Apple pay was the first to really embrace the idea of paying for items at stores using mobile technology. They cornered the market on mobile payments from 2014 to 2016 but now they have some competition. Many different companies now including Samsung, Chase, Android, Microsoft, Walmart and Kohls offer users the option to pay without reaching for a wallet. They are all slightly different but use the same basic technology.
According to BI Intelligence, a research service operated by Business Insider, the total amount of payments made using mobile technology is going to be close to $75 billion dollars in 2016. They estimate that by 2020, more than $500 billion dollars of retail payments will be made using this technology as the technology gets better and more user friendly. What follows is an explanation of how these mobile payments technologies work and what effect they will have on how we shop.
Understanding Contactless Payments
Are you confused about what contactless payments are and how you can use them? Imagine this – your iPhone has the Wallet app and allows you to use Apple Pay. You enter your payment information (credit or debit card) in Apple Pay where it will remain until you need to use it.
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You are out picking up some groceries and you see that the store offers mobile payment readers. Instead of getting out your credit or debit card, you just place your phone near the point-of-sale device and your payment information will be transferred and the payment made.
The way this works is the chip in your iPhone and the POS (point-of-sale) terminal communicate with the chip on your phone and an antenna via radio waves. Your phone being placed near the terminal signals the chip in the phone and the POS device to securely transfer your payment. There is no risk of anyone being able to intercept this information with contactless payments as it happens in less than one second.
Understanding NFC (Near-Field Communication) Technology
NFC technology is different than Contactless Payment technology. With Near-Field technology, your smartphone can communicate with another device that would be classified as a reader. For NFC technology to work, one of the devices has to create a RF field which starts the transaction and gives the other device the signal to communicate. In our example in the beginning of the article, the reader device at the store would initiate the transaction by communicating with your smartphone where the payment information is stored.
There is really an endless amount of opportunity for NFC technology in the retail world. This type of payment technology is something that the retail world has been looking to incorporate for a long time. In order for the technology to work, though, the retailers must have terminals that are up to the security standards for EMV. The retailers must also purchase these payment terminals from specific companies including VeriFone and Ingenico. These companies sell devices that work with the wallet app on smartphones to accept NFC payments.
EMV is the key to enabling retailers to use NFC technology as the NFC technology is very specific about how it works with mobile phones. Many retailers are already purchasing the technology needed to make NFC technology a reality in their stores. VeriFone is already reporting record growth as retailers purchase this technology.
Understanding Bluetooth Payment Technology
Compared to the other technologies discussed above, Bluetooth payment technology is relatively new and experts are still trying to figure out exactly how to use it in the retail setting. It is thought, though, that Bluetooth payment technology may be the future of retail payments. Mobile platforms like Apple, Google, Microsoft and BlackBerry have been using Bluetooth for many years but are now focusing more on NFC technology with the wallet apps that they offer on their phones.
Even though it is not used as much for contactless payments right now, Bluetooth technology definitely has some benefits as compared to Apple Pay and other wallet apps. Bluetooth technology allows shoppers to connect their mobile devices to the reader device at a greater distance than the NFC technology. Bluetooth can work as far away as 50 meters while NFC technology requires the device be just centimeters from the reader device. The distance that Bluetooth offers would make the checkout process go a lot smoother and faster which would benefit everyone. You would be able to leave your phone in your pocket or purse to pay with Bluetooth technology.
Another benefit of using Bluetooth for retail payments is that the payments process quicker than they do with NFC technology. NFC technology can only process one payment from one device with one reader at at time. Bluetooth payment technology allows many different transactions to be processed at just one processing terminal which would mean less waiting in line at retailers.
Furthermore, Bluetooth payment processing is almost always faster than NFC.
There is a lot to learn still about how mobile payments can improve the shopping process for both customers and retailers. As time goes on, technology is sure to improve and we will learn more.