile payments and cash-based transactions is also important; many want a simple method for loading cash into a smartphone payment app.
If the history of mobile payments is a guide, mobile payment processing will surmount the challenges, and further change how we live by expanding the use of digital cash for mobile transactions. As the change occurs, Allied Wallet will be here to offer merchants and consumers secure payment gateways and digital wallets for receiving and making payments.