You may never have heard the term “mobile wallet” before, but if you’re involved in business 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 for years to come, 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 ways to process payments without being connected to a phone line. Each one works a little differently.
* Wireless terminals are the most used mobile payment options at the moment. They use WiFi connections or cell phone signals to process credit card payments in the traditional way. Another option is a smartphone adapter that allows merchants to use their Blackberry or iPhone to do the same thing. With the exception of smartphone apps, there is nothing particularly new with this technology.
* SMS payments imply a relationship between a particular merchant and the cellular service provider. You can set up such arrangements so that the merchant initiates the contact or the buyer does, but the bottom line is that when the buyer sends a specific text message to a particular number, the merchant gets paid. The most common use right now is for low-cost items such as cell phone ringtones, games, or charitable donations. However, with a 50% transaction fee, it’s hard to see why anyone would bother at this point.
* Mobile wallets are not here yet. The technology is still under development, but it shows great promise. Almost everyone has a mobile phone and by providing secure software that will allow people to simply ‘swipe’ their phones in some way to pay for purchases, the entire credit card payment process could be shortened.
So what is heist?
There are several features that any mobile wallet must have in order for it to be successful. First of all, it must allow the buyer to select which card they want to use for which purchase. Then it should work with whatever phone the buyer already has. It must allow the use of checking accounts, without requiring the buyer to establish new lines of credit. Security needs to be extensive so that if a person loses their phone, their credit card information isn’t at risk, and finally, a mobile wallet needs to work as fast as a regular credit card to replace it.
All of these features may seem pretty simple, except for the security issue, but they actually require a lot of programming, planning, and work.
The missing pieces of the puzzle
For all of the above items to be addressed, three things must happen. It will be necessary to write software that allows phones to communicate with credit card terminals, a relatively simple problem.
More complex is the need to change the merchant’s hardware and software so that it can interface with the client’s 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.
The biggest concern is finding a way to link customers’ credit cards to their phones and banks. The problem here is that the current regulations do not allow “middlemen” in the payment process. What that means is that there is no provision for the payment to be transferred from the customer’s bank to the phone company and then to the merchant’s account. Some significant changes will be needed to make it possible for the money to be transferred directly, and that is likely to be the biggest delay.
When will it all happen?
The best estimates are five to ten years into the future. Regulatory hurdles take time to overcome and there is always that nasty little security detail that will keep people from jumping on board when mobile wallet programs finally come around. The best case scenario would involve third-party payment organizations introducing the technology, as they are not hampered by the bureaucracy inherent in the credit card industry.
It is inevitable that some kind of mobile wallet will appear in the near future. When it does, business credit card processing will change dramatically.
