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mobile wallet solutions

Small Business Guide to Mobile Wallets

By Nick Nayfack

Have you ever used a mobile wallet? Gartner forecasts that the worldwide mobile payment market will have more than 450 million users and a transaction value of more than $721 billion in 2017. While mobile wallets have been around now for years, they have been slow to gain traction with consumers. That may be changing now as more consumers seem interested in using this service, and as information surrounding the launch of the Apple Pay mobile payment system continues to dominate technology news. Just exactly how do mobile wallets work and why would consumers want to use them?

What is a mobile wallet? A mobile wallet allows a consumer to make a contactless payment from a smart device. Instead of swiping a card or entering a pin number on a point-of-sale (POS) terminal, consumers can pay with a tap on their smartphone.

What is near-field communication (NFC) technology? Mobile wallets use NFC technology to make contactless payments. NFC is a form of short-range wireless communication between two electronic devices. Retailers must have a NFC POS system in place in order for consumers to use mobile wallets.

How do loyalty and rewards programs work with mobile wallets? The introduction of mobile wallets illustrates a value-add component for merchants and consumers that goes well beyond a simple payment transaction. Consumers can take advantage of retailer loyalty and rewards programs through the mobile wallet. Merchants can provide compelling incentives for consumers to use a mobile wallet, which will increase customer engagement with their brand. Starbucks is a good example of a mobile payments success story that uses loyalty to drive customer engagement. Starbucks has the most widely used digital payments application in the U.S. with more than 10 million users.

Why has consumer adoption been slow for mobile wallets? Consumers who are not early technology adopters have been unaware or skeptical that this payments technology is necessary. Consumers are used to using regular wallets, interacting with a cashier and handling cash and credit cards. Changing consumer behavior always takes a fair amount of time, but the tide is now turning in favor of mobile wallets. 

What Are the Advantages of Accepting Mobile Wallets at My Business?

Mobile wallet payments offer two distinct advantages over traditional credit cards:

•    Convenience. Mobile wallets are just another step toward being required to carry just one thing — a smartphone. No more wallets full of credit and debit cards. Consumers can pay quickly with their phones and keep your lines moving.

•    Security. While no system is perfect, mobile wallets offer some advantages over typically credit cards. A stolen card doesn’t require a passcode or physical ID to make a purchase, but smartphones do. Additionally, these systems typically use some level of encryption so your actual credit card number is not stored or transmitted in the system. Instead, a one-time code is generated, so even if the system is later compromised, personal data is not available. For your business, you’re not just giving your customers peace of mind, you’re also taking additional steps that aid in PCI compliance.

As a business owner, these points are also good for you. Customers like convenience, and mobile wallet systems are both convenient and provide a little bit of “wow” factor. And anything any part of the payment chain can do to improve security in this new age of compromised data is promising.

Will Mobile Wallets Finally Catch On?

Google Wallet debuted in 2011, yet it’s still only a marginal player in the payments industry. Apple Pay was announced with partners that would put them in hundred of thousands of locations at launch day, but that’s still just a small fraction of businesses in the U.S. However, many in the industry believe we may have finally turned a corner to broad mobile wallet acceptance in the near future, driven by these factors:

•    People are upgrading to NFC-enabled smartphones in record numbers. Apple alone reported the sale of more than 10 million iPhone 6 and 6 Plus models (NFC equipped) in just three days. 
•    The need for increased security in every aspect of the payment chain. Additionally, the drive to the EMV (or chip and pin) standard in the next several months so it’s the perfect time to upgrade to NFC as well.
•    The fact that major players — like Google and Apple — are driving mobile wallets.
•    Consumer demand. Many other countries are far ahead of the U.S. in mobile wallet adoption, and consumers here are expressing a desire for the service.

As you look at your payment processing needs moving into 2015, it’s important to recommend mobile wallet options and explore how they could work for your business. 



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