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Traditionally, when it was time to take payment for a bill in a shop or restaurant, the customer could use either their checkbook, cash, or a credit or debit card. Now they have the option of also making mobile payments, or more specifically paying with their mobile phones. As the number of people owning smartphones grows, so does the expectation that businesses will offer this additional payment option. For business owners then, it is important to understand this growing technology, as well as how it will change taking face to face payments, as well as payments online.

How Does A Mobile Payment Work?

Making a mobile payment is not just about paying for a restaurant bill or buying clothes in a store though. It can work for business and customers in a number of different ways. Payments can be made via a premium SMS based transaction, which will then be billed to their mobile phone account, or you can do this through a hosted checkout.

Once the merchant has received notification of the payment, they will release the goods. Another way is via Direct Mobile Billing, one of the simpler online payment systems which allows consumers to make an online payment to an e-commerce site such as an online gambling site by using a two-stage authentication process, and then bills the consumers mobile account, with no need for debit or credit card or the setting up of an account.

A third way to take a mobile payment is known as WAP or Mobile Web Payments, and it works like a desktop payment system in that is uses web pages or downloaded applications to make a payment, usually with a credit or debit card. This process is sometimes preferred by those familiar with desktop payments for some time, or those who will use the same merchant again, and can, therefore, recall their information for later use.

And What About Mobile POS?

Mobile POS, or Mobile Point of Sale is most common in an in-store transaction. It is where customers are present and are able to make mobile payments at a POS device. The amount will then be charged to either a bank account, their mobile account or to a pre-paid account. The same is for the merchant who can take a payment using a mobile device such as an iPad, via their wireless network. Pay with phone, unlike the other mobile payments options, is all about the interaction between two pieces of hardware.

Also referred to as ‘contactless payment’, it works when a customer’s mobile phone is used via a radio frequency ID chip (RFIC) or Near Field Communication (NFC) technology, which will ‘speak’ to the payment terminal to authorise the payment. As this is still an emerging technology there are challenges to overcome, namely that established merchants will need to update their hardware, which can prove costly if they have a large number of stores. For a smaller or new business however, it is ideal. As such, customers are largely maximising its benefits right now when making transport payments such as parking meters, buying travel tickets or single-item purchases that are not too expensive.

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