These days, one size definitely does not fit all when it comes to making payments for goods and services. Of course, there are old-school methods like cash or checks as well as standard credit and debit cards, but today’s mobile society is ushering in an entirely new generation of solutions. With technology moving at what often seems to be a breakneck pace, it’s important to stop once in a while to review the newest trends and to understand how they actually work. Mobile payments and digital wallets are a case in point.
Mobile Payments Defined
Gone are the days when merchants were tied to their hard-wired countertop payment terminals. Today’s portable technology enables entrepreneurs to take their wares on the road to trade shows, bazaars, farmer’s markets and tent sales with the capability of easily accepting customers’ credit card payments via mobile solutions. These include mobile terminals that have built-in WiFi or a SIM card. Another option are small reader devices that connect to mobile phones or tablets. In both cases, virtually all types of payments can be taken including credit and debit swipe and EMV cards as well as contactless NFC transactions that are connected to customers’ digital wallets. At this stage of the development of these technologies, some mobile readers must be upgraded in order to accept payments from digital wallets. Therefore, it’s important for business owners wishing to adopt these trends to be sure that the equipment they purchase is compatible with the expanding needs and demands of their customer base.
Digital Wallets Defined
As smartphones become ever more pervasive in our society, consumers are gradually warming to the convenience and portability that using a phone’s digital wallet feature provides. Think of the digital wallet as an electronic storage center where customers can securely keep their encrypted financial information. The setup process involves manually entering in or scanning credit cards, debit cards and customer rewards cards into the Apple or Android phone’s software. Once it has been successfully saved, the customer can use their phone to securely make mobile payments via contactless NFC readers. In order to authenticate the transaction, the customer generally uses the phone’s fingerprint scanning feature. Then within a few seconds, the payment is encrypted, authenticated and processed. Best of all, the customer does not need to carry any cash or a bulky card-filled wallet. All that is required is the mobile phone that they already have with them anyway.
Now that we’ve shown the difference between mobile payments and digital wallets, it’s good to once again note that a customer is not required to have a digital wallet in order to make a payment on countertop or mobile terminals. Most all terminals and readers are set up to accept traditional plastic cards. So customers who remain squeamish about entrusting their financial data to their smartphone can still make payments as usual. However, using a digital wallet to make a payment is oftentimes faster than using an EMV chip card, which can take time due to the need to “dip” the card and then wait for the card to process. NFC payments with digital wallets with encryption and tokenization are just as secure as EMV cards, but require a simple “tap” on behalf of the customer. Only time will tell, but it seems quite possible that the digital wallet may become the rule rather than the exception in the years to come.