How to Accept Mobile Payments: An Essential Guide for Small Businesses
Digital payment methods and mobile wallets have been gaining popularity for some years now. Wearables paved the way long ago, and mainstream adoption via iPhone and Android devices has been rising rapidly ever since.
Along with numerous other global firsts, 2020 was the year that digital and mobile wallet payment methods transcended credit cards. As of 2020, digital payments and mobile wallets have captured 21.5% of the POS transaction payment market share. In the global e-commerce space, that figure is 44.5%.
What’s more? By 2024, mobile wallet use for POS transactions is predicted to make up a third of transactions worldwide. Nearly 1.48 billion people use mobile wallets today, up from 900 billion before the pandemic.
Needless to say, the mobile trend is on the rise, and retailers are going to need to keep up. So, we’ve put together this guide that covers everything you need to know about mobile payments, how to accept them, and which mobile payment systems are the best for small businesses.
What are mobile payments?
Mobile payments can be a confusing topic for retailers as there are two sides to this space:
1. Mobile card readers – Mobile card readers are point-of-sale (POS) solutions that accept payments from customers. Mobile card readers could theoretically accept both credit cards and mobile wallet payments (if you have the right one).
2. Mobile payments – Mobile payments are electronic payments that are made via a mobile device rather than a credit or debit card. Mobile wallets are run through the likes of Apple Pay for iPhone, and Samsung Pay or Google Pay for Android devices. They can be set up on both tablets and mobile phones, that customers simply tap on POS devices to complete their transactions.
As such, POS stations need to be able to accept mobile payments. So, when you’re looking to choose the right card reader for your small business, a mobile card reader is likely to be ideal.
Why are mobile payments so important for retailers?
Although EFTPOS machines and other POS solutions can accept electronic, mobile, and credit card payments, mobile devices are usually the most flexible POS solution.
Busy restaurants, small business owners, market stall operators, and retail sales clerks are all mobile. The nature of this work is active, social, and adaptable. Stationary POS systems lock merchants to one spot. Mobile POS solutions allow fluidity, engagement, and a better customer experience.
As for accepting mobile payments from customers, this is important for retailers simply because that’s where consumer’s money is. These days, no one steps out without their phone. They may forget their wallet, car keys, and myriad other “essential” items, but no one ever leaves their phone — the digital wallet — behind.
The mobile phone is the central hub of life, making it the most convenient place to store and access money. Retailers that accept mobile payments get sales regardless of whether their customers have cash or cards on them.
How do mobile credit card payments work?
From a mobile POS device that has an accompanying app (as most of them do), accepting a payment looks something like this:
- Open the app on your smart device.
- Connect whatever hardware you have — plug it in or connect it via Bluetooth.
- Make sure your device is synced to the hardware.
- Swipe, dip, or tap the customer’s card or mobile device.
- The reader instantly captures the customer’s payment information and processes the transaction.
- The transaction is complete.
From the merchant’s perspective, the entire process could not be more straightforward. In the background, of course, it’s a little more complex, but your payment processor handles this. They take care of contacting the issuing bank, authentication, processing, and putting it into your bank account. All you have to worry about is finding the best providers.
Types of mobile payments
Here are the four most common methods to clear some of the confusion around what mobile payments actually are. The first two are specific to e-commerce, while the last two relate to in-store transactions.
1. Browser-based
Browser-based mobile payments refer to any online payment that’s processed when the customer enters their payment information on a website via their mobile phone.
These would include scenarios where a customer is shopping online from their mobile and they go through the checkout entirely via the browser. This could even include PayPal transactions via a browser on mobile.
2. Mobile payment apps
Similar to the browser, mobile app payments are the ones in which payments are made through an app. Mobile payment app examples would include many of the major fashion brands, think Mango and H&M, that have mobile apps where consumers can shop and checkout via the app.
3. Contactless
Contactless is by far the most popular concept of the 2020s as it uses near field communication (NFC) technology to read card information and process payments. Contactless payments are in-person, contact-free payments.
