What is Mobile payment? Types, Mechanisms, Implementation Benefits, and How to Choose a Company Without Failure payment processing company

In recent years, mobile payment using smartphones and tablets has rapidly spread not only in physical stores such as retail and food service but also in online businesses such as e-commerce sites. The sight of end users smartly completing payment with just their smartphones without carrying a wallet has become a part of everyday life.

However, even though we call it "mobile payment," the payment conducted at physical stores and the payment completed entirely on the web such as your own e-commerce site differ greatly in their systems, the systems required for implementation, and the payment experience (PX) that should be provided to end users. To integrate mobile payment in the best way for your business model and achieve both maximizing sales and improving back-office efficiency, you need to properly understand each characteristic at the practical layer.

This article thoroughly explains the basic mechanisms and types of mobile payment, as well as the decisive advantages and disadvantages of mobile , for e-commerce businesses considering mobile payment implementation, store managers, and accounting and payment staff responsible for daily sales management and accounting processes. Furthermore, from the perspective of payment experts, we will delve into the selection criteria for "payment processing company Companies (PSPs)" to build robust infrastructure while minimizing operational man-hours.

What is Mobile payment? Basic Knowledge and Notable Background

Definition and Overview of Mobile payment

Mobile payment refers to a cashless payment method that uses mobile devices such as smartphones and tablets, or dedicated apps and small payment devices installed on them, to payment money.

From the perspective of business operators, a major feature is that they can instantly build an advanced cashless environment by simply preparing their own smartphone or an inexpensive dedicated card reader, without having to purchase or install expensive large stationary POS registers as before. In online business, it is positioned as a technology that simplifies the smartphone purchasing process to the extreme, providing end users with a frictionless purchasing experience.

Background of Promoting and Spreading Cashless Payments

The reason mobile payment has become so deeply embedded in the market is infrastructure development in line with the country's goal to raise the cashless payment ratio, as well as large-scale promotional campaigns by various payment brands.

Furthermore, the maturity of the end-user device environment cannot be ignored. With most citizens carrying smartphones at all times and routinely using contactless payment and QR code scanning, the need to eliminate the hassle of taking out cash and managing coins during payment has rapidly increased. Nowadays, whether a store or e-commerce site supports mobile payment directly determines why end users choose it.

Types and mechanisms of mobile payment (for physical stores and e-commerce)

Mobile payment are classified into several types based on the usage scenario (whether Card Present Transactions in physical stores or online payment such as e-commerce sites) and the communication method of the device. Correctly understanding the features and mechanisms of each is the first step in defining requirements for the optimal system for your company.

Mobile payment for physical stores and face-to-face business

The mobile payment introduced in real settings mainly consists of two types: "QR payment" and "contactless IC payment (touch payment)."

• QR payment (Code payment): There are two methods: the "Store Scan (CPM) method," where the store's reader reads the barcode or QR code displayed on the smartphone app, and the "User Scan (MPM) method," where the customer scans the QR code presented by the store with the smartphone camera. In particular, the user scanning method does not require a dedicated reading device at the store; you can start simply by placing the printed QR code next to the register, making it popular among businesses seeking to minimize initial investment.
  
  
• Contactless IC payment (Touch payment): This system completes payment by simply holding a smartphone or smartwatch over a dedicated device using credit card information registered with Apple Pay or Google Pay, transportation IC, or various types of electronic money. By utilizing FeliCa technology and international standard NFC technology, entering a PIN or signing is generally unnecessary, significantly increasing the turnover rate of the register.

Mobile payment in In-House EC and Online Services

For online payment aimed at end users browsing web browsers or e-commerce apps on smartphones, the following methods are mainstream.

• 〇〇Pay / ID payment: This is an online payment using account information from PayPay, Amazon Pay, Rakuten Pay, d Payment, etc. End users no longer need to enter credit card numbers or shipping addresses for each e-commerce site; they can instantly complete their purchase by verifying each payment brand's ID and password, or performing biometric authentication.
  
  
• Carrier payment: This system uses authentication systems from major mobile carriers such as Docomo, au, and SoftBank, allowing you to pay for products by combining your monthly mobile phone bill. This payment method is highly effective for young people who do not own credit cards or end users who strongly resist entering card information online.

Four Decisive Benefits for Businesses Implementing Mobile payment

We delve deeply into the decisive benefits gained by integrating mobile payment into your business and accounting operations from four perspectives.

1. Improving store operation efficiency and preventing missed opportunities by eliminating waiting at the register

In operating physical stores, cash-based payments have placed significant psychological burdens and work time on staff due to issues such as "miscounting bills and coins," "change handover errors," and "checking cash surplus or shortage within the register." Also, waiting at the register during busy times can cause customers to give up buying and leave, causing them to miss out on the "opportunity at the register."

By introducing mobile payment (especially contactless IC payment and QR payment), payment can be completed in seconds. Since change is not exchanged, checkout speed dramatically improves, enabling error-free and speedy checkout operations even with limited staff. This allows frontline staff to focus their resources on higher-value tasks such as customer service and promoting product appeal.

2. Reducing "cart abandonment" and maximizing e-commerce sales through excellent payment experiences (PX)

In online businesses such as your own e-commerce site, about 70% of end users who add products to their carts abandon before completing the final purchase process, known as "cart abandonment," is the biggest challenge for business operators. The biggest friction (stress) when cart abandonment occurs when entering a 16-digit credit card number or expiration date manually on the purchase screen. Especially when you type these characters on the small screen of a smartphone, it significantly lowers the conversion rate (CVR).

