When Apple Pay was introduced in 2014, many people scoffed at the idea of smartphones potentially replacing cash and credit card transactions. They’re not scoffing anymore.
Over the last few years, top technology innovators like Apple, Google, and Samsung have advanced the mobile payment industry by introducing next-generation apps that make mobile payments more accessible to consumers. Merchant support for the technology has also increased, as most credit card readers and point-of-sale (POS) terminals accept mobile wallets and other contactless payments.
We’ll explain everything your business needs to know about accepting mobile wallet payments and how mobile wallets can help future-proof your business.
Editor’s note: Looking for the right credit card processor for your business? Fill out the below questionnaire to have our vendor partners contact you about your needs.
What are mobile wallets?
Mobile wallets are digital tools that help your smartphone make financial transactions, including credit card payments. Mobile wallet apps store financial data like credit and debit card information as well as identification, gift cards, and more.
Mobile wallets rely on NFC (near-field communication) mobile payment technology. Consumers don’t have to swipe a credit card. Instead, they place their phone near the payment terminal briefly until they’re alerted that the payment is complete.
Mobile wallets can also store and handle consumer incentives, like customer loyalty programs and coupons, replace paper boarding passes, and transmit credentials.
The growth of mobile wallets
Mobile payments are on the rise. According to the Global Market Insights project, mobile wallet market size was valued at $220 billion in 2021 and is expected to expand at a compound annual growth rate of 17 percent from 2022 to 2030.
Smartphones are driving mobile wallet growth. According to Pew Research, about 96 percent of Americans use smartphones. This massive user base is fueling tech advancements and lifestyle changes amid demand for improved customer experiences and secure transitions.
How mobile wallets work
Mobile wallets work in-store for small business transactions and can also be used for online payments. Customers can avoid carrying physical wallets and bags while using one device for all payments.
Consumers link mobile wallet apps like Apple Pay to existing credit or debit cards. Sensitive card data is replaced with encrypted tokens for extra security.
How do you accept mobile wallet payments?
Setting up mobile wallet payments for your business is generally fast and affordable. First, you must choose a credit card processor that supports mobile payments. Hundreds of payment processing companies exist. However, the best credit card processors can set you up to accept digital wallets.
If you already have a payment processor, call your rep and ask what you need to do to accept mobile credit card payments and digital wallets – it may be as straightforward as upgrading to a new credit card reader with NFC capabilities. The card reader or terminal should cost you no more than $500; depending on the mobile payment provider, it might even be free.
If you’re not yet accepting credit cards, consider working with a mobile credit card processor like Square or PayPal. Setting up an account with them is quick and easy, upfront costs for processing hardware are minimal, and there are no monthly or annual account fees.
What are the benefits of mobile wallets for businesses?
For small businesses, accepting mobile payments can improve the customer experience and streamline processes. Additional benefits include the following:
- Customers like mobile wallets. Mobile wallets are growing increasingly popular with consumers. According to WorldPay’s Global Payments Report, digital wallets are projected to represent 52.5 percent of transaction values by 2025. With such a massive user base, it only makes sense for your company to enable mobile payments. More convenience for customers may mean more sales for you.
- Mobile wallets allow quicker transactions. Mobile wallets facilitate quicker transactions than traditional payments like debit and credit cards. Debit cards require customers to enter a PIN, and your business may opt to require receipt signatures for credit cards.
- Mobile wallets are on track to replace debit cards. Mobile wallets are usually extensions of debit cards and make it easier for customers, who would otherwise have to open entire new bank accounts to enable phone payments. As such, they may eventually replace debit cards entirely. Additionally, millennials and Generation Zers always have their phones with them, so accidentally leaving a card or wallet at home isn’t a concern.
- Mobile wallets can accommodate mobile apps. Mobile wallets are an easy, effective way to store mobile apps. For example, customers can add Starbucks coupons, loyalty points, and other incentives to their mobile wallets.
- Mobile wallets provide additional security. Credit card security risks can be costly. However, mobile wallet payments eliminate many of these risks. For example, customers must verify mobile wallets with tech tools like Face ID and passcodes. Verifying identity is not your employees’ responsibility. There’s also no chance of accepting fake credit cards. Mobile wallets won’t work if they’re not connected to a genuine debit account.
- Mobile wallets can generate customer loyalty. Customers who like paying with mobile wallets will be drawn to your business – particularly if your competitors haven’t yet adopted the technology.
The best POS systems allow companies to accept digital payments via mobile wallets while helping you track sales and manage your business.
How safe are mobile wallets?
Mobile wallets have preinstalled security features designed to stop unwarranted usage, including the following:
- Mobile wallets are encrypted. While credit cards are easy to scan or steal, mobile wallets are more secure – since most people usually know where their phones are – and include encryption technology. Customers don’t have to worry about leaving a credit card behind at the terminal, and since the data for mobile payment is encrypted, the risk of data theft is lower.
- Mobile wallets require identification. Mobile wallets incorporate security measures like face scans, fingerprints, PINs, and passcodes.
- Mobile wallets are hard to replicate. Mobile wallets are harder to steal from because they’re harder to replicate. If someone loses their wallet, their cash and cards are gone. In contrast, if they lose a phone, inherent security features protect against theft.
Mobile wallets aren’t perfect, of course. For example, your phone could lose power as you’re purchasing, a bug could render a QR code unreadable, and there’s always user error. However, mobile wallets are inherently more secure than other payment types and can help build customer trust.
How do mobile wallets make money?
Mobile wallet apps’ banking partners (i.e., the banks that host customers’ connected payment cards) pay the mobile wallet companies a small percentage of every purchase their customers make through the app.
For peer-to-peer payments through Venmo, merchants pay 1.9 percent plus 10 cents per transaction.
What are some mobile wallet providers?
The mobile wallet market has exploded in recent years. Here are some mobile wallet options that stand out from the pack and serve millions of consumers:
- Apple Pay. Many businesses accept Apple Pay, which lets users make digital payments in-store and online. Apple Pay is available on iPhones, iPads, Apple Watches, and Mac computers.
- PayPal. PayPal is a leading mobile payments provider that lets customers make purchases online or in-store without using a credit card. Funds can be loaded into PayPal’s digital wallet, or users can link credit and debit cards to the account.
- Google Pay. Google Pay users can make purchases with payment card information stored in the digital wallet. Customers can also use stored payment information for Google services to make purchases online or in-store.
- Click to Pay. Click to Pay is an online checkout solution available through Visa, Mastercard, American Express, and Discover. It lets customers store payment information from those card companies and use it for purchases.
- Amazon Pay. Amazon Pay customers can make purchases with the credit and debit cards they have stored with the e-commerce giant. Amazon gets a commission for each purchase made through the service.
- Meta Pay. Meta Pay (formerly Facebook Pay) is a payment method available to all customers who use Facebook. It’s also available via Messenger, Instagram, WhatsApp, and anywhere you see the Meta Pay button when shopping online.
- Samsung Pay. Samsung Pay is a digital wallet and mobile payment service available on compatible Samsung devices.
Zelle for Business is a newer contactless payment option for businesses. However, your bank must offer Zelle as an option for your business account type for your company to use it.
Updating payments options to meet consumer needs
Mobile wallet usage is growing, and businesses understand their payment options must grow along with consumer interest and demand. Mobile wallets offer benefits for consumers and businesses – as companies like Starbucks have already discovered. If you’re not already set up to accept mobile wallet payments, check with your credit card processor to see how you can quickly get up to speed on this growing payment trend.
Linda Pophal contributed to this article.