Mobile phone usage continues to grow on a global scale and so does a consistent increase in the use of mobile payment systems. While payment acceptance methods have evolved for businesses, the available services for consumers have also changed in a rapid format. Specifically, digital wallets and e-wallets have been gaining popularity among mobile device users. Depending on the user’s needs, there are many different merchant payment acceptance and consumer purchasing options available today.
What’s the Difference Between Digital and eWallets?
Many credit card terminals today have built-in payment processing capabilities to accept physical cards and contactless card transactions. This feature has emerged with the popularity of ewallets and digital wallets. Understanding the difference between the 2 can help consumers choose the best option for their financial services.
A digital wallet allows a consumer to carry their payment methods with them in a secure location on their mobile device. Examples of this include Google Wallet and Apple’s Passbook. With these wallets, the money stays in the user’s bank account until a transaction is made, much like using a credit or debit card.
An eWallet is an application in which the customer actually stores cash, similar to a pre-paid account. The money is moved from the user’s bank account into a holding account within the eWallet. It can be accessed to complete transactions but is limited to the amount of money in the account.
There are Three Types of eWallets
Merchants and payment processors basically have two different options for what sort of wallet they want to offer. Those two types are called open, semi-open, and closed wallets. Their functionality differs greatly between one another.
Closed Wallets
These wallets are designed by specific merchants to allow customers to make transactions only with that business. The customer can securely store their card or account information in this wallet to make transactions with that specific merchant. It’s very similar to a gift card or another prepaid balance.
Merchants who opt for closed wallets often do so for data-collection and rewards programs. If they have a mobile application that can securely store their customers’ information, they can track activity and offer loyalty rewards. This is a practice that is generally used by larger merchants creating their own internal loyalty programs.
Read also this FintechZoom article: Important Banking Information: Your BMO Harris Routing Number and Account Numbers.
Semi-Open Wallets
A semi-open wallet gives the consumer a list of options for purchasing. They are not designated to only one merchant nor are not usable everywhere, so they aren’t categorized as either closed or open wallets. Instead, they typically offer a specific list of participating merchants with whom the customer can complete transactions using this wallet.
Open Wallets
Open wallets allow customers to purchase from multiple merchants with a variety of payment types. They provide a secured location for the consumer to store their card or bank information, which can be used to make transactions. They can track the activity of the customer, but cannot gain nearly as much information about them as a closed wallet can.
Payment Acceptance Method
There are a couple of different ways that merchants can accept payments from mobile wallets. In general, they can use two types of Point of Sale (POS) systems: fixed terminal, or mobile POS. Depending on the needs of the merchants, they have the option for a portable or fixed terminal to handle their business’ needs.
Fixed Terminal
This type of POS system is the traditional one that you might think of when you go to the grocery store or other retailer. There is a keypad in which you insert a chip card, or swipe a non-chipped card. This device is usually connected to a larger computer that has the payment processing software installed.
These types of systems are great for larger retailers because you can buy the products in bulk for multiple registers. It also allows them to purchase accessories such as scanners and other devices that help with inventory tracking and management.
When choosing a POS system for your business, it’s important to consider the types of payments you’d like to accept. Providers offer different options for merchants to accept payments, including:
- Chip cards
- Magstripe cards
- Contactless payments
- eWallet payments
- Digital wallet payments
Customers appreciate the ability to use whatever payment method is convenient for them. Expanding the types of payments that you accept could give you an edge over your competitors.
Mobile POS
A mobile POS, (mPOS), is a portable, wireless device that can be used to accept payments for goods and services. It can be a physical piece of hardware that was purchased as part of a larger POS, or a software system that is downloaded onto a tablet or smartphone. Both are considered mPOS systems.
These types of systems are gaining popularity as a much more affordable payment solution for small businesses. Many merchants don’t have the space or the cash to invest in large, fixed terminals, but can afford a tablet and some software. This makes the mPOS an attractive option for start-ups and small businesses.
The original mPOS system was designed to allow merchants to move around while still accepting payments. In many cases, you still had to have a fixed terminal as well. However, the software for mPOS has improved dramatically and can now accept the same payment methods as fixed terminals, without the need to the heavy-duty hardware.
Conclusion
As mobile payment systems continue to evolve, payment types and options for consumers will, as well. Merchants will have more options in terms of what methods to accept and will be able to better track their customers’ activity and purchasing habits. Smart merchants will find ways to accept traditional payment methods, as well as digital and eWallets to meet their customers’ needs.
