Mobile payments are everywhere. And they’re quickly gaining in popularity — not just in the U.S., but worldwide.
Note that cash, credit cards and debit cards are still the reigning champs when it comes to consumer spending — and they’ll likely hold on for a little longer. However, their continued dominance is in question as mobile payments become more mainstream.
What are mobile payments? Why do they pose a threat to credit card and debit card payments?
How Mobile Payments Work
A growing number of modern mobile devices now support digital wallets (aka e-wallets) that allow users to store their credit or debit card details for payments and transfers.
This means when customers are at the checkout counter, they can simply wave their smartphones across a near field communication (NFC) terminal to make purchases — just as they would with a traditional credit card.
However, mobile payments aren’t limited to smartphones. You also can use wearable technologies such as smartwatches and jewelry.
Mobile payments aren’t just for in-person shopping, either. By 2021, more than 50 percent of all e-commerce transactions will be made using alternative payment methods such as mobile devices instead of with traditional plastic.
What Does This Mean for Debit Payments and Credit Card Payments?
At first glance, this switch to mobile payments isn’t a big deal. That’s because credit cards are still the primary funding source for most users, no matter what mobile devices are being used.
The only difference is that the phone, watch or payment-enabled jewelry is now the primary interface — whether one is shopping online or at a brick-and-mortar establishment.
However, this shift to mobile does reduce the need to use credit cards as a starting point. For example, PayPal and Alipay both have mobile apps that allow users to connect their devices directly to banks, e-wallets and other non-card sources.
This transition is having a significant impact on the credit card and debit card industries.
In fact, China’s mobile payments market is already worth $3.5 trillion. By 2019, mobile payments could become the No. 1 payment method for e-commerce — worldwide.
This shift is occurring in the U.S., too — albeit a little slower.
Part of this stems from the fact that only 36 percent of stateside merchants currently accept contactless payments made through NFC-enabled credit card readers. Again, this is changing as more retailers embrace contactless payment technology. Over time, mobile payments will likely rise as credit card and debit card payments slowly decline.
As a Merchant, How Should You Get Ready for Mobile Payments?
If you’re a brick-and-mortar retailer, there’s not a whole lot you need to do. As long as you have an NFC-enabled credit card terminal, you should be able to accept contactless payments — no matter what mobile device or wearable technology your customers use.
The underlying payment source might change from customer to customer, but the sales process on your side will remain the same.
As an e-merchant, however, things are a bit trickier.
The good news is that many mobile wallets are designed around e-commerce standards. So, customers can use their devices on your shopping carts without your needing to change anything
However, some e-wallets exist in closed ecosystems. If you want to accept payments through platforms such as PayPal or Alipay, you may need to add this extra functionality to your online checkout carts.
If you need help setting up your business for mobile payments, let us know. Our team can walk you through all the steps, so you can offer your customers the widest range of payment options possible.
To connect with our merchant services team today, click here.