April 7, 2021 Getting Paid en_US Mobile payments allow businesses to accept and process payments through mobile devices. Learn how mobile payments work and how to start accepting them. https://quickbooks.intuit.com/cas/dam/IMAGE/A8Dicb6qC/mobile-payments-guide-feature-us-1.jpg https://quickbooks.intuit.com/r/getting-paid/mobile-payments/ How to accept mobile payments: A guide for small businesses
Getting Paid

How to accept mobile payments: A guide for small businesses

By Kat Boogaard April 7, 2021

A whopping 65.6% of Americans check their phones 160 times per day. In 2019, the average U.S. adult spent over three hours on their smartphone every single day.

There’s no denying it: Our phones have become a part of us. We use them to browse social media, research the internet, connect via calls or messaging, take photos and videos, and even make purchases. That’s right—mobile payments are shaping the way customers shop not only online but also in stores.

Are mobile payments something your business should be using? And if so, what do you need to know about this increasingly popular payment method? We have all your answers right here.

What are mobile payments?

A mobile payment is an electronic payment made through a mobile device, such as a phone or a tablet.

Given our attachment to our digital devices and our desire for increased convenience, mobile payments are becoming increasingly popular. Research from McKinsey found that in a 12-month period ending in August 2019, more than three quarters of consumers in the United States had made some sort of mobile transaction.

4 types of mobile payments

The gist of mobile payments is that customers hand over money using their mobile devices. However, there are a number of different types of mobile payments that fall under this broader umbrella.

Four types of mobile payments

1. Browser-based mobile payments

You might also hear this referred to as a web-based payment or even an online payment. With this type of mobile payment, customers enter their payment information into a website on their mobile phone.

Some websites have a built-in payment system (Shopify sites, for example), while others use payment options on external systems (like Amazon Pay and PayPal). The latter option directs customers to a separate browser window where they complete their transaction.

In either case, the entire checkout and payment process is happening within their browser.

Example: Marcy has an e-commerce site for her pottery business where she sells her handmade coffee mugs. On her site, customers can add items to their cart, visit the checkout page, and enter their card details directly.

2. App-based mobile payments

This type of payment is similar to a browser-based payment, however, it takes place within a dedicated mobile payment app instead of through an internet browser.

This is common among larger businesses and retailers, especially food businesses. Starbucks, Panera, and McDonald’s are just a few of many companies who have a dedicated mobile app where customers can make purchases.

Even if you aren’t an industry giant, this type of mobile payment can be used by any business that has and runs their own app.

Example: Keegan runs his own bakery where people stop to grab a quick to-go breakfast. He worked with a developer to create a mobile app specifically for his bakery. Through the app, customers can order pastries and process their payment, then pick up their order at the counter.

3. Mobile credit card readers

A mobile credit card reader allows business owners to use their mobile phone as their point of sale (POS) system.

To do this, they’ll need to purchase a mobile card reader (don’t worry, QuickBooks has one). Today, most card readers not only process physical cards but digital wallets too—which we’ll talk about more in the next section.

Example: Jordan has a commercial cleaning business, where his crew cleans various office buildings. He likes to process payments from customers on the spot, so he uses a mobile card reader to accept payments from clients on location.

4. Contactless payments

Out of all of these types of payment methods, contactless payments are the ones that seem to be gaining more and more steam—especially since the start of the COVID-19 pandemic. Research from the National Retail Federation (NRF) found that no-touch payments have increased by 69% since January 2020 and 19% of U.S. consumers made a contactless payment for the first time in May 2020.

Here’s how it works: Customers use a mobile wallet (like Apple Pay for iPhone, Samsung Pay for Android devices, or Google Pay). They open their wallet app and a card reader scans their phone. Using Near Field Communication (NFC) technology, the card reader processes the payment information. There are a few contactless payment services (like PayPal) that use a Quick Response code (QR code) instead of NFC technology.

There are no physical card swipes or traditional authentication methods like PINs and signatures, and the actual card information isn’t transmitted. Instead, contactless payments use a virtual token that stands in for the card numbers, which is called tokenization.

There’s another subset of contactless payments: invisible payments. These happen almost without any action by the customer and reduce a lot of friction in the purchase process. Uber is a common example; you pay for your ride without even thinking about it.

Example: Jordan runs his own automotive repair shop. When customers come to pay for and pick up their vehicle, they hold their mobile device over Jordan’s card reader to process their payment.

Why are mobile payments important?

Wondering whether or not your business should consider implementing mobile payments? Here’s the short answer: Yes.

Mobile payments are convenient for customers and make the checkout process seamless and straightforward. And, the easier you make it for your customers to complete a purchase, the more likely they are to actually do so.

