Mobile payment generally refers to payment services performed from or via a mobile device. A consumer can use a mobile to pay cashless for goods and services, or to transfer money to another individual. Mobile payments are becoming a key instrument for PSPs and other market participants, in order to achieve new growth opportunities. In developing countries mobile payment solutions have been deployed as a means of extending financial services to underbanked communities.
Individuals can make electronic money transfers to each other through the intermediary of a mobile payment app. Many startups and payment solutions were launched to facilitate peer-to-peer (P2P) monetary transactions. Generally P2P transactions are free of charge, when using a bank account or debit card. Most providers also set a transaction value limit, although it generally increases with time.
Some apps, e.g. Apple Pay or Google Pay, allow users to pay online and in-stores. Most services enable payment through web browsers. Thanks to near-field communication (NFC) technology, contactless payments are now possible, using a smartphone or wearables.
As mobile payments gain popularity, insecurities regarding the safety of the payment methods, along with a general lack of trust in them, seems to be slowing their adoption rate. In a 2016 survey by Accenture, 21 % of respondents declared themselves reluctant to enter their payment card details into their smartphones, and 19% believed paying with their phones could lead to fraud. The three biggest mobile payment security risks imply either losing your smartphone, cybercriminals hacking your mobile wallet or malware on your device.
Proper security settings can make losing your smartphone less risky than losing your credit card or actual wallet. Using two-factor authentication, e.g. a Pin and a biometric method, is the best way to keep a thief out of your phone. Furthermore, with many smartphones, data can be erased, and password authentication can be switched on remotely, using a PC or a tablet.
When a credit or debit card is added to a mobile wallet, the card number is stored securely via encryption, using a code created by an algorithm. Additionally, major mobile wallet providers use tokenization, which means that actual card information is not shared with merchants or even the wallet providers. For additional safety, cards should be added into mobile wallet from a password-protected home WiFi network.
Computers are generally more vulnerable than smartphones, even as the threat of mobile malware grows. Nevertheless, it is recommended to avoid clicking on links included in suspicious ads, email or text messages from unfamiliar sources.
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Since January 2018, Android Pay and Google Wallet have been unified into a single payment system, Google Pay. The rebranded service’s new API allows merchants to add the payment service to websites, apps, Stripe, Braintree, and Google Assistant.
Compatible Android devices, with Android KitKat 4.4 or more recent, can communicate wirelessly with point-of-sale terminals using an NFC antenna, host-based card emulation (HCE) and Android’s security. To add a new payment card to their wallet, customers can either enter the information manually in the Google Pay app, or simply take a photo of the card.
When paying, a virtual account number, or token, is generated, along with a one-time security code, instead of sharing the customer’s payment information. Two-factor authentication grants this contactless payment method an additional layer of security. Physical authentications, such as fingerprint ID can be used to activate Google Pay.
The service is currently available in 21 countries (as of 27/09/18) around the globe. It was first introduced in the United States in 2015. Google expects to be able to make their service available in France and South Korea in 2018.
Currently, customers can add cards of all major cards companies (Visa, MasterCard, Amex, Discover, Diners Club, JCB, Maestro) to their account. Further partnerships allow users to include their PayPal (in the USA), EFTPOS (in Australia), Interac (in Canada), nanaco and Edy (in Japan) payment information to their Google Pay wallet.
Apple’s mobile payment and digital wallet service was launched in September 2014. It is compatible with the iPhone (6 or more recent), iPad (Air 2 or Pro) and the Apple Watch. Alternatively, iPhone, 5, 5C and 5S can use Apple Pay through an Apple Watch, although it is not compatible with Touch ID security.
When paying, a device-specific number, or token, and unique transaction code are used in-lieu of the actual card information. Authentication can be made via PIN, or with Touch ID or Face ID, depending on the biometrics readers on the device used. Apple users can also pay online purchases made in iOS apps and Safari with Apple Pay, whether they are browsing on their iPhone, iPad or Mac. Security is reinforced through two-factor authentication and a dedicated chip that stores encrypted payment information, the Secure Element.
While merchants can choose to buy an Apple Pay-specific terminal, the service can work with existing contactless terminals.
Apple Pay services are currently available in 30 countries (as of 27/09/18). The service was first made available in the United States on October 20th, 2014.
Apple Pay works with most credit and debit cards (Amex, Visa, MasterCard, UnionPay, etc.). Cards previously on file with iTunes are automatically added to the users’ wallets. New cards can be added either by manually entering the information in the app, or by taking a picture of the cards.
