Mobile Payment System

Payments

09.09.2024

The number of smartphone users is expected to reach 7.1 billion by the end of 2024. This leads to the growing popularity of mobile payments, which have already exceeded 1.3 billion. Retail businesses should use the opportunity to improve the financial experience for customers. As a result, the mobile point-of-sale (POS) market is about to grow to $6 trillion by 2028. Let us explain mobile payment system and why your e-commerce company requires it.

What is a mobile payment system?

Mobile payments become popular due to the widespread adoption of smartphones. The mobile payment system is the best alternative to the traditional cash system. The customer can use a portable electronic device, such as a smartphone or tablet to purchase various goods. No need to swipe a physical card or insert it into a card terminal. Mobile payments can be made with no direct contact between your device and the reader at the checkout counter.

How do mobile payment systems work?

For online payments, you provide the recipient’s details and specify the transaction amount. Then, enter a PIN code or biometric details for authentication. For example, you can transfer money using Apple Pay, Google Pay, and Samsung Pay.

For in-store payments, you specify the amount you want to transfer using the mobile wallet app. You then hold your mobile device close to the NFC terminal. Encrypted information is exchanged until the payment is complete. This contactless method doesn’t take more than a few seconds.

Mobile payment systems enable transactions both online and in-store. Online, you enter the recipient’s details and complete authentication with a PIN or biometric data. In-store, you hold your mobile device near the reader. The whole process is going to take just a few seconds.

Components of phone payment system

E-commerce companies should consider their business requirements when selecting the type of cell phone payment system hardware:

All-in-one POS system (for large retail and service establishments) features a card reader, barcode scanner, cash drawer, and receipt printer.
Standalone credit card reader (for small, independent retailers) must be connected to a smartphone via USB or Bluetooth.
MPOS terminal (for SMBs and consumers) accepts payments from other mobile devices and contactless bank cards.

Payment system software is connected to the POS terminal to process financial information for the purchase. It has the following components:

POS processor transmits information between the customer and the merchant’s banking systems.
Online processor manages card payments similar to a physical POS terminal.
Business account accepts funds from customers‘ bank cards during purchases.

Payment software also has inventory tracking, custom reporting, and loyalty programs. There are also SDKs and APIs for customizing financial operations.

Types of mobile payment systems

Let your customers pick the most convenient characteristics of mobile payment system. Here are the most common options to send and receive money from smartphones:

Mobile wallets keep a user’s credit or debit card details on a custom app, which allows customers to make purchases using the telephone.
Mobile point of sale (mPOS) turns a mobile device into a payment processing solution based on a SoftPOS application.
Mobile commerce (mCommerce) enables transactions via a wireless device such as a smartphone or smartwatch. Merchants require an application or website that supports mCommerce.
NFC is a short-range wireless technology that needs the customer to place their cell phone against a POS terminal (or card reader) to complete a transaction.
Contactless transactions are processed through sound waves containing encrypted financial data.
Quick response (QR) payments require a unique code to be scanned with a special app, finalizing a transaction.

Explore the main types of mobile payment systems on the market:

Mobile wallets
Mobile point of sale (mPOS)
Mobile commerce (mCommerce)
NFC for mobile payments
Sound wave-based payments
Quick response (QR) code payments

How popular is mobile payment system

Financial apps and special platforms have contributed to the popularity of digital purchases. In China, 81.5% of smartphone users make digital payments. In the United States, this figure is estimated at 43%. Mobile payments are expected to reach 80% of all digital transactions by 2025.

Financial apps and special platforms drive the popularity of mobile payments. In China, 81.5% of smartphone users make digital payments, compared to 43% in the U.S. By 2025, mobile payments may comprise 80% of all digital transactions worldwide.

What types of businesses typically use mobile payments system

Small and large businesses easily accept mobile payments from customers. Here are some examples:

Online stores and marketplaces allow customers to do their shopping on cell phones and other devices.
Restaurants, cafés, and bars enable fast table turnover and high customer satisfaction.
Service providers (electrician, courier, or translator) accept payments on the go, without using cash or checks.
Event and entertainment organizers establish smooth ticketing and registration through faster transactions.
Transportation services such as Uber accept mobile payments with a tap or within a mob app for rides.
Freelancers and small-business owners accept payments through peer-to-peer (P2P) apps.

Businesses that typically use mobile payment systems include online stores, restaurants, service providers, event organizers, transportation services, and freelancers. These sectors benefit from faster transactions, higher customer satisfaction, and the absolute convenience of accepting payments on the go.

What are the advantages of mobile payment

Now that you know the mobile payment meaning, you should know what makes it so attractive for e-commerce businesses. Here are the primary benefits to emphasize:

High security. Advanced measures like tokenization and biometric authentication reduce fraud risks for both merchants and consumers.
Convenient use. Payments are stored digitally, eliminating the need to enter details manually.
Quick processing. Automated actions create a faster, more user-friendly experience for customers.
Reasonable cost. Lower service fees make mobile payments less expensive than traditional ones.
Better sales. Faster, easier payments can increase the number of spontaneous purchases and the customer’s spending.
Global reach. Digital payments enable international transactions, focusing on a larger audience.
Access to customer data. Businesses can strengthen marketing strategies by checking data history to understand purchasing trends and customer preferences.

Take a look at the primary advantages of mobile payments:

High security
Convenient use
Quick processing
Reasonable cost
Better sales
Global reach
Access to customer data

Challenges in the smartphone payment system

Mobile payments are not flawless. Here are the primary disadvantages to be aware of:

Privacy concerns. Businesses must securely manage automatic customer data load and comply with different regulations like GDPR.
Transaction disputes. Increased disputes and chargebacks need to be handled properly to maintain customer trust.
Legislative compliance. Businesses should stick with financial regulations that vary from one region to another.
Technical issues. Downtime or glitches in mobile payment systems can harm sales.

Take a look at the primary disadvantages of mobile payments:

Privacy concerns
Transaction disputes
Legislative compliance
Technical issues

How much does a mobile payment system cost

The mobile payment system cost varies widely. POS software can be installed for free. Alternatively, you may pay up to $200+ per month for cloud-based systems or a one-time fee starting at $1,000 for legacy systems. Hardware costs range from $0 for basic card readers to $1,200+ for full retail setups. Businesses incur ongoing payment processing fees based on card sales. Some systems, like PayPal Zettle, offer free basic software but may charge for upgrades and add-ons.

Mobile payment system costs vary. POS software can be installed for free or up to $200+ monthly for cloud-based systems. The hardware cost can range from $0 to $1,200+ for full retail setups. Some systems, like PayPal Zettle, offer free software but may charge for upgrades.

How to get a mobile payment system

Integrating the mobile payment method into the retail business architecture requires proper preparation. Review the steps to take:

Evaluate your business needs. You should know the needs of the business itself and the customers. Researching different mobile payment technologies
means finding the best solution for your business.
Choose the best provider. It’s important to find a single-source provider, providing complex financial services. The payment information must be protected at every step of the potential
payment process.
Integrate the gateway. You need to register a merchant account and integrate the payment system into the POS system or any other application used.
Complete the formalities. You should get API credentials to enable secure communication with the payment system during transactions. This may require some programming skills.
Do testing. The gateway model needs to be checked before the official launch. The sandbox setup for test payments can be carried out to eliminate potential problems.

Conclusion

The growing development of mobile payments promises to redefine your relationship with money, making it more connected to your digital life than ever before. Working with the right mobile payment system enhances the security of transactions and expands access to financial services worldwide. Embrace digital payments and the benefits that come along with them.