Mobile Payment Options
The fastest-growing segment of credit card use is in card-not-present or CNP transactions. Implementing a contactless payment option, such as Apple Pay or Android Pay, provides customers with another payment option that can speed up the process. Mobile payments mean quicker lines — especially with the implementation of EMV.
There are five primary models for mobile payments:
- Mobile wallets
- Contactless payments NFC (Near Field Communication)
- Card-based payments
- Carrier billing (Premium SMS or direct carrier billing)
- Direct transfers between a payer and payee bank accounts in near real-time (bank-led model, intra/inter-bank transfers/payments that are both bank and mobile operator agnostic)
A mobile wallet stores payment info in an app. It utilizes technologies such as Near Field Communication (NFC) and QR codes and allows to make payments on the web and card terminals and make in-app purchases.
According to Deloitte, there are major benefits to mobile wallet acceptance:
- the higher speed of contactless transactions relative to other payment means;
- the ability to attract consumers with higher disposable incomes;
- the opportunity to provide more personalized experiences by integrating loyalty programs.
Mobile wallets are accepted through a near field communications (NFC)-enabled POS system. If you have upgraded your magnetic stripe POS to accept chip cards (EMV-ready cards), your system has NFC technology and can accept mobile wallet payments.
Near Field Communication (NFC) phones use radio frequency identification to communicate with each other and with NFC-enabled points of sale. The phones have to be within four inches (ten centimeters) of each other.
Every mobile OS maker has their own apps that offer unique NFC functionality. Android users have the widest variety to choose from: the most well-known option is Android Pay. Samsung Pay is available for Samsung phone users. Apple’s phones from the iPhone 6, and Apple Watch, also have NFC functionality, usable for Apple Pay.
NFC-enabled devices can support three modes of operation:
- Card emulation: this mode enables devices to act like smart cards, allowing users to perform transactions such as purchases, ticketing, and transit access control with just a touch;
- Peer-to-peer: this mode enables two NFC-enabled devices to communicate with each other to exchange information and share files;
- Reader/Writer: this mode enables devices to read information stored in smart posters and displays. Examples include reading timetables, tapping for special offers, and updating frequent flyer points.
Security for contactless payments is the same as for a credit card. Fraud protection laws all apply, and secure channels and encryption are used for sending credit card information and PIN numbers. For high-priced purchases or several purchases within a short period of time, the user is asked to manually enter her PIN number to ensure theft has not occurred.
Smartphones let a customer store multiple credit cards and other payment methods all in one device that the customer is likely to carry everywhere with them already. NFC can evolve into a one-step payment method that works anywhere the customer wants to make a purchase. Typically contactless payments are faster because the PIN number or a signature is not needed. It also, however, can cause the customer to spend more since paying is so quick and easy.
QR code payment is a contactless payment method where payment is performed by scanning a QR code from a mobile app. This is an alternative to doing electronic funds transfer at point of sale using a payment terminal. This avoids a lot of the infrastructure traditionally associated with electronic payments such as payment cards, payment networks, payment terminal, and merchant accounts.
To use a QR code payment the consumers scans the QR code displayed by the merchant with their phones to pay for their goods. They enter the amount they have to pay and finally submit. This is a more secure card-not-present method than others.
A simple mobile web payment system can also include a credit card payment flow allowing a consumer to enter their card details to make purchases. This process is familiar but any entry of details on a mobile phone is known to reduce the success rate (conversion) of payments.
In addition, if the payment vendor can automatically and securely identify customers then card details can be recalled for future purchases turning credit card payments into simple single click-to-buy giving higher conversion rates for additional purchases.
The consumer sends a payment request via an SMS text (or MMS) message to a short code and a premium charge is applied to their phone bill or their online wallet. The merchant involved is informed of the payment success and can then release the paid for goods. This method is ideal for users who don’t have a smartphone.
Many cloud-based payment systems continue to use SMS for presentment, authorization, and authentication, while the payment itself is processed through existing payment networks such as credit and debit card networks. These solutions combine the ubiquity of the SMS channel, with the security and reliability of existing payment infrastructure.
Since SMS lacks end-to-end encryption, such solutions employ higher-level security strategies known as tokenization and target removal, whereby payment occurs without transmitting any sensitive account details, username, password, or PIN.
Direct operator billing, also known as mobile content billing, WAP billing, and carrier billing, requires integration with the mobile network operator.
Benefits it provides:
- Mobile network operators already have a billing relationship with consumers, the payment will be added to their bill.
- Provides instantaneous payment.
- Protects payment details and consumer identity.
- Better conversion rates.
- Reduced customer support costs for merchants.
- Alternative monetization option in countries where credit card usage is low.
Direct operator billing is being deployed in an in-app environment, where mobile application developers are taking advantage of the one-click payment option that Direct operator billing provides for monetizing mobile applications. This is a logical alternative to credit card and SMS billing.
Sources: nfc-forum.org, wikipedia.com, everything.explained.today, wikivisually.com, wikizero.com, wikipediam.org, nearfieldcommunication.org,