Every year, more and more people use mobile wallets to store credit and debit card information on their mobile devices and wearables. Mobile wallets give consumers flexibility and convenience by allowing them to quickly make purchases online, withdraw cash from ATMs, and send money to others – all with a tap on the phone. Due to the speed, convenience, and security, mobile payments continue to grow increasingly, with the market estimated increase of more than $1.31 trillion by 2023, according to eMarketer.
Though it is a relatively new payment option it can offer some considerable advantages. Here are the key reasons why mobile wallets are gaining popularity.
What Mobile Wallets Really Are
A mobile wallet is a type of digital wallet that allows paying for goods and services, processing payments, and accessing account information through a smartphone. The mobile wallet stores the payment card information on the device thus accelerating the payment process. A user just needs to download a mobile wallet app and register. After that, mobile payments can be pulled off within seconds.
You may be confused between mobile and digital wallets. At first glance, they may seem similar but there’s a difference between the two. A digital wallet is a broad term for software that electronically stores credit and debit card numbers, loyalty card numbers, etc. in the cloud. With a digital wallet, you can access your cards from a device like your laptop, tablet, or phone. A mobile wallet can be installed on your phone as an application and allows you to “tap to pay” in stores, often using Near Field Communication (NFC) technology. With mobile wallets, consumers can pay by tapping a terminal or scanning a QR code with a smartphone or a device like a smartwatch or a fitness tracker.
Types of Mobile Payments
There are many ways to make payments online. The following are some of the most popular mobile payment types:
- Pay per SMS or phone number. It is one of the simplest payment methods, as the user operates within a single platform. The user needs to enter the mobile number of the recipient and the amount to be sent.
- QR Payments. QR or “Quick Response” codes are square bar codes. Every QR Code contains small data packets in the form of dots that hold a certain piece of information. There are two ways of payment through a QR code. The QR code is presented on the mobile device of the purchaser and scanned by their POS or another mobile device. Alternatively, the QR code can be shown by the buyer, in a static or one time generated way, to the seller.
- Cloud-based payments. When used for payment systems, the cloud is used to accept and process payments over the internet, rather than using a physical device.
- Near sound data transfer (NSDT). The audio channel of a mobile phone is another wireless interface that can be used to make payments. This technology is based on the acoustic features of mobile phones to support mobile payments and other apps that are not chip-based. It produces audio signatures that the microphone of a mobile phone can pick up to enable electronic transactions.
- Near field communication (NFC). NFC is a technology that enables two NFC enabled devices to connect via a set of communication protocols. This method is quite secure as compared to other methods because the payment details are stored in an interim token form.
Why Mobile Wallets Are Preferred Over Other Payment Methods
When everything goes digital, so why not the payments. Given that millennials are becoming the largest segment in the workplace, companies should consider providing their customers with mobile payment options. And there are reasons that make mobile payments popular.
More than 70% of Americans have voiced their doubts about the security of the conventional mobile payments method. Mobile wallets provide unparalleled safety. From biometric authentication to the ability to lock a lost or stolen phone, mobile wallets provide better security. Moreover, some mobile wallet providers require a selfie to authenticate a payment.
Mobile wallets provide the security features that are much harder to break compared to using a lost or stolen card. The phone and the digital wallet can be locked to prevent unauthorized use if a mobile phone is lost or stolen. The same cannot be said about conventional payment methods; if a physical wallet is lost or stolen everything inside is lost – payment cards, cash, ID.
Mobile wallets are extremely convenient and that’s one of the key reasons for their growing popularity. They mean no more lugging around a wallet stuffed to the brim with cards. What’s more, if buyers happen to have forgotten their wallet, they can still pay with their phones.
Mobile payments are becoming the natural extension of all the daily tasks that people want to accomplish on their smartphones. We are already consistently using mobile phones and adding payments to our devices makes the process easier and more convenient than ever before.
According to Statista, 21% of people surveyed said they had abandoned their shopping cart due to the long payment process. With mobile payment, not only are the buyers benefit from streamlined services, but the retailers also break down barriers to conversion. In addition to that, it roughly takes 15 seconds to complete one transaction but with mobile payment, it is done in 6 seconds, which is almost half the time taken by a card to process a payment.
Value is the holy grail of business. From buyers to business owners, everybody is focused on value creation. One of the factors that rocketed mobile wallets to huge popularity is the value they provide the customers.
Speaking of the value in terms of wallets, buyers demand a platform where they can securely store their financial data, such as bank accounts, credit cards, and loyalty cards. Mobile wallets are designed to store all this information. Value is essentially the influential factor in customer decision-making and mobile wallets can rule the decision in your favor by delivering exceptional value.
With the availability of services like PayPal, Google Pay, Apple Pay, and others, the competition in mobile payment is growing. And to stay on top of this competition, companies have to develop various loyalty programs. It directly encourages buyers to use mobile wallets.
Expenses and Cash Flow
Mobile payments remove the need for businesses to buy expensive point of sale equipment. It also eliminates paper and ink expenses, as you can email or text receipts to your buyers instead of printing paper receipts. Also, mobile wallets can accelerate your cash flow since most mobile payment processors transfer funds to a business account in under three days.
By using mobile payments, companies can collect valuable customer data, such as how often clients shop at their stores, how much they spend, and what their preferred payment method is. This information can be used to analyze customer shopping behavior and improve customer service. Improving customer service, in turn, leads to increased sales.
What the Future Holds for Mobile Payments
Mobile wallets enable customers to manage their accounts from anywhere, at any time. Such financial convenience is the cornerstone on which the mobile payments industry was founded, and will impact how mobile payment processing evolves in the coming years. Though the number of mobile users who manage their money on mobile devices is growing, most of that activity is still limited to basic functions such as checking account balances. However it’s no doubt that the future is digital and as the mobile payment technology becomes more secure, user-friendly, and value-oriented, so mobile wallets will play a significant role in the future of finance. If you need a consultation on how to create a mobile wallet, feel free to contact our expert mobile app development team.