Mobile Payment: Payments Made From a Smartphone or Tablet

What Is a Mobile Payment?

A mobile payment is a money payment made for a product or service through a portable electronic device such as a tablet or cell phone. Mobile payment technology can also be used to send money to friends or family members, such as with the applications PayPal and Venmo.

Key Takeaways

  • Initially more popular in Asia and Europe, mobile payments spread to North America and experienced considerable growth.
  • Merchants unwilling to retool existing terminals have contributed to the slow growth of mobile pay compared to physical credit cards.
  • Mobile payments offer additional privacy and security benefits compared to physical cards.
  • There are mobile payment apps for both Apple and Android (Apple Pay and Google Pay).

Understanding Mobile Payments

Many banks have recently adopted technology into their banking apps that allow customers to send money instantly to friends and family members directly from their bank accounts. Mobile payments are also made on site at stores by scanning a barcode on an app on your phone, accepting payments from convenience stores to large, multi-national retailers.

The cost of the purchase may be deducted from a pre-loaded value on the account associated with the particular store, or paid by credit or debit card. Payment information is encrypted during transmission, so it is thought of as being a safer payment method than paying with a debit or credit card.

Mobile payments work much the same as credit cards, without needing to reach for your wallet or purse.

Mobile payments first became popular in Asia and Europe before becoming more common in the United States and Canada. Early on, mobile payments were sent by text message. Later, technology allowed for pictures of checks to be taken via cell phone camera and sent to the payment recipient. This technology eventually morphed into mobile check deposit capabilities for banking apps.

Since 2014, apps such as PayPal and Apple Pay were developed that allow payment by passing a smartphone screen displaying a special barcode under a store's barcode scanner. They also allow the user to simply tap their phone against a contactless credit card terminal, paying instantaneously.

Soon to develop applications were competitors to Apple, companies like Google and Samsung, who released their respective mobile payment apps in the wake of Apple pay's success.

Benefits of Mobile Payments

The most obvious benefit of mobile payments is the elimination of a physical wallet. Not reaching and pulling out cash not only saves time but is safer as well as nobody is able to see the contents of your wallet or purse.

Touch ID in the form of a fingerprint scan or PIN input makes mobile payments more secure than a physical credit card. Since individual security codes are generated by the mobile service for each transaction, this method of payment is significantly safer than using a physical card. Merchants will usually not check identification, so accepting mobile payments is a smart move for them as well, as they will not have to deal with fraudulent activity as much.

An additional benefit—though a minor one for most people—is that when you are with other people they are not able to tell what card you have. Users with low credit scores and credit cards with low limits and high APRs might not want, say, an interviewer or date to know these things, and mobile payments offer an additional level of personal privacy.

Article Sources
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  1. PayPal. "PayPal with Fingerprint Authentication and PayPal App Now Available Globally on Samsung Galaxy S5, Gear 2 and Gear Fit." Accessed April 21, 2021.

  2. Apple. "Apple Announces Apple Pay." Accessed April 21, 2021.