Everything You Need to Know About Mobile Payments
Posted on by Sean Williamson
Mobile payments are defined as payment services that fall under financial regulations, and are performed via, or with, a mobile device. This type of transaction method has been advancing and gathering momentum in recent years, and is believed to have huge potential in both developed and developing countries of the world.
As technology keeps improving, the first world has become an increasingly cashless society and the search for more secure transaction methods is continuous. However, mobile payments are not only suited to the first world, they also offer many advantages to those in poorer areas. There’s a huge number of communities of under banked or unbanked individuals in third-world countries, and mobile payments have the potential to provide an easy way for people to access goods and services in a secure, convenient and cost effective manner.
Types of Mobile Payments
Mobile payments have come a long way since the term Cybercash was first coined by Noseweek in 1994. At present, the available platforms fall into 4 main categories: Mobile web payments, SMS or USSD transactional payments, direct mobile billing and contactless near field and quick response technologies.
Mobile web payments work in much the same way as paying online using a desktop computer. Users visit the service’s website through their web browser, or download the application to their smartphone or tablet. A credit or debit account, or pre-registration with an online payment solution, is required.
Premium SMS or USSD payments are currently the predominant type of mobile payments, and require consumers to send a payment request via SMS or USSD. A premium is charged to their online wallet or phone bill, and when the merchant receives confirmation, the goods or services are released. Direct mobile billing is very common on e-commerce sites, and is also utilised at some online casinos. This system uses 2-step authentication involving a PIN and a One-Time Password or OTP and after these are entered, the consumer’s mobile account will be charged. No credit or debit accounts, or pre-registration with online payment solutions like PayPal, are required. This makes many people consider direct mobile billing a truly alternative payment system.
Finally, Near Field Communication and Quick Response, or NFC and QR, systems are a new and rapidly growing area of mobile payments. In NFCs such as Google Wallet, consumers wave a phone specially equipped with a smartcard near a reader module, and much like in a QR system like LevelUp, a 2-D barcode is scanned. Funds are t deducted from a prepaid account, or charged directly to a bank or mobile account. These methods might also be combined, because not all smartphones support NFC. There are also technologies that offer a smartphone app and a card reader to vendors, allowing them to accept physical card payments on the spot. These include Square and PayPal Here.
Mobile Payment Possibilities
Mobile payment technology is expected to keep evolving and developing, and experimental technologies such as Google’s Hands Free, which confirms a consumer’s ID and processes transactions using only their initials and their profile picture, could well be the way of the future.
While cash payments are still important, the option to make use of cutting-edge mobile payment alternatives certainly offer many benefits to consumers and vendors across the globe.