What is a mobile wallet?
What’s a mobile wallet?
As the name suggests, a mobile wallet is a wallet that lives on your smartphone or mobile device. Mobile wallets provide quick access to debit and credit cards, loyalty cards, and even plane or concert tickets. With mobile wallets, your most important cards and tickets are at your fingertips. This gives you a convenient way to pay for goods and services without having to pull a physical card out of your wallet at checkout.
When a customer utilizes a mobile wallet, they’re essentially turning their mobile phone into a digital wallet that holds all of their credit card and debit card information. Besides pure convenience, one of the biggest advantages of using a mobile wallet is card security. Accessing a mobile wallet is generally harder than stealing physical cards or cash. That’s because mobile wallets often have two-factor authentication, requiring a passcode or biometric scan in order to complete a transaction. Without this second form of proof to authenticate a cardholder, a transaction ends before an order is placed.
Accessing a mobile wallet app is easy, as many smartphone companies offer their own mobile wallets – Apple Pay, Google Pay, and Samsung Pay. There are also other mobile wallets like Venmo and PayPal that allow you to send money to businesses and individuals from your bank account.
But how do mobile wallets work? Generally, mobile wallets store encrypted credit card data. So when someone is paying with a mobile wallet, they’re using an encrypted version of their physical card.
Mobile wallets utilize near-field communication (NFC) to “talk” to the card reader or payment terminal. Customers can activate their mobile payment card on their phone by opening their respective payment app, such as Samsung Pay or Google Pay on Android phones or Apple Pay on iPhones. For added security, the NFC function on mobile devices only activates when a user opens their mobile wallet.
Once activated, the NFC technology utilizes radio frequency identification (RFID) to pass data on radio waves from one entity to another using a particular frequency – 13.56MHz. This frequency only works when the two NFC chips are close together. If you’ve ever made a tap-to-pay payment, you’ve seen firsthand how close you need to be to the terminal for the payment to work. If they’re too far from each other, the two NFC chips won’t talk to each other, and no transaction will occur. Customers can also use mobile wallets to make payments on ecommerce sites when shopping from their mobile devices.
Now that you know how mobile wallets work, let’s take a look at why you should accept them at your small business.
Accepting mobile wallet payments
As you can see, there are many benefits of mobile wallets for customers, including convenience and security. But what about the benefits for your business? You might be surprised to learn that mobile wallets also come with a variety of benefits for your business, too. Here are a few reasons why you should consider accepting mobile wallet payments:
- More potential customers – Mobile wallet users are increasing, and an estimated 150 million people in the United States have used mobile wallets. This growing popularity means that more and more consumers will come to expect mobile wallet payment acceptance. More convenient payment options for customers can mean an increase in sales at your business. And, as long as customers have their phone, you'll be able to capture sales even if a customer forgets their wallet.
- Quicker transactions – Efficiency in your business is key, and mobile wallets are a faster way to pay. That means you’ll be free to do business without the snags that come from waiting for cards to process or dealing with cash or checks.
- Mobile app integration – One of the big advantages of mobile wallets is integration with other mobile apps. Companies can offer discounts, rewards, and even mobile wallet payments through apps, encouraging customer loyalty and repeat business.
- Additional security – As mentioned above, another advantage of mobile wallets is the additional security. To pay with a mobile wallet, your customers need a secondary form of authorization, whether by PIN code or biometric identification. This helps ensure only legitimate transactions are taking place at your business, reducing the amount of fraud your business encounters. Less fraud is good for the customer and also your bottom line.
Let’s take a look at what your business needs based on how your customers are using their mobile wallets:
- In-app purchases – To accept this type of mobile wallet payment, you’ll need a smartphone app that allows your customers to pay in the app. If it’s a dedicated payment app, you’ll also need a way to relay the customer’s payment information to your point of sale (POS) system. Talk to your app developer or POS system provider for more information on integrating these into your business.
- Mobile browser-based payments – As we talked about, this is an online payment that a customer makes from their smartphone on an ecommerce website. So to accept this type of payment, you’ll need a payment gateway to capture the information and then you’ll also need to work with a payment processor to facilitate the information where it needs to go.
- Contactless payments – Your customer will utilize their mobile device to pay you with their mobile wallet. To accept these payments, you’ll need a card reader that can accept NFC payments. If your business is on the go, your payment processor may have a solution to help you take NFC payments using mobile credit card readers.
- Mobile credit card readers – To accept mobile wallet payments on the go, you’ll need a mobile card reader. Most often, you’ll work with your payment processor to get a mobile card reader or mobile point of sale (mPOS) system. You’ll then utilize a smartphone or tablet app to take payments. With mobile credit card processing, the whole process takes place on the smartphone or tablet, making it easy and convenient for your business.
Are mobile wallets safe?
Tokenization helps prevent fraud because it substitutes the 16-digit credit card number with a random string of numbers. While the random string of numbers functions as the credit card information in that given transaction, they’re useless after that. That means that even if a hacker got a hold of the tokenization number used for the purchase, they couldn’t turn around and use it for any other purpose. In other words, the data is safe because the customer’s actual card data was never used for the transaction – a stand-in number was.
The extra authentication also plays a role if a phone were to get stolen. The thief wouldn’t be able to use any payment card information stored in your mobile wallet because using it requires a secondary form of identification. It’s also possible to wipe your phone remotely, so thieves cannot see that you’ve stored credit cards in your mobile wallet.
Mobile wallet payments are a fast, secure, and easy way to pay. Your customers can utilize them to quickly make payments to your business while feeling like their data is safe and secure. For businesses, you get a payment method that is fast, safe, and can attract new customers to your business. If they know you accept mobile wallet payments, your customers can feel confident in leaving their physical wallet at home.
Heartland is the point of sale, payments and payroll solution of choice for entrepreneurs that need human-centered technology to sell more, keep customers coming back and spend less time in the back office. Nearly 1,000,000 businesses trust us to guide them through market changes and technology challenges, so they can stay competitive and focus on building remarkable businesses instead of managing the daily grind. Learn more at heartland.us.