Why You Need to Accept Mobile Wallets at Your SMB
Consumers are increasingly using digital wallets like Apple Pay at checkout. Learn more about this payment method and how your small business can accept it.The use of mobile wallets is on the rise.A mobile wallet is defined as any smartphone capable of making financial transactions. Many smartphones now include mobile wallets as a built-in feature.
You can work with your credit card processor to accept mobile wallet payments.
This article is for business owners who are considering accepting mobile payments.
When Apple Pay was introduced in 2014, many people scoffed at the idea that a smartphone could replace cash and credit card transactions at the point of purchase. Today, mobile payments are on the rise – and expected to surpass $250 billion by 2024, according to a Global Market Insights Inc. report.
Several factors are converging to drive this growth: the proliferation of smartphones (about 96% of Americans use them), enabling technology, lifestyle changes, demand for improved customer experiences, and the need for fast, easy and secure transactions. Millennials are currently the largest audience for mobile payments – nearly half the people in this age range report using a mobile wallet.
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Over the last few years, top technology innovators like Apple, Google and Samsung have advanced the mobile payment industry by introducing next-generation mobile payment apps, making mobile payments more accessible to more consumers
Merchant support for the technology has also increased, as most new credit card readers and point-of-sale (POS) terminals can accept mobile wallets and other contactless payments.
For small businesses, accepting mobile payments can improve the customer experience and streamline processes, to name just a few benefits. Some industry experts say that adopting mobile payment technologies is one way to future-proof your business. But does it make sense for small businesses to get on board now?
To help you weigh the pros and cons, here's an overview of mobile payments, potential benefits and the technology necessary to support them.
What are mobile wallets?
As a broad definition, a mobile wallet involves any technology that turns your smartphone into a wallet capable of making financial transactions. This can also involve making credit card payments, relying on near-field communication technology ("tap to pay"), and often includes incentives for consumers like loyalty programs and coupons.
The clear advantage is "contactless payment," which typically involves NFC technology. Phones such as the Samsung Galaxy S20 use NFC so you don't have to swipe a credit card; you simply place the phone on a reader that scans the QR code for the customer's card.
Mobile wallets work in the store for small business transactions, but they can also be used for online payments. It's a way for customers to avoid carrying a real wallet or purse, using one device for all payments.
Of course, the mobile wallets complete the transaction with the customer's existing credit card. For example, they can link Apple Pay to their bank card or credit card. Sensitive card data is replaced with encrypted tokens for extra security.
With various digital wallet apps, a smartphone can be used to make payments, record and redeem loyalty points, replace paper boarding passes, convey personal identification, and transmit credentials that grant access to secured doors and rooms.
Key takeaway: Mobile wallets let customers use their smartphones to make payments online or in-store via tap-to-pay or QR code scans.
What are the benefits of mobile wallets for businesses?
Among the benefits of digital wallets for businesses are:
Growing increasingly popular with consumers. A November 2020 report on mobile payment predicted that, by the year's end, 760 million people globally would count themselves as mobile wallet users. With such a large user base, it only makes sense for your company to allow for mobile payments – more convenience for customers may mean more sales for you.
Quicker transactions. Mobile wallets facilitate quicker transactions than traditional payments such as debit and credit cards. Debit cards require customers to enter a PIN and credit cards may require customers to give their signature before a transaction is complete, neither of these requirements is part of mobile wallet payments.
May slowly replace debit cards. Mobile wallets are usually extensions of debit cards rather than entirely new bank accounts that customers open just to be able to pay from their phones. As such, they could grow to entirely replace debit cards. This is especially true since many millennials and Generation Z customers always have their phones with them, so accidentally leaving a card or wallet at home isn't a concern for this group.
Mobile apps can be part of mobile wallets. Look to Starbucks for an example of this advantage in action. The ubiquitous coffee brand offers rewards programs, coupons and more incentives through its app, which can also be added to a customer's mobile wallet and used as payment – think of it as a digital Starbucks card. This model at once gives Starbucks a loyalty program and a payment avenue through which 25% of its transaction occur.
Additional security. Credit cards come with security risks, many of which are eliminated when using mobile wallet payments. For example, since mobile wallets must be verified by the customer using a fingerprint or a four to six-digit PIN they set, you don't have to worry about your staff failing to match the customer's name or signature to those on a card. There's also no chance of accepting fake credit cards, as without connections to a real debit account, mobile wallets and payment programs simply don't work.
Can earn customer loyalty. Some customers are dead set on only paying with mobile wallets. If your company is among a few in its industry or market that take mobile payments, then those customers will likely choose you over a competitor.
Key takeaway: The benefits of using mobile wallets for business include faster transactions, a growing user base, more secure transactions and the potential facilitation of customer loyalty programs housed in your company’s mobile app.
How safe are mobile wallets?
Mobile wallets have preinstalled security features designed to stop anyone else from using the account. Whereas credit cards are easy to scan or steal, mobile wallets are easy to keep track of – since most people usually know where their phones are – and include encryption technology. They also offer optional security measures to prevent unwanted users from using the mobile wallet app, such as a required face scan, fingerprint, PIN or passcode.
Mobile wallets are harder to steal from because they are harder to replicate. Usually, people hang on to their phones more than they do their wallets. If someone loses their wallet, their cash is gone. If someone loses a phone, the lock on the phone and the app protects against theft.
There are some inherent risks in relying solely on a mobile wallet for payments, of course. The phone could die right at the point of purchase, a bug could prevent the traction from working or make the QR code unreadable, and there's always the chance of user error. (For these reasons, you should give your customers as many payment options as you can.)
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