What Are Mobile Payments?

There are a variety of mobile payment systems that all work a bit differently. Some might require your phone to be near the other device receiving the payment, like with near-field communication (NFC) payments, while others just use the internet.

Most mobile payment systems can be identified in one of these categories:

  • Everyday transactions: One type of mobile payment takes place anywhere you are, like at home. You can open an app on your phone and pay anyone for any reason you wish: split a bill, send a money gift, refund someone for something they did for you, and so on. Money is usually taken straight from your bank account, but some services let you hold the cash in a “mobile wallet” for quicker transfers.
  • Point of Sale (POS) payments: These take place at the place where you’re buying the service or good. Lots of stores have POS mobile payment systems in place that make it super easy to just tap your phone on the card reader or press a button on your phone to instantly pay the bill.
  • Closed-loop mobile payments: These types of mobile payments are specific to a company. For example, Starbucks lets you buy anything from their menu using your phone, and you can even skip the line in the store and go directly to a mobile-order-specific line to quickly pick up your order.
  • Carrier payments: Since every mobile payment–capable phone uses a cell phone carrier, some services are in place that let you pay for items from your phone but not actually have to pay until you get your cell phone bill. These are sometimes seen with donations you can make over text.
  • Mobile card reader: Some companies offer a small device that plugs into your phone or tablet that can be used to accept payments from a debit or credit card. These are perfect for small businesses or even individuals who are accepting payments on the go.