Getting paid is one of the biggest challenges faced by small businesses. Often, your customer has to jump through hoops to pay you. And even when they follow all the correct steps it can take weeks, or months, for those funds to hit your bank account. Along the way the check could get lost in the mail or your customer may forget to pay you altogether. It’s important for small business owners to lessen the number of steps and amount of effort it takes to get paid. Mobile payments are a commonly preferred solution for both merchants and customers. You can take payments on your mobile device using simple accounting or payment processing software.

What are mobile payments?

Mobile payments are electronically processed payments through a mobile device, such as a smartphone or tablet. There are many different types of mobile payments, all offering customers the convenience of digital transactions and eliminating the need to carry cash. In a business environment, mobile payments can be used for transactions of goods or services in store as well as outside of the store at pop-up events and markets.

Types of mobile payments

When it comes to executing mobile payments, there are several methods available. Each process has its own benefit and strength. The system you choose should serve the unique needs of your individual business.

•  NFC mobile payments

Near-Field Communication payments are “contactless” payments using mobile wallets, such as Apple Pay, Google Pay and Samsung Pay. To accept an NFC mobile payment, you need to use a card reader that allows for contactless payments, such as QuickBooks All-in-One card reader. The NFC-enabled card reader communicates wirelessly with the customer’s mobile wallet on their smartphone when they are within two inches of proximity. Contactless payments are just as secure as EMV chip card payments and typically allow for quicker transactions.

•  Magnetic secure transmission (MST) payments

Magnetic secure transmission (MST) payments work similarly to NFC by establishing a connection between the customer’s smartphone and the card reader or point of sale (POS). A magnetic signal is passed through the connection, similar to how a physical POS picks up card information when swiped. Samsung Pay users can use MST payments from their devices. MST payments are just as secure as NFC as they are both contactless payments using a secure tokenization system.

•  Quick response (QR) code payments

Quick response (QR) code payments are most popular in countries like China and are often advertised on shop posters or product labels. The QR codes can be scanned to process payments. The unique QR code pattern is captured and decoded by the user’s device in order to process the transaction. After the information is transmitted, users may be prompted to confirm payment information or verify geolocation. QR code payments can be scanned by the customer or the merchant. The customer can scan the merchant’s QR code, confirm the price, and finalize the payment. Alternatively, the merchant can scan the customer’s QR code and set the transaction amount, which can be authorized by the customer.

•  Sound wave-based payments

Sound wave-based payments, or sound signal-based mobile payments, allow for transactions to be processed without an internet connection, and instead use sound waves to transmit encrypted payment data. Sound waves are sent from the merchant’s terminal to the customer’s smartphone to securely communicate payment details. Then the customer’s smartphone converts that data into analog signals that finalize the transaction.

•  SMS payments

SMS payments are a convenient way to pay for products or services via text message. A customer can get a code from a merchant’s website and text that code to the text number provided by the merchant in order to confirm payment and receive access to what they paid for. Once the SMS payment is processed, the payment amount is added to the customer’s phone bill.

•  Mobile bank transfers

Mobile bank transfers allow for payments to be made without the use of a POS or card reader. This method is most commonly used for peer-to-peer payments and bill payments. The payment is processed by the participating banks, allowing the sender to directly transfer money to the recipient’s bank account. Keep in mind that different banks have different limits for what customers can do with mobile bank transfers.

What is a mobile wallet?

A mobile wallet is a digital wallet with credit or debit card information stored on a mobile device, such as on an app on your smartphone. Common mobile wallets include Apple Pay, Google Pay and Samsung Pay. Each mobile wallet securely stores sensitive card and bank data that is encrypted and ready to be used for mobile payments. Some mobile wallets can also store tickets, boarding passes and other documents. To accept a payment using a mobile wallet, the customer simply needs to bring his or her mobile device close to the mobile card reader or POS. 

How do mobile payments work?

Depending on the type of mobile payment received, the experience may vary but the result will be the same–a convenient mobile transaction for the customer. If using an NFC-enabled mobile card reader, the customer can simply place their smartphone containing their mobile wallet near the card reader to accept the payment. If using a magstripe reader, the customer can swipe their card to accept the payment. And if using an EMV chip card reader, the customer can ‘dip’ their card to accept the payment. Once the customer’s card information is communicated to the merchant’s card reader or POS, the transaction is passed to a financial institution, the acquiring bank, to send the payment request to the issuing bank, the cardholder’s credit card company. The issuing bank checks if the customer has enough money or credit for the transaction, as well as runs fraud detection checks. If there are no issues, the transaction is authorized and a hold is placed on the funds, which often appears as “pending.” Then the funds are moved from the credit card company to the acquiring bank.

How can I accept mobile payments?

To accept mobile payments for your business, you will need a mobile credit card reader and its accompanying mobile app or software. QuickBooks offers its chip and magstripe card reader free to new customers. Simply follow the card reader setup instructions to begin accepting mobile payments.

What are the benefits of mobile payments?

Several security measures protect the data in mobile payment apps and digital wallets. Consumers send payment information from their phone to a point of sale terminal using transfer technology. This usually happens through Near-Field Communications (NFC). NFC transfers encrypt payment data to protect it from interception. Depending on the app and hardware used the data may also be tokenized. Tokenization means translating credit card data into a single-use token ID number. Even if a hacker obtains the token, it won’t let them access or use the card for extra transactions. Tokenization protects both consumers and businesses from fraud during digital wallet transactions.Security features built into phones serve as an added layer of protection. Consumers often lock their phones with a password, PIN, or biometric identification such as a fingerprint. Once they unlock their phone the payment app or digital wallet often need authentication before a consumer can use them to pay. As a final measure consumers can remote lock or wipe their phones in the case of theft. Make sure to pay close attention to security when choosing payment processing software. Research which party is liable in the event of a data breach, and only use software providers that protect your business. Using a third-party payment provider is often safer than managing your own tech.

In addition to being secure, mobile payments make the transaction experience fast and convenient for the customer. Instead of having to wait in lines to transact via a traditional POS system, in-store payments can be made with mobile card readers, meaning merchants can move the line faster and make more sales. Convenience is also a big factor for customers who don’t typically carry cash and prefer to pay with a credit or debit card.

The future of mobile payments

Mobile payments are valuable payment processing options for small businesses of all types. Whether you are a photographer, shop owner, or freelancer, the ability to get paid from anywhere is powerful. Use your payment processing capabilities as a relationship-building opportunity for your customers. If you’re visiting a client, offer to accept a credit card payment for your services, on the spot. If you take payments at a storefront terminal, use the opportunity to tell customers about loyalty programs or special offers. If you’re collecting payment at a storefront terminal, use the opportunity to tell customers about any loyalty programs or special offers.

As a business owner, your goal is to make the payments process as streamlined as possible. Accepting mobile payments makes it easier for you to get paid faster while protecting yourself from risk and fraud. When you sign up for a mobile payment service, make sure you understand who is responsible in the event of a data breach or fraud. It’s important that your business will not be held responsible for losses. Reputable companies with experience in protecting sensitive data will help protect your business.