It’s no wonder that mobile payments continue to gain traction, especially among younger consumers:

  • The COVID-19 pandemic kicked cashless payments into overdrive, with 27% of small business owners reporting an increase in contactless payments using contactless cards or mobile phones in late March 2020.
  • 40% of millennials say they would give up carrying cash in favor of mobile payments.
  • One third of Americans say they’d like to pay via their smartphone all the time.

In short, mobile payments are quickly transforming from a “nice to have” to a “must have,” and you don’t want your business to be left behind.

How to accept mobile payments: 3 simple steps

Mobile payments sound complicated. But, the good news is that they’re actually pretty painless to implement and accept.

If you have a brick and mortar location where you want to accept mobile payments, here are the steps you’ll need to follow:

Steps to accept mobile payments
  1. If you don’t have one already, purchase a card reader. Look for one that not only accepts mobile debit card and credit card payments but also contactless payments.
  2. Register your business with your mobile payment system. Whatever reader or system you’re using should walk you through the steps to get set up.
  3. Connect your business bank account to process and receive payments. Your system will give you step-by-step directions to establish this connection.

Be aware that your business might pay a fee for credit card or mobile transactions. Read the fine print carefully so you know exactly what to expect.

What about if you have an e-commerce business? Many website platforms have payment functionality built in or available using something like Shopify, Squarespace Commerce, or WooCommerce.

You’ll need to sign up with one of those platforms (if you haven’t already) and then follow the steps to accept mobile payments on your website.

Benefits of accepting and using mobile payments

We’ve briefly touched on the fact that mobile payments are moving from a benefit to an expectation in the eyes of consumers. But, as a business owner, figuring out mobile payments feels like yet another thing on your growing to-do list.

Here’s the good news: Implementing mobile payments for your customers is more than worth it as they offer the following advantages:

  • Increased convenience for customers: Mobile payments are quick and easy for customers. This also speeds up the checkout process, reduces lines in physical locations, and improves the overall customer experience. That’s important when you consider that 32% of customers admit they’ll walk away from a brand they love after just one bad experience.
  • Less cash management: Not only do customers not have to worry about their wallets, but you don’t have to count cash at the end of the day and make endless bank deposits. This concept is so appealing that Sweden is making the move to be completely cashless.
  • More efficient bookkeeping: Your mobile payment system should be linked to your accounting system. That takes care of any manual data entry for you, reduces human error, and saves you from various bookkeeping hassles.
  • Integration options: Many mobile payment solutions also offer integrations like customer loyalty programs and incentives, where loyalty points are tied directly to a customer’s mobile device. It’s a way more straightforward approach for both you and your customers than a punch card or other physical method.
  • Greater revenue: If you have a business that generates sales at different locations—like farmer’s markets or craft shows, for example—only accepting cash or check payments closes you off from a number of customers. Mobile payments can increase your customer base and give your revenue a boost.
  • Better security: Security features are always a concern when you’re processing a customer’s payment information. However, mobile payments are just as secure as a credit card transaction, if not more so. That’s because many mobile payment systems use tokenization to initiate money transfers, and tokenized data is useless to hackers and other cyber criminals.

How do mobile payments work?

Rest assured that you don’t need to understand the ins and outs of mobile payment technology to be able to use them in your business.

But even so, it’s nice to have at least a general grasp on how mobile payments work so you feel comfortable and confident allowing your customers to pay this way.

Exactly what happens behind-the-scenes of mobile payments depends on what type of technology you’re using. There are two different types of technologies used for mobile payments:

Near Field Communication (NFC) vs Magnetic Secure Transmission (MST)
  • Near Field Communication (NFC): The card information is stored in a customer’s smartphone or their debit or credit card, which contains an NFC chip. When they place their card or device near the terminal or reader that also contains an NFC chip, the card data is exchanged and payment is processed.
  • Magnetic Secure Transmission (MST): When they’re placed close to one another, a customer’s smartphone will communicate with a business’ card reader using magnetic signals. It’s essentially the same thing as a magstripe reader used for physical cards, except without the actual swipe (which is now considered to be somewhat obsolete). If your credit card reader already has a magstripe reader, you won’t need additional equipment to process MST payments the way they do to process NFC payments.

Both will get the job done and complete the payment process, and many businesses actually use and accept both types of payments.

Reap the benefits of mobile payments

We’re willing to bet that your mobile device is within arm’s reach right now—and the same is true for your customers.

When 92% of Americans believe that smartphone addiction is real, mobile payments are no longer a luxury or added perk for consumers. They’re quickly becoming an expectation.

Sound daunting? It doesn’t have to be. Use this article as your guide to get mobile payments up and running for your business and you’ll streamline the checkout process, improve your customer experience, and ultimately boost your bottom line.


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Kat Boogaard is a freelance writer specializing in career, self-development, and entrepreneurship topics. Her work has been published by outlets including Forbes, Fast Company, Business Insider, TIME, Inc., Mashable, and The Muse. Read more