The form of payment is changing rapidly in this tech-savvy world. For consumers, the advancement of technologies like NFC payments allows them to pay in just a few clicks. Sending money to friends, making point-of-sale payments and transferring money has never been easy. For business owners, the smartphones and mobile payment technologies enable them to collect the payments out in the field and not just at the counter.

Along with evolution, there comes a lot of new terminologies, including mobile payments and digital wallets. These two forms of payment may seem identical, but they are very different.  Keep reading to learn about what ewallet payment system and mobile payments are and how they are different and how they are beneficial for merchants.

What’s a digital wallet?

A digital wallet is an electronic method of storing payment information. It offers many features and not every wallet provides the same functionalities. Nowadays, it is popular as the Peer-to-Peer payment app. The major features of digital wallets are:

1. Pay at a store

Most of the digital wallets enable the uses to conduct transactions at a brick-and-mortar location. Google Pay, Amazon Pay allow this type of payment at NFC-capable point-of-sale.

2. Store credit & Debit card information

The primary feature of digital wallets is to provide functions for storing debit card and credit card information. Samsung Pay is an excellent example of this feature. It will allow the payment directly from the card. Although PayPal draws funds from a stored credit or debit card but payout through the service itself.

3. Peer-to-Peer payments

Digital wallets enable users to transfer funds to one another. These payments are small and used to split a lunch bill, shared rent and others. The digital wallet solutions like Apple Pay enables a user to cut their payments and transfer fund this way.

4. Online payments

The best feature of the mobile wallet is that they can be used to make an online payment for shopping. The merchants provide their preferred digital wallet button to their customers for making payments.

5. Security

The mobile wallet app is encrypted with many security features like passwords, pins, fingerprint scan, iris scan and many others. The users also can get a glimpse of the last four digits of their credit card instead of displaying the credit card number.

6. Holds cash

The digital wallet app lets the users to maintain their cash balance within the app. It also promotes coupons, rewards and other beneficiaries to its users. 

What are mobile payments?

In the past, you might hand limited options for making payments including cash, credit card and check. In this age of smartphones, there is a new way to pay by using mobile devices. Mobile payments are considered as transactions conducted by using mobile devices.

You can use mobile phones to settle up your payment with your friends, can check out at any brick-and-mortar shop, or make an online money transfer. Collecting mobile payments need specific technology. Merchants will not be able to accept mobile payments if they are still practising cash registers. They need to upgrade the POS system, which will receive the payments from services like Google Pay, Amazon Pay.

The number of mobile payments is increasing every year. In 2018, there are 55 million mobile payments have been conducted across the US, as per the reports. Besides, banks have also adopted to integrate mobile payment technologies for their customers to pay directly from their bank accounts.

Mobile Payments Vs Digital Wallets-What’s the difference?

An easy way to differentiate digital wallets from mobile payments is that digital wallets enable the users to store their payment information and allow them to pay at any point-of-sale terminal. The use of digital wallet declines the use of physical credit or debit card. The payment is directly pullet from a credit or debit card rather than keeping a cash balance in the digital wallet.

On the other note, mobile payments hold a broad concept. Mobile payments can be made on-site at stores by scanning a barcode on an app, accepting or making payments from local stores to large retailers. The cost of amount will be deducted from a pre-loaded value on the account associated with the particular credit or debit card.

In mobile payment, the user generally pays by tapping on a point-of-sale terminal with a smartphone. For mobile payments, business owners can integrate three technologies as per their business requirements.

1. NFC communication: It is ideal for the point-of-sale terminal at the brick-and-mortar stores. The device can transmit the payment information from the phone to the terminal through Near Field Communication technology.

 2. QR Codes: Another technology in mobile payments is sending QR codes that the merchant can scan or the users can import through the phone’s camera. Paytm is an excellent example of this kind of technology.

3. MST transaction: Magnetic stripe transactions are also a vital part of mobile payments. Samsung holds the proprietary of MST, which mimics the magnetic swipe and transmits the payment information like the physical card.

Role of Mobile payments and Digital wallets for Merchants

For merchants, mobile payments and digital wallets are redefined, but there is a significant difference between the two methods. If they are selling online or having a mobile app, then digital wallet payments are ideal for them. They need to add a new code to their online store or app store. They can hire a wallet app development company to integrate these payment options. Integrating digital wallet to as online payment is quite different than other methods that enable to accept credit card with minimums steps.

Merchants who manage a traditional brick-and-mortar shop where the customers come and pay through the point-of-sale terminal, mobile payments are ideal. All you need is to integrate NFC terminal, and you are set to receive payments through Google Pay, Amazon Pay and other service providers. You can incorporate Samsung Pay if you want to stick to traditional magnetic stripe card payments.

Final words

There is a fine line between mobile payments and digital wallets. There is no difference between them for consumers, as they can use them without any hassle and with utmost convenience. But for merchants, they hold significant importance and the vital part for the growth of their business. 

Author bio:  Nikunj Gundaniya, Product manager Digipay.guru, one of the leading Digital wallet solutions, which provides mobile finance application development services.