Cash is the peer-to-peer mobile payment service developed by Square. In December 2017, it had 7 million active users. The app is available in English or French. The service is available to “residents of all 50 United States”, but it isn’t available in U.S. territories or outside the U.S.
Users can request and transfer money to other through the app or per email. The money received can then be withdrawn at ATMs using the Cash Card, the debit Visa card linked to their account, or be transferred to any local bank account. The black, customizable Cash Card features the user’s printed signature on the back.
Square Cash transactions are free. However, the service only works with debit cards and limited to 2500 USD per week. Square Cash Pro doesn’t have those limitations but charges a fee for debit card or bank account transactions.
The American mobile payment service Venmo was first released in 2009. It is a subsidiary of PayPal since 2013, as a part of the acquisition of Braintree, which had acquired Venmo in 2012. The service is exclusively available to American consumers.
Venmo contain a strong social networking aspect. It was created to help friends split bills. Transaction details, excluding amounts, are shared on the user’s news feed and friends network similar to that of a social media feed. Interactions are encouraged by Venmo through comments using jokes, emojis or likes. Profiles are personalized with profile pictures, usernames and Venmo transaction history. While the latter can be made private, most users keep the default privacy settings.
The service was initially exclusively designed for peer-to-peer payments. On January 27, 2016, PayPal announced that Venmo was working with select merchants who would accept Venmo as payment. All merchants that accept PayPal can now accept Venmo, including certain merchant apps.
First, one must create an account and provide basic information, including bank account information. A Venmo balance, bank account, debit card or credit card is used to make transactions. Paying with a bank account or debit card is free, while credit card payments incur a 3% charge. Transfers are not made in real-time and can be canceled after an initial transfer is sent.
Venmo MasterCard are offered to users. The card is similar to a traditional bank debit card, with the additional ability to directly track spending in-app. It can also be cancelled from within the app.
The initial transaction limit is set to 299.99 USD. After the user’s identity has been verify, this limit is increased to 2999.99 USD per week.
The Chinese multi-purpose messaging, social media and mobile payment app is one of the world’s largest standalone mobile apps, with over 1 billion monthly active users, and 902 million active daily. It is own and developed by Tencent. In 2017, WeChat mobile payment reached 600 million active users, compared to the 450 million of their biggest competitor, Alipay.
To get started, users need to activate the wallet feature of their WeChat account. It must be linked to a bank account. Foreigners will also need to enter their passport information to register.
In China, users who have provided bank account information may use the app to pay bills, order goods and services, transfer money to other users, and pay in stores if the stores have WeChat payment option. Businesses with official accounts offer these services by developing lightweight apps within WeChat Pay. Users can link their Chinese bank accounts, as well as Visa, MasterCard and JCB.
Major brick-and-mortar retailers are increasingly launching their own payment systems. In-house mobile payment solutions have many advantages, notably giving the retailer access to consumer data, which would not be shared by external services such as Apple Pay.
Late last year, Target launched its own mobile payments system. The app allows shoppers to check-out in-store, even scanning the items with their smartphones, and use their Cartwheel digital coupons and discounts. Currently, users can only pay using their REDcard, Target’s card, available as a debit or credit card. Target gift cards might be accepted in the future. Not accepting third-party cards entice customers to switch to their company card, which help the company saves on their transaction costs while encouraging client fidelity.
The app of the coffee chain, launched in January 2011, is the most popular mobile payment app in the United States, with 20.7 million active users in 2017. Combining payments and its loyalty program was the key to the success of the digital transformation of Starbucks. The app acts as an extension of the retail experience, offering a clear return for customers, both in time and money savings. Users can pre-order through the app and paying with it earn credit for future purchases.
The Starbucks app gives the company data and insights into customer behaviour. That insight is used to optimize and provide more timely perks.
Launched in late 2015, the mobile payment service is feature directly into the pre-existing company app. The service can be used to pay online or in-store, currently being accepted in all U.S. locations of the retail chain. Customers can like their credit or debit card, a prepaid account or a Walmart gift card to their account. Payment at checkout is made by scanning a QR code presented by the terminal. The app allows users to split payment between different payment methods, including cash. Savings Catcher rewards are automatically redeemed at the next in-store transaction.
Walmart is using the app to further enhance its knowledge of customer shopping habits. This should lead to further benefits by, for example, enabling customers to do things like create shopping lists based on their previous purchases.
No mobile payment app is universally better than all others. Just like with other payment methods, geographical preferences and particularities influence the popularity of each methods. Furthermore, each apps have their own country coverage. Try choosing the app that better match your own needs, for example offering a better acceptance near you.
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