{"id":3224,"date":"2014-07-03T10:12:12","date_gmt":"2014-07-03T14:12:12","guid":{"rendered":"http:\/\/mobile-solutions.ingenico.com\/?p=3224"},"modified":"2014-07-03T10:14:43","modified_gmt":"2014-07-03T14:14:43","slug":"3224","status":"publish","type":"post","link":"https:\/\/mobile-solutions.ingenico.com\/3224\/","title":{"rendered":"Not All Mobile-Payment Systems Are Mobile Wallets"},"content":{"rendered":"

http:\/\/www.digitaltransactions.net\/news\/story\/4754<\/a><\/p>\n

by Scott Holt, Vice President of ROAM, Boston, Mass.<\/p>\n

Even people in the payments industry are confusing the terms, and that\u2019s obscuring some important developments in mobile acceptance, says Scott Holt.<\/strong><\/p>\n

The convergence of mobile payment and mobile-payment acceptance is interesting because it enables a true mobile-to-mobile transaction.<\/em><\/p>\n

Working in the mobile-payments space, I see a lot of confusion about the term \u201cmobile-payment system.\u201d This may be because so many vendors slap the phrase \u201cmobile-payment system\u201d on their products, hoping to increase their appeal. In some cases, the terms \u201cmobile wallet\u201d and \u201cmobile-payment system\u201d are used interchangeably, as if they meant the same thing.<\/p>\n

In reality, this broad term \u201cmobile-payment system\u201d can encompass several different things, including open-loop mobile wallets (e.g., Google Wallet), closed-loop mobile wallets (e.g, Starbucks) used by consumers, and mobile-payment acceptance solutions used by merchants. Some vendors that talk about \u201cmobile-payment systems\u201d imply that merchants need all three of these things. The fact is, they need only one, the mobile-payment acceptance solution. But they should accommodate at least one of the others.<\/p>\n

Dispelling Confusion<\/strong><\/p>\n

To help dispel the confusion over \u201cmobile-payment systems,\u201d here\u2019s a quick breakdown:<\/p>\n

In every payment transaction, there are two sides, the payor (making the payment) and the payee (accepting the payment). Payors can use cash or debit\/credit cards, of course, but if they choose to make a payment using their own mobile device they need either an open-loop mobile wallet or a closed-loop mobile wallet.<\/p>\n

Examples of open-loop mobile wallets are Google Inc.\u2019s Google Wallet, MasterCard Inc.\u2019s MasterPass, and the recently departed Square Wallet from Square Inc. These applications store information from a consumer\u2019s credit cards\u2014typically multiple cards\u2014and are designed to securely pay for individual transactions across multiple merchants, provided those merchants are equipped to accept mobile wallet payments.<\/p>\n

Most open-loop mobile wallets use a barcode or quick-response (QR)-code model, though some rely on proprietary readers at registers or near-field communication (NFC) technology.<\/p>\n

Closed-loop mobile wallets are merchant-specific. For instance, Starbucks offers a closed-loop mobile wallet, as do Dunkin Donuts and McDonald\u2019s. These closed-loop wallets are often apps downloaded from the Apple or Android store, and thus many call them \u201cmobile-payment apps.\u201d Merchants like closed-loop mobile wallets because they can track purchases and data and add services such as a loyalty program and rewards tracking.<\/p>\n

On the payee side, merchants typically have either fixed terminals or mobile point-of-sale (mPOS) solutions enabling consumers to pay via a merchant-owned mobile device, or both. The \u201cboth\u201d option is gaining in popularity, but, much as some U.S. households are abandoning landlines in favor of mobile phones, many smaller merchants are going right to mPOS.<\/p>\n

Early forms of mPOS solutions were narrow in scope and involved a dongle that plugged into a smart phone or tablet. The vendor usually acted as a payment service provider and processed transactions, deducting a fee for each one. There were no tie-ins with a merchant\u2019s payment infrastructure or other backend software, such as inventory or loyalty programs.<\/p>\n

Recently, more advanced mPOS solutions have emerged that not only process cards but also offer a host of other capabilities, including the ability to:<\/p>\n