How Do Mobile Payments Work?

As we move closer to a cashless society, alternative forms of money, and faster means of paying for purchases are becoming more widespread. Most of us do at least some of our transactions online—bill pay or online shopping from new shoes to airline tickets.
But what if you’re not at your computer? How about using your smartphone?
Business News Daily recently listed 27 different mobile payment systems available to businesses, and the number is likely to grow. Financial and online giants like Google, Amazon, PayPal, American Express, MasterCard, and Visa, among others, have all developed mobile payment platforms, and Apple, Microsoft, and Google all have apps in one form or another for their smartphone operating systems. Forbes magazine even suggests that in the not-too-distant future, plastic cards may fade into memory like rotary phones, VCRs, and 8-track tapes.
So how do mobile payments work? Chances are that if you have a smartphone and a bank account, getting started is simply a matter of downloading a free app. Then it’s simply a matter of holding your phone close to a terminal that can read a QR code, barcode, or receive an electronic signal to pay your bill. While not all retailers are onboard, the number is growing. Even fast-food places like Burger King, Wendy’s, and Starbucks take mobile payments—in fact the Starbucks app is the most-used digital payment system in the U.S., accounting for over 14% of the chain’s revenue and its use grows daily.
While the plastic card issuers are integrating mobile payments into their systems, they’re not in a hurry to give up the lucrative card market since they exist on the fees they charge merchants and banks to process payments on their systems. Instead, they’re putting microchips in the cards that allow them to be read electronically using what’s known as Near Field Communications (NFC). With NFC, a card is passed close to a reader and an information exchange takes place. Because most NFC systems are cloud-based, other information such as loyalty card data can be part of the process. Several smartphone apps use NFC, as well.
You may have concerns about your financial data bouncing around the ether, and those concerns are legitimate. The payment system providers have taken various measures to keep your transactions safe. NFC devices, for instance, only communicate over very short distances, usually a matter of a few inches, and authorization codes are typically only valid for a few minutes, at most. All smartphones have the option of setting passwords for access. Apple has gone even farther, incorporating fingerprint readers in its latest versions of iPhones.
Is the security perfect? Probably not, but it’s generally safer than handing your Amex to a stranger at a restaurant. Plus, starting in October 2015, retailers and card issuers that haven’t adopted smart card technology will become liable for fraudulent transactions. Long in use in Europe, it has helped increase security and reduce fraud there.
Fans of Bitcoin and other cryptocurrencies may find that mobile payment technology is especially helpful to them, since a merchant no longer has to officially accept the currency in order for you to pay with it. If you both subscribe to a payment processor that handles the currency, the transaction is transparent to the merchant, who can be paid in government currency if they choose. has a look at 10 mobile payment systems for consumers, as well as a series of other articles on mobile payments. Business owners can read an article about payment systems at for details on the many options available. For an in-depth look at whole mobile payments landscape, check it out on Wikipedia.
Our eyes are firmly focused on the future at Amagi Metals. We stay informed of the latest news and trends, whether in payment systems, cryptocurrencies, sound money policy, precious metals, or the economy in general. We pass this information along to our customers through the Knowledge Center on our website,, because we believe that knowledge is not only power, but the key to prosperity, as well.

One Reply to “How Do Mobile Payments Work?”

Leave a Reply

Your email address will not be published. Required fields are marked *