Today, most credit cards are contactless-enabled, and mobile wallets use NFC technology to connect with POS devices. Contactless, as a result, is the most popular type of mobile payment offered by merchants. Customers just tap their card to a reader when they’re ready to pay.
4. Mobile card readers
Mobile card readers are the hardware and software that connect with a mobile device to let merchants accept credit card or mobile wallet payments. Not all mobile card readers, however, accept mobile payments.
Mobile card readers are the most popular POS solution for restaurateurs and retailers. They allow them to go to the customer instead of forcing them to come to the checkout counter to make a payment. They’re also very popular for on-the-go service providers.
Types of mobile card readers
Mobile card readers come in a few different styles. Some plug into the phone, others are peripheral devices, but all of them allow merchants to accept payments from their smartphones.
The key difference to look out for is the way in which the reader “reads” the card number. There are three different methods. Many card readers will combine a few methods, but not all allow for mobile wallet payments. We will highlight them in the descriptions below.
1. NFC readers
As explained above, NFC readers take contactless payments from any payment method that has NFC technology. That includes most credit and debit cards, Venmo, some gift cards, and all mobile wallet methods.
All retailers should have an NFC reader to accept contactless payments. However, it’s also worth having one of the other methods, so that payments can be taken from customers who aren’t very tech-savvy.
2. EMV card readers
EMV card readers are the method that reads the chip, which all cards have these days. To take an EMV payment, the card would need to be “dipped” into the chip reader. Therefore, the hardware will include a device that cards can be inserted into.
3. Card swipers
Card swipers take magstripe payments by swiping the physical credit card through the card reader. This was the original credit card POS method, but today it’s become redundant.
EMV chips are available in all cards and are much more secure. Since 2015, regulation has put these cards out of favor — if a magstripe is used with a fraudulent card, the merchant is responsible for the loss. So, it’s best to avoid the card swiper.
Ideally, you want a combination of the EMV and NFC. EMV to take chip cards and NFC for all mobile wallets and contactless payments. Thankfully, many card readers offer this combination.
How to accept mobile payments
Accepting mobile payments is as simple as accepting NFC payments. As long as you select mobile payment technology that is NFC enabled, customers can simply open their digital wallets and tap their phones to complete the transaction.
Merchants simply offer the reader as they would with any other contactless payment method.
The costs of mobile payment processing
There are actually no differences in pricing for merchants using a mobile device to accept payments vs. someone using a different POS method. There is also no difference in the fees attracted for payments from customers using a mobile wallet vs. customers using a credit card. Therefore, there are no additional costs to mobile payment processing — just the usual costs of electronic payments.
The best credit card readers for accepting mobile payments
To ensure you’re set up for mobile payments as well as EMV, all of the options below are combined solutions. They are also PCI compliant with strong security features to keep your customers and transactions safe. Here are the best one-stop mobile POS card readers you can choose from:
1. Square credit card reader
Square’s mobile credit card reader is free with a Square merchant account and includes the Square app for both iOS and Android.
2. SwipeSimple B250
SwipeSimple’s mPOS card reader connects to any iOS or Android phone or tablet via Bluetooth Low Energy and supports all modern payment standards. It can even accept magnetic stripe payments for legacy cards.
3. PayAnywhere mobile card reader
The PayAnywhere mPOS service is free with an account and includes the PayAnywhere app and software solutions such as personalized receipts, inventory management, and customer purchase reporting.
4. Authorize.net BBPOS Chipper 2x
The Authorize.net BBPOS Chipper 2x is a Bluetooth-enabled device that connects with any iOS or Android smart device. You can also use it with Windows computers that have the Authorize.Net vPOS solution installed on them.
How to choose the right mobile credit card reader for your business
Selecting the right mobile credit card reader comes down to balancing the customer experience with the greatest value for merchants. You absolutely must have a reader that accepts all modern payment methods. That means EMV and NFC. The more payment options you cover, the more convenient it is for your customers.
