Know Everything about Mobile Wallets in 10 Minutes

You must have already noticed how smartphones are replacing the plastic credit cards for online transactions through the technological marvel that mobile wallets are. More and more consumers have started to adopt smartphones payment system and this mode of payment is now-a-days considered as the safest method of online transactions.

What is Mobile Wallet Technology?

While there does not exist a universally accepted definition of mobile wallets, simply speaking, mobile wallet is any payment system which enables the consumers to pay via their mobile phones. Hence, with help of a mobile wallet, you can instead of paying with cash, credit cards or cheque – use your mobile phone to pay for wide range of services and goods.

mobile wallets

Benefits of Mobile Wallets

Listed below are some of the major benefits of mobile wallets and mobile payments :

  • Very fast mode of payment
  • Payment method stays with the consumers which mean increase in security
  • Businesses are being made secure by handling fewer amounts of cash
  • Mobile wallets allow businesses to use their existing marketing strategies, payment processing and customer management in whole new ways
  • Mobile wallets provide user-friendly interface to its consumers
  • The mobile wallet module enables commercial institutes and banks to reach customers in rural zones and enhance their reach at a minor cost
  • The charges of mobile wallet funds transfer are much lesser than the traditional funds transfer

As a small business, it’s extremely important for you to understand mobile payment technology and the implications it has on credit cards payments and cash transactions.

Types of Mobiles Payments

Wikipedia classifies mobile payments into 4 major types:

  1. Premium SMS based Transaction
  2. Direct Mobile Billing
  3. Mobile Web Payments (WAP)
  4. NFC (Near Field Communication) Payments


Let’s delve into the details of each of these methods.

Premium SMS | MMS based Transaction

In this mode of payment, the buyer sends a payment request via a text message or an USSD to a short code, after which a premium charge is automatically applied to their phone bill or their online wallet. The merchant is informed about the payment being successfully transacted so that it can then release the payments for services and goods. This type of mobile payment is very common in Asia and some parts of Europe.

This method is disliked by many due to drawbacks such as:

  • Poor Reliability
  • Security Issues
  • Slow Speed
  • Low Payout Rates
  • High Cost
  • Low Subsequent Sales

Direct Mobile Billing

This type of payment is used during the check out processes at e-commerce sites. The payment process involves a two-factor authentication; a PIN and an OTP (a one-time password) after which the consumer’s cell phone is charged for whatever he/she purchased.

The amount billed may also include applicable taxes and a processing fee sometimes. Direct mobile billing payment method does not need any previous registration, and it does not include any other sources of backing such as credit cards or bank accounts. Direct mobile billing is very popular in Asia due to some of the following major advantages of it:

  • Security
  • Convenience
  • Ease of Use
  • Speed
  • Proven and Tested

Mobile Web Payments

The customer uses web pages or applications displayed or downloaded and installed on the mobile smart phones to make a payment. This payment method uses Wireless Application Protocol (WAP). It has the following advantages:

  • Follow-on Sales
  • Higher Customer Satisfaction
  • Easy to Use

NFC Payments

An NFC (Near Field Communication) payment is a contactless form of payment, used mostly in paying for purchases made in transportation services and physical stores. Customers use special mobiles which are equipped with smartcards in this regard. All they have to do to make a purchase is to wave their smart phone near a reader module. While some of the transactions don’t require any verification, others do require verification via PIN before the transaction is completed. The payment made could be deducted from the consumer’s bank account, or charged to his/her mobile or even from a pre-paid card.

NFC payment system faces significant challenges for wide and fast implementation due to the nonexistence of standards, complexity of the stakeholders’ ecosystem and unavailability of supporting infrastructure. Some banks and phone manufacturers are enthusiastic about it; for example Aconite and Ericson make it possible for banks to create customer mobile phone payment applications that make use of NFC payment technology.


Technical experts are guessing that tapping a smartphone to make payments will become normal over the next decade. But customers still appear to be happy with their low-technical, analog wallets, given the current lack of efficient payment choices that work all over the place and on any mobile phone.
These were some of the basic bits of information which we felt you need to know to be able to brag about being highly knowledgeable about mobile wallets.

But what is more important is that you keep an eye on mobile wallets and find out if they will become as popular as credit cards.


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