In the age of smartphones and modern technology, payments are changing rapidly. From a customer’s point of view, the rise of technologies such as NFC payments (e.g., Apple Pay) and services such as Venmo has made it easier than ever to pay for things and send money to friends. From a merchant’s point of view, mobile hardware readers have emerged in recent years that enable them to collect payments out in the field—not just at the counter.
Along with this evolution comes lots of new terminology—including mobile payments and digital wallets. The two terms might seem interchangeable to some people, but they are actually very different. Keep reading to learn about what mobile payments and digital wallets are, how they’re different, and what the increased adoption of both of them means for merchants.
What Are Mobile Payments?
In the past, when you wanted to pay for something, you had limited options: cash, check, or credit card. In the age of smartphones, there’s now a new way to pay: using your mobile device.
Mobile payments are transactions completed using your mobile device. You can use mobile payments to settle up with your friends (e.g., splitting the bill at a restaurant) or you can use them when checking out at a brick-and-mortar or mobile retailer.
Collecting mobile payments requires specific technology. For example, an apparel retailer won’t be able to accept mobile payments if they’re still using an old-school cash register. Rather, they need a modern POS system that accepts payments from services such as Apple Pay and Google Pay.
More and more mobile payments are made each year; in 2018, 55 million Americans used mobile payments to buy something. Platforms such as Paypal and Venmo can be used to make mobile payments in certain circumstances (e.g., buying something at a tag sale). But in order to make mobile payments at most retail stores, customers will have to set up a digital wallet on their device.
What Are Digital Wallets?
A digital wallet is a device, app, or online service that enables customers to send and receive money and make financial transactions without having to carry a physical wallet, physical credit cards, or physical cash. Instead, their encrypted credit card information is stored on their mobile device. Customers simply place their digital wallet-enabled devices near an NFC reader and the transaction is finalized.
If you’ve ever paid with an EMV credit card (i.e., a “chip card”), you may have noticed that these kinds of transactions don’t always happen as lightning-fast as you would hope. Because digital wallets don’t require customers to hand over any credit cards or place them into a chip reader, they help speed up transactions considerably. Of course, merchants can only accept payments from digital wallets if they have smart payment terminals and modern POS systems.
Although digital wallet adoption perhaps hasn’t grown as fast as some industry watchers expected—only 13 percent of smartphone owners have a digital wallet app today—analysts predict that it will pick up considerably in coming years. To prepare for this shift in consumer behavior, merchants should move to a modern payment solution today.
What Mobile Payments and Digital Wallets Mean for Merchants
Even if their customers aren’t asking to pay with digital wallets just yet, merchants would be wise to move to systems that can accommodate these payment mediums. Although some customers might not ever use a digital wallet to make mobile payments, many tech-savvy customers have grown comfortable using them and prefer them over traditional payment methods. Simply put, if you want to allow customers to pay with their method of choice, you’ll need to invest in technology that enables you to accept digital wallet payments.
Beyond that, consider what mobile payments could mean for your business and how mobile payments and digital wallets will grow in the future. For example, a restaurant owner who wants to improve the customer experience can streamline the payment process by taking mobile payments right at the guest’s table. And during the holiday season, a retailer might decide to hire additional employees, equip them with mobile payment readers, and send them into the aisles to allow customers to check out without having to wait in long lines.
The good news is that solutions like Poynt can help merchants collect mobile payments and process payments from digital wallets, helping them prepare for the future. Click here to learn more about how businesses like yours stand to benefit from a mobile payment solution.