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Grow Your Business Technology

Should Your Small Business Accept Mobile Payments?

business mobile payments
Credit: Denys Prykhodov/Shutterstock

In the past few years, you may have noticed a new kind of credit card terminal at cash registers, one that customers wave their smartphones over. These new mobile payment systems that use NFC technology have been cropping up everywhere, with companies like Apple, Samsung and Google hoping to make their mobile phones a new replacement for your credit cards.

Since going online in 2014, Apple Pay has been available to the roughly 90 million U.S. iPhone owners, with alternatives made available to Samsung, LG and other Android smartphones. However, most smartphone owners have not been using these virtual wallets.

Mobile, contactless payments have been growing, but at a much slower pace than anticipated. Less than two percent of card payments are done with smartphones, making it far from mass adoption, Ian Holmes, manager of banking fraud with SAS, said. Interest initially surged when the technology was released, mostly with younger users, but has since plateaued.

The main concern of most consumers is storing their credit card data online and in their phones, according to Bart Mroz, CEO of digital commerce consultancy SUMO Heavy.

"Every big technology player wants a mobile payment system. But mobile payments aren't good enough to supplant traditional payment methods completely," Mroz said. "Storing raw credit card data necessitates an incredible amount of security and process to maintain, and that's [what is] holding many consumers back from using mobile payment apps."

While growth in usage hasn't come to a standstill, it's slowed significantly in the past year. Zohar Steinberg, CEO of mobile payment company Token, says consumers want a more convenient way to make payments at the register, but a recent flood of major data breaches has shaken their confidence in these systems' security.

"As a security solutions provider, we see that today's consumers are very picky and value trustworthiness the most when it comes to their personal and financial information," Steinberg said.

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Several companies have made strides to improve security and market that their solution is trustworthy.

Typically, transactions at the register are secure. It's loading users' credit cards into the system that presents a risk, Holmes said. However, more cooperation with major banks has proven to increase security.

"During the initial rollout of Apple Pay, Apple took the view [that] they knew the risks of facilitating payments and restricted banks insights during the request to connect a card with a device," Holmes said. "After fraudsters exposed weaknesses, Apple relinquished some of that control and provided banks more insights. Banks also became [savvier] about the risks." [Read related story: How to Use Face ID and Apple Pay]

Multi-factor authentication has served to increase security when accessing virtual wallets, helping ensure the card info on a phone can only be accessed only by users who physically poses their phone and/or input the necessary biometric signature such as a fingerprint. Companies also use tokenization, a process of creating a proxy payment signature that allows you submit payment information without giving your actual card number.

Some mobile payment systems have also employed incentives to get more users. Starbucks's app is a mobile payment system for a single brand, but is one of the most popular because of its rewards program.

While contactless pay with smartphones has lagged domestically, the technology is more widely accepted in places like Asia. According to Chargebacks911 COO Monica Eaton-Cardone, Chinese consumers spent $5 trillion on mobile payment apps last year, with roughly half the population using payment platform Alipay for day-to-day transactions.

"This is a pattern we're seeing throughout Asia, Latin America, and Africa, with developing economies maturing into increasingly-affluent — and mobile-native — consumer economies," Eaton-Cardone said. "Here in the U.S., payment cards came around decades before mobile technology. In many other parts of the world, though, the consumer economy is developing in a post-mobile environment."

While using your smartphone to pay for groceries, gas and other goods hasn't become as synonymous as using your debit card, consumers are still interested in the convenience of carrying their cards with them virtually in their phone. According to a Boston Retail Partners study, Apple Pay, the most popular mobile wallet is currently accepted by 37 percent retailers, with 40 percent planning on accepting it in the near future. Apple's competitors aren't far behind either.

The more retailers offer the option for contactless, mobile payments, the more consumers will realize that it's a viable option for payment, and vice-versa – as confidence builds that their private information will be kept secure, consumers will drive demand for more vendors to provide NFC contactless readers at the register.

Editor's Note: Looking for a credit card processor for your business? If you're looking for information to help you choose the one that's right for you, use the questionnaire below to have our sister site, BuyerZone, provide you with information from a variety of vendors for free:

Andreas Rivera

Andreas Rivera graduated from the University of Utah with a B.A. in Mass Communication and is now a staff writer for Business.com and Business News Daily. His background in journalism brings a critical eye to his reviews and features, helping business leaders make the best decisions for their companies.