By providing mobile-friendly features such as "〇〇Pay / ID payment" in your own e-commerce, end users can complete payment with just a few taps or just facial and fingerprint recognition. Providing this stress-free, seamless payment experience (PX: Payment Experience) is key to closing the abandoned cart hole and maximizing the return on investment (ROI) of web marketing.

3. Secure acquisition of "new customer segments," including young people and inbound tourists

With changes in purchasing behavior, especially young people in their teens and twenties tend to prefer paying with Pay, which they are familiar with using smartphones, as well as carrier payment and buy now pay later payment, over credit cards. Additionally, in the dramatically recovering inbound (foreign tourists), digital wallets originating from abroad (such as China's Alipay and WeChat Pay, and major payment in various Asian countries) have become a daily infrastructure of payments.

Preparing mobile payment method for these target groups with massive purchasing power acts as a lure to stores and e-commerce sites, serving as a powerful tool to attract customers and set competitors apart.

4. Reducing the practical burden on accounting staff and lowering cash management costs

When mobile payment is introduced and cashless rates increase, the amount of cash handled in stores visibly decreases. This dramatically reduces invisible costs such as the "effort and risk of cash transportation" for depositing daily sales proceeds into banks, and the "exchange fees" for securing change for change.

Since all sales data is digitally recorded in the system, accounting staff are freed from manual processing tasks involving paper receipts and daily reports, greatly improving the accuracy and speed of monthly closing tasks, which is a significant back-office practical benefit.

Practical Considerations and Disadvantages When Introducing Mobile payment

Mobile payment offers many innovative benefits, but there are precautions to be aware of in advance and potential drawbacks to establish them in your operations.

payment Fees and initial implementation costs incurred

When using mobile payment, businesses must pay a "payment fee" of several percent (typically around 2% to 4%) for each payment is established. Additionally, for physical stores, there are costs for purchasing dedicated payment terminals and barcode readers, while for online stores, initial development man-hours and monthly fees for system integration into e-commerce sites are incurred.

These may seem like simple cost increases, but compared to the aforementioned effective benefits such as "reducing labor costs through cashier operations," "increasing sales by preventing cart abandonment," and "reducing cash management costs," it is important to comprehensively evaluate the medium- to long-term impact on the P/L (profit and loss statement).

Increasing Deposit Cycle Complexity and Risk of Overcrowded Management Screens

In the pursuit of payment convenience, there are cases where they directly establish contract with each payment brand's operating company individually for implementation. This is the biggest practical pitfall.

If you contract individually directly, the closing and payment dates differ for each payment method, making passbook deposit confirmation extremely complicated," and "When errors occur or during refund processing, you have to log in to multiple management screens different for each brand," which is a back-office accounting and payment This can cause a huge mess that puts pressure on the person in charge. The proliferation of payment method can lead to the backward result of increased operational workload.

Security measures and fraud preparedness

Since you accept payment directly yourself, you need to consider the risk of third-party fraud (impersonation scams or stolen card use). On e-commerce sites, to prevent the loss caused by chargeback when sales cancellations due to fraud occur, it is essential to build a robust security foundation, such as introducing the latest identity authentication scheme "EMV 3-D Secure (3D Secure 2.0)."

Building a Fail-Free Mobile payment Foundation: Criteria for Selecting payment processing company Companies (PSPs)

To maximize the benefits of mobile payment adoption while completely eliminating the disadvantages of "cluttered payment cycles" and "proliferation of management screens," almost all domestic businesses implement this through "payment processing company Companies (PSPs)," which provide and manage multiple payment method in one place. We explain the criteria for selecting a PSP to build a solid foundation that can withstand practical work.

1. Choosing "Online Payment Service" to minimize the burden of accounting practice

payment processing company When selecting a company (PSP), the most important thing to prioritize is a "Online Payment Service" that can provide all the necessary "〇〇Pay / ID payment" for your e-commerce site, credit cards, carrier payment, and QR payment for physical stores, all through a single contract and a single system integration (API integration). is the point of holding it.

By using PSP, no matter how much payment method increases, the calculation of sales deadlines, payment cycles, and fees for businesses can be consolidated in one place. Accounting staff can now only perform sales matching (clearing work) on specific payment dates a few times a month, dramatically reducing back-office operational workload.

2. Visibility of an "Integrated Management Dashboard" that centralizes all data

Check whether the sales data paid by end users on the e-commerce site and the sales data paid at the store are integrated and visualized on the same management screen.

When the management dashboard is centralized, daily routines such as error investigation, refund processing, and monthly sales report creation can be completed smoothly. It also enables accurate cross-channel understanding of customer behavior, seamlessly connecting to data-driven marketing initiatives.

For mobile payment deployment and optimization, GMO Payment Gateway is the solution.

Implementing mobile payment is an essential growth strategy for providing end users with a stress-free, excellent "payment Experience (PX)" and maximizing conversion rates in the coming era. And the foundation of this success is absolutely necessary a sophisticated, centralized management system that does not overwhelm back-office accounting staff.

At GMO Payment Gateway (GMO-PG), as a leading company in payment processing industry, we have continuously supported the infrastructure of Japan's e-commerce and cashless markets from infancy. Our Online Payment Service" PG Multi-Payment Service" offers a wide range of mobile payment method both domestically and internationally, from Credit card payment to major types of 〇〇Pay/ID payment, carrier payment, buy now pay later payment, and Card Present Transactions solutions for physical stores.

Based on a deep understanding of your business model, phases, and on-site workflows, we comprehensively propose data-driven payment strategies to maximize conversion rates and significantly increase sales. If you are a business planning to introduce mobile payment, or if you are struggling with the clutter of existing cashless operations, accounting or payment staff, please feel free to contact our extensive Actual of GMO-PG. We propose the best infrastructure of payments for your company's future vision and drive your growth forward.