Top 6 Mobile Payment Methods to Consider for Your Business

Mobile payments are transforming the way consumers and businesses interact. As more customers prefer to pay using their smartphones and other devices, small business owners need to stay ahead of the curve. But what exactly are mobile payment services and how do they work?

In this guide, we’ll explore the main mobile payment methods, how they work, and why they’re important to your business. Whether you’re a new small business owner or looking to expand your payment options, understanding these technologies will help you stay competitive.

What are mobile payments?

Mobile payments refer to any financial transaction made via a mobile device, such as a smartphone or tablet. These payments can take place in person, online or through an app. They use technologies such as short message services (SMS), mobile wallets, near field communication (NFC), and quick response (QR) codes.

This transaction method provides customers with a faster and more convenient way to transact. Customers don’t have to struggle with plastic bank cards and germ-laden cash.

For small businesses, accepting mobile payments can increase revenue, reduce wait times, and provide a seamless payment process. Additionally, it signals the adoption of the latest technologies. This factor can lead people to seek a more sophisticated shopping experience.

Here is a list of six of the most popular mobile payment methods:

1. Send SMS to Pay Payments

The traditional text message also serves as a means of sending money. SMS (Short Message Service) or SMS to Pay payments allow customers to make purchases via SMS. These transactions are usually made through the customer’s mobile wallet – which we’ll talk about later.

While convenient, SMS payment is not ideal for point-of-sale transactions that need to be completed and verified quickly.

How it works

The company sends the customer an invoice, invoice or payment request via SMS. The text usually includes an encrypted secure payment link for added security.

Why it matters for small businesses

SMS payments are ideal for businesses that need a simple, easy-to-use option. This is convenient for collecting recurring bills or payments.

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The simplicity of SMS payments appeals from the customer’s point of view. However, they are more vulnerable to fraud and chargebacks. Additionally, some cell phone carriers charge per text message.

2. Mobile wallets

Mobile wallets like Apple Pay, Google Wallet and Samsung Pay are well-known tools. These apps store payment information digitally. This preloaded data allows users to transact with just a tap.

How it works

Customers enter their credit or debit card details into a mobile wallet app. When they are ready to pay, they pull out the app. From there, a person can tap their smartphone on a contactless payment terminal or select their stored card to make online purchases.

For most small purchases, no signature or security details are required. Yet with bank-grade encryption, single-use security tokens, and other anti-fraud measures, mobile wallets are considered very secure tools.

Why it matters for small businesses

Mobile wallets provide customers with a fast, secure and contactless payment method. For businesses, accepting mobile wallets can reduce payment friction, which can increase customer satisfaction and sales. Additionally, mobile wallets use encryption and tokenization for security, making them a safe option for businesses and customers.

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Businesses need to ensure their point-of-sale (POS) system is NFC-enabled. Although most modern systems support mobile wallets, some older terminals may require an upgrade.

3. Peer-to-peer (P2P) payment applications

Peer-to-peer (P2P) payment apps like Venmo, PayPal, and Cash App allow individuals to send and receive money quickly. Although these apps are designed for person-to-person transactions, many small businesses, freelancers, and service providers use them regularly.

How it works

Customers transfer money directly from their app account to a company’s account. Unlike contactless payment, this method typically involves manually searching for a recipient’s account in the app. Accordingly, users are asked to create a pseudonym or provide their email address.

Why it matters for small businesses

P2P payment apps are ideal for businesses with low-volume or pop-up stores, freelancers, and service providers. They’re easy to set up, usually have low fees, and offer fast payment transfers. But they are intended for more personal instances, hence the use of pseudonyms and transaction notes.

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Although P2P applications are convenient, they are not designed for high-volume business transactions. Many of these platforms limit the amount of money that can be sent or received within a given time frame. Additionally, payments are treated like cash, meaning there is less protection against fraud and errors.

4. Banking apps

Mobile banking apps offered by financial institutions allow customers to transfer money, pay bills, and sometimes make purchases directly from their bank account. These apps can also support payments through services like Zelle.

How it works

Customers use their bank’s mobile app to transfer money or make payments. Some banking apps allow businesses to set up a payment link, allowing customers to pay directly through their bank.

Why it matters for small businesses

Banking apps provide a cost-effective way for small businesses to accept payments. Because transactions occur directly between banks, they often have lower fees than credit card processing.

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Although mobile banking apps are secure and efficient, they don’t offer the same convenience as other payment methods. Not all customers use the same bank, and therefore the same application. Additionally, the payment process may be slower than other mobile payment technologies.

5. QR code payments

QR code payments are popular for their simplicity and inexpensive implementation. They are a great blend of convenience and security. But they are highly dependent on the customer’s technical skills and Internet connection.

How it works

A business generates a QR code that links to a payment gateway. The customer scans the code with their smartphone, which opens a payment interface. From there, the customer finalizes the transaction by selecting their payment method.

Why it matters for small businesses

This payment method is easy to set up. You can project the QR code onto anything from a napkin to a computer screen. This simplicity is ideal for all kinds of situations, from pop-up events to table payments at a restaurant.

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QR code payments require an internet connection and a newer smartphone model. So if cell reception is spotty or a customer still uses a flip phone, this method may have a problem. And even with the right equipment, the cryptic appearance of a code means some people may feel confused about how to pay.

You’ll also need to make sure your QR code leads to the right place. A dead link kills transactions.

6. NFC contactless payments

NFC (near-field communication) technology allows contactless payments. This concept allows customers to place their mobile device or card on a terminal to pay. This method is most commonly used with mobile wallets. But it is also the technology that allows you to pay by credit or debit card.

How it works

Customers bring their NFC-enabled device (such as a phone or laptop) closer to a payment terminal equipped to support this technology. The transaction is completed wirelessly in seconds. There is usually no need for signatures or other practical steps.

Why it matters for small businesses

NFC contactless payments are championed for their convenience, speed and security. For businesses with high transaction volumes, this method significantly reduces transaction times. It also offers a hygienic and contactless payment option.

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Businesses will need a point of sale system that supports NFC technology. While this purchase involves budgeting, the benefits of faster, more secure transactions mean costs can be recouped quickly.

FAQs

What are the benefits of mobile payments for small businesses?

Mobile payments provide small businesses with faster payment processes, reduced reliance on cash, lower transaction costs, and the ability to accept payments remotely or on the go. All of these factors can increase revenue and improve customer satisfaction. They also project a more technological image of your company, which improves public perception.

How do mobile payment methods differ from traditional payment methods?

Mobile payment methods rely on smartphones and apps like Google Pay and Apple Pay. These tools transfer money via near-field communication, QR codes, or text messages. This reliance on technology sets it apart from traditional, tangible forms of payment, like cash. Additionally, mobile payments are generally faster, more convenient and more secure thanks to features like tokenization and biometric authentication.

How do I check if my phone is compatible with mobile payments?

To ensure compatibility, check that your device supports Near Field Communication (NFC) or Bluetooth for contactless payments. Most modern smartphones incorporate this technology. Some mobile payments involve a QR code, which only requires your phone’s camera app.