How to accept mobile payments in 3 steps

According to Finder, 76% of UK smartphone users use banking apps, and 48% use payment service apps. Being able to pay by mobile is becoming a basic expectation. 

Mobile payments are shaping the way customers shop not only online but also in stores. Here’s what you need to know about how to get your small business to accept mobile payments, including the different types, their benefits, and how they work.

Jump to a section:

• What are mobile payments?

• 5 types of mobile payments

• Why are mobile payments important?

• 3 steps to accept mobile payments

• The benefits of accepting mobile payments

• How do mobile payments work?

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.

In the context of a small business, a customer might visit your bricks and mortar store, and want to pay using their mobile phone. For example, they may have a digital wallet like Google or Apple Pay, where they simply tap their phone like a contactless payment.

5 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.

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. If they visit her site on a mobile phone, 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, KFC, 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. However, there is now a further addition of aPOS (Application Point of Sale) that is different from mPOS (Mobile Point of Sale).

• mPOS requires additional hardware to take payments from customer phones, such as a compact and portable card reader that works with your mobile phone.

• aPOS is software or an app that turns your mobile itself into a contactless POS, without the need for any clunky extra hardware like a Bluetooth card reader. 

To do mPOS, they’ll need to purchase a mobile card reader. 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. 

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 tokenisation.

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.

5. Application Point of Sale (aPOS)

These are software applications specifically designed for mobile devices like tablets or smartphones, allowing businesses to accept payments and manage sales on the go. 

They're a plausible option for small businesses looking for a flexible, affordable, and user-friendly POS solution. They can download an app such as Zettle or Shopify POS, set up the app with their products, and take mobile payments through the mobile app. 

If you use a system like Zettle by PayPal, there are no extra fees or costs for hardware such as a card reader. It accepts cards and digital wallets like Apple and Google Pay.

Example: Jordan has a stall at a festival selling jewellery. When customers want to pay for a product, they hover their phone over Jordan’s phone to make the 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.

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.

3 steps to accept mobile payments

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:

• 1) If you don’t have one already, purchase a card reader. Look for one that not only accepts card payments over the phone but also contactless payments.

• Alternatively, download an app that allows you to use your phone as the point of sale. QuickBooks integrates with the Zettle by PayPal POS app.

• 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 mobile card payments. 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

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. 

• 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 tokenisation to initiate money transfers, and tokenised data is useless to hackers and other cyber criminals.

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 might feel like yet another thing on your growing to-do list.

How do mobile payments work?

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): 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. It needs to be less than two inches away to work.

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

You may also have heard of EMV, which stands for Europay, Mastercard and Visa. This is a security protocol established for the embedded chips in credit cards, as opposed to relying solely on magnetic stripes. 

EMV technology is used for mobile payments as well. Many mobile payment systems, such as Apple Pay, Google Pay, and Samsung Pay, utilise EMV standards for secure transactions. These systems often rely on near-field communication (NFC) technology to enable contactless payments, where the EMV chip securely transmits payment information to the point-of-sale terminal during a transaction.

Reap the benefits of mobile payments

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

With more and more studies revealing that smartphone addiction is real, mobile payments are no longer a luxury or an added perk for consumers. Mobile statements are quickly becoming an expectation.

Sounds daunting? It doesn’t have to be. You can use this article as your guide to get mobile payments up and running for your business and you will most likely streamline the checkout process, improve your customer experience, and ultimately boost your bottom line.

FAQs

How much does it cost to take a card payment on your mobile?

Some mobile payment providers charge fees for card payments, so it’s essential to check the terms and conditions carefully. Fees can rise for large transactions, and fees may vary depending on the payment method – for example, paying by credit card or bank transfer.

Is mobile credit card processing safe?

Mobile payments use a variety of encryption methods to protect your information, and some payments can’t be made without a fingerprint or facial recognition on your phone. It’s important to keep apps updated and use multifactor authentication if possible.

What about making traditional phone payments during a call?

Some businesses allow customers to pay over the phone, such as takeaways or services requiring a personal discussion. These types of phone payments may have higher fees and risk of fraud (someone calling with a stolen card), but give an opportunity to upsell.

What is a virtual terminal payment?

Small businesses have the option to utilise virtual terminals for receiving payments from clients, whether it be over the phone, through email, fax, or face-to-face using an internet-enabled device such as a laptop, tablet, or smartphone. The majority of virtual terminals are capable of processing credit and debit cards, along with ACH payments.

Is EMV better than NFC?

NFC and EMV serve different purposes in the realm of payment technology. NFC facilitates contactless transactions, offering convenience and speed, while EMV enhances security by using chip technology to authenticate transactions. Both are valuable in their respective roles, with NFC providing convenience and EMV bolstering security. Which one is "better" depends on the specific context and priorities of the user or business.

Starting your own business

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