Everything You Need to Know about Mobile Payments

Mobile payment technologies

Mobile payments are expected to boom this year. Market penetration of mobile devices is constantly on the rise, so no wonder that retailers are eager to introduce mobile payment services to provide better experiences to their customers.

Take public transport as an example – by the beginning of 2016, over 40k rides in London were paid with mobile payments every day.

Currently available mobile payment services are also growing fast. Android Pay notes 1.5 million new users every month and Samsung Pay reached $500 million worth of transactions only 6 months after its launch!

Let’s take a closer look at the industry and see how mobile payments work and how consumers use them.

What is NFC?

Mobile payments are based on a technology called Near-Field Communication or NFC. It basically allows two devices to exchange data when located within a few centimeters of each other. The technology works only if both devices are equipped with an NFC chip.

Now, you might be thinking that Bluetooth already does that. But even when you compare NFC to its lighter version, Bluetooth low energy (LE), you’ll see that NFC uses a fraction of the power Bluetooth does. And when our smartphones become our wallets, battery life will be more important than ever.

NFC works in two ways:

  • One-way communication – this is where a powered device (for example, a smartphone, credit card reader, or card terminal) communicates with an NFC chip. In practice, when you tap your commuter card on an NFC-powered terminal, the terminal will subtract money from the balance on the card.
  • Two-way communication – this variant involves two devices that can communicate with each other. For example, touching two NFC-equipped devices, you can transfer data like photos, links, or contacts.

What are three most popular mobile payments systems?

1. Apple Pay

Apple launched Apple Pay in 2014 and today boasts about brands like KFC, Starbucks, and ExxonMobile on board, allowing consumers to shop using their smartphones.

How does Apple Pay work? It basically allows mobile devices to make payments on the web, in iOS apps and contactless points of sale. Instead of using their credit or debit cards, consumers can use their smartphones to easily communicate with these points of sale.

2. Android Pay

This alternative is a digital wallet platform introduced by Google in 2015. The platform builds on the foundation of Google Wallet which was established already in 2011.

Using the NFC technology, consumers can simply tap their phones against cash registers or make an in-app purchase, and they’ll trigger a charge to their credit card stored on Google.

At its launch, Android Pay was compatible with 70% of Android devices and accepted at more than 700 000 merchants.

3. Samsung Pay

Samsung’s response to mobile payments was a little late, as the technology launched in late 2015.

Unlike Apple and Google, Samsung Pay doesn’t ask retailers to invest in new cash registers. That’s because the technology works with traditional credit card readers. All you need to do is tap your phone against a credit card reader.

Mobile payments security

Since mobile payments are relatively new on the scene, consumers raise questions about their security.

When it comes to authorization in mobile payments, consumers can trust the secure element to do its job. It can be a physical object – a chip in the phone – or a virtual functionality stored in the cloud. The secure element is protected by a unique digital signature and it’s tamper-proof.

For example, Apple relies on a physical chip available for iPhone 6 and up. Every time a user initiates a transaction, the secure element generates a random, one-time use code for transmitting the user’s debit or credit card number.

For point of sale transactions, fingerprint recognition and PIN authorization are also popular options.

Providers of mobile payment technologies consider security as a top priority, so over time these companies are bound to introduce robust security protocols such as tokenisation or multi-factor authentication.

About the author: Ready4S is a leading mobile app developer in Europe and the US, who focus on achieving ambitious goals and making a real difference in the mobile world.

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