The Benefits and Risks of Mobile Payment Technologies

The Benefits and Risks of Mobile Payment Technologies

By In Information, Uncategorized On February 4, 2015

Predicting Future Mobile Payment Technology Trends as an Up-and-Coming Payment Option

With each coming year, the advance of technology makes shopping an even quicker and more convenient process for consumers. On the vanguard is the advent of the mobile wallet – a still developing movement which allows consumers to purchase goods using a mobile device.

This new technology affords small business many opportunities to grow and capitalize, but the uncertainty also presents the possibility of new setbacks and challenges.

What is a Mobile Wallet?

The mobile wallet technology is still rather nebulous and undefined, but is generalized to mean a kind of cashless and card-less transaction which involves direct payment via mobile device.

This could be achieved through the medium of near-field communication (NFC)-enabled devices. The buyer would simply place their mobile device near the NFC terminal at a store and the payment would be made automatically using the device.

For card-not-present transactions, mobile payment options also include the use of consumer apps and other payment channels.

Experts predict mobile payments will become a mainstream option by the end of 2015. Moreover, mobile payments will yield roughly 10% of all card-not-present transactions. By 2019, mobile sales are expected to exceed $140 billion.

The Benefits of Mobile Payments

Consumers are attracted to the seamless simplicity of the mobile wallet concept. Eliminating the need to carry multiple cards, the mobile wallet pares down the shopper’s necessities to one convenient device.

The mobile wallet is also sure to win over the tech-savvy shoppers and gadget devotees who would be sold simply by the realization of the all-encompassing mobile device (or at least the novelty of the technology).

For retailers, the mobile wallet also offers the potential for increased operational efficiency. It can eliminate several steps from the payment process. It can also make the self-checkout option feasible for a much wider range of businesses–the customer can simply scan their items, swipe their device across the terminal and have a digital copy of the receipt emailed instantly.

Businesses could also increase customer loyalty by integrating a rewards or frequent shopper program into the process–when the customer uses a mobile device for payment, their rewards account is automatically credited as well.

Most importantly, merchants can expand their profit potential. By reaching more customers, the merchant has an increased likelihood of making a sale.

The Potential Drawbacks of Mobile Technology

As the technology is still in its infancy, there are still a host of uncertainties involved in the process.

The mobile wallet system relies on both the NFC technology as well as mobile devices, so any sudden change in these two platforms could hold unforeseeable consequences for the mobile wallet platform.

For a business, adopting the platform would necessitate NFC terminals, as well as maintaining an app to accept payments. It would also involve retraining many of the company’s employees on both the customer service end as well as in management to deal with the new checkout and payment processes.

Crossing the frontier into transactions which do not involve any kind of tangible tender also introduces problems which weren’t as prevalent for card-present merchants. These problems include the elevated risk of chargebacks.

For example, a person whose phone had been stolen and used to make a fraudulent purchase will likely file a chargeback.

Mobile payments bring new risks for card-not-present merchants too. Mobile devices are much more susceptible to hackers and fraudsters. More data breaches means unauthorized transactions and chargebacks will increase.

How Will Mobile Technology Affect You?

Ultimately, there are numerous benefits–as well as many troublesome uncertainties–surrounding the mobile payment channels. As technologies continue to develop and codify, it is likely that these concerns will be addressed. But for most small businesses, it might yet be a bit early to jump on board too enthusiastically.

If you think mobile payment options could improve your business’s profits but are leery of the risks associated with chargebacks, let’s talk. Fill out the form to the right. After conducting a free chargeback analysis, we’ll help you determine which areas of your business pose the highest risks.