For the business, however, you want to get value for your money. Transaction fees must be weighed up when looking at options. Be cautious that the cheapest is not always the cheapest. Look into hidden fees, caps, and other charges which could get out of control.
Consider which solution has the best fund transfer speeds. Some may process to your bank account the next day, while others can take between 3-5 days. Be mindful that some vendors may charge for this quick turnaround. Weigh up if the value adds up for your business.
Finally, consider all of the nice-to-haves. Many mPOS solutions come with software features that can help you improve invoicing, inventory management, reporting, and even marketing with loyalty program solutions. Again, consider the cost against how much value you can get from these services.
Your one-stop solution for processing payments
Behind every good card reader is a mobile credit card processing company facilitating the connections between the banks, card issuers, and POS accounts. The ultimate convenience for merchants is when all of these are combined into a one-stop payment solution that offers total pricing transparency.
Payment Depot connects with a variety of mobile card readers — such as SwipeSimple and Authorize.net — to offer a holistic financial solution with payment processing and POS brought together. Contact Payment Depot to learn how we can set up your entire mPOS and payment processing solution today.
Quick FAQs about Mobile Payments
Q: What are mobile payments?
Mobile payments are electronic payments made via a mobile device rather than a credit or debit card. They are run through mobile wallets like Apple Pay, Google Pay, or Samsung Pay and can be set up on both tablets and mobile phones. Users simply tap on Point of Sale (POS) devices to complete their transactions.
Q: Why are mobile payments important for small businesses?
Mobile payments are important as they cater to the growing trend of consumers using mobile wallets. Retailers that accept mobile payments can make sales regardless of whether their customers have cash or cards on them, thereby improving the customer experience and potentially increasing sales.
Q: What are mobile card readers? How do they relate to mobile payments?
Mobile card readers are point-of-sale (POS) solutions that accept payments from customers. They could theoretically accept both credit cards and mobile wallet payments. They are the most popular POS solution for small businesses as they allow for fluidity, engagement, and a better customer experience.
Q: What are the different types of mobile payments?
The different types of mobile payments include browser-based mobile payments (done via a mobile phone browser), mobile app payments (done via an app), contactless payments (using Near Field Communication (NFC) technology to process in-person, contact-free payments), and mobile card readers (hardware and software that connect with a mobile device to accept credit card or mobile wallet payments).
Q: How can small businesses accept mobile payments?
Small businesses can accept mobile payments by using mobile card readers that are NFC-enabled. This allows customers to open their digital wallets and tap their phones to complete the transaction.
Q: Are there any additional costs to mobile payment processing?
There are no additional costs to mobile payment processing. The fees for payments from customers using a mobile wallet vs. customers using a credit card are the same. The costs are only the usual costs of electronic payments.
Q: What are some recommended mobile POS card readers?
Some recommended mobile POS card readers include Square’s mobile credit card reader, SwipeSimple’s mPOS card reader, the PayAnywhere mPOS service, and the Authorize.net BBPOS Chipper 2x. All of these options are PCI compliant with strong security features.
Q: What factors should I consider when selecting a mobile credit card reader?
When selecting a mobile credit card reader, consider the customer experience, the transaction fees, fund transfer speeds, any hidden fees, caps, and other charges, and additional features such as improved invoicing, inventory management, reporting, and marketing with loyalty program solutions.
Q: What is the role of a mobile credit card processing company?
A mobile credit card processing company facilitates the connections between the banks, card issuers, and POS accounts. They offer a one-stop payment solution that offers total pricing transparency. Examples of such companies include Payment Depot, Stripe, and Authorize.net.
Q: What is the predicted future trend of mobile wallet use for POS transactions?
By 2024, mobile wallet use for POS transactions is predicted to make up a third of transactions worldwide, indicating a growing trend and necessity for businesses to accommodate mobile payments.