06 Feb The Mobile Wallet: An Up and Coming Method of Merchant Credit Card Processing
You may never have heard the term “mobile wallet” before, but if you are involved in merchant credit card processing, pay attention. This is the wave of the future. Mobile wallets will be one of several ways to process payment no matter where you are in the next few years, and for a business that doesn’t stay in an office, it can make closing the sale much simpler.
Mobile Payment Options
Wireless terminals, SMS payments and mobile wallets are all ways to process payments without being hooked to a telephone line. Each works a bit differently.
* Wireless terminals are the most commonly used mobile payment options at this time. They use WiFi connections or cellular phone signals to process payment from credit cards in a traditional manner. Another choice is a smart phone adaptor which allows merchants to use their Blackberry or iPhone to do the same thing. Barring the smart phone apps, there is nothing particularly new with this technology.
* SMS payments involve a relationship between a particular merchant and the cellular service provider. You can set up such arrangements so that either the merchant initiates contact or the buyer does, but the end result is that when the buyer texts a specific message to a particular number the merchant gets paid. The most common use at this time is for small ticket items such as cell phone ringtones, games or charitable donations. With a charge of 50% per transaction though, it is hard to understand why anyone would bother at this point.
* Mobile wallets aren’t quite here yet. The technology is still in development, but is very promising. Just about everyone has a mobile phone and by providing secure software that will allow people to simply “swipe” their phones in some manner to pay for purchases, the whole process of credit card payment could be abbreviated.
So What is the Hold Up?
There are several features that any mobile wallet must have for it to be successful. First, it must allow the buyer to select which card they wish to use for which purchase. Next, it must work with whatever phone the buyer already has. It must allow for use of current accounts, without requiring the buyer to establish new lines of credit. Security must be extensive so that if a person loses their phone, their credit card information isn’t at risk and finally, a mobile wallet must work as quickly as a regular credit card to replace it.
All of these features may seem simple enough, barring the security issue, but actually, they take a great deal of programming, planning and work.
The Missing Parts of the Puzzle
For all of the above items to be addressed three things must happen. Software will need to be written that allows phones to communicate with credit card terminals – a relatively simple issue.
More complex is the need for merchant-based hardware and software to change so that it can interact with the customer software. The problem here is that different terminals use different formats, many of which are proprietary. For a widespread mobile wallet concept to work, all credit card processing will have to work on the same system.
Of greater concern is finding a way to link customer credit cards to their phones and their banks. The catch here is that current regulations don’t allow for “middlemen” in the payment process. What that means is that there is no provision for payment to transfer from the customer’s bank to the phone company and then to the merchant’s account. It will take some significant changes to make it possible for the money to transfer directly, and that is likely to be the biggest hold up.
When Will It All Happen?
Best estimates span between five and ten years in the future. Regulatory hurdles take time to overcome and there is always that nasty little security bit that will prevent people from jumping on board when mobile wallet programs do finally appear. The best case scenario would involve third party payment organizations introducing the technology, since they aren’t held back by the red tape inherent in the credit card industry.
It is inevitable that some sort of mobile wallet will appear in the near future. When it does, merchant credit card processing will change dramatically.