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Mobile Payments 101

By: Debora Tennison, Director of Electronic Services

Posted on 11/14/2019 3:34:01 PM

woman shopping on her phone

If you’re like the majority of holiday shoppers this year, you used mobile payments for at least some of your holiday shopping transactions. It seems like mobile payments have just eased into our lives without much introduction.

But, what really is a mobile payment. How do mobile payments work? Are they safe? As it turns out, mobile payments aren’t just convenient, they’re faster and more secure than traditional debit card payments. Here’s everything you need to know about mobile payments.

What is a Mobile Payment?

A mobile payment is when you use contactless technology to pay for a transaction with your phone using a stored credit card, debit card, or bank account. You might have seen a little icon that looks like a turned over Wi-Fi symbol on point of sales machines. This symbol indicates that the machine accepts NFC (Near Field Communication) payments, and that you can simply pay with any card or mobile phone that is NFC-enabled, simply by tapping the device or card onto the machine.

A mobile payment can be when you use your mobile device on a point of sales terminal when you check out at a store or gas station. But, a mobile payment also includes things like peer-to-peer transaction apps like Venmo that allow you to send money to friends, family, or even as a payment for a service or product.

How do Mobile Payments Work?

Person holding mobile phone close to point of sale terminal to make a mobile payment

On a technical level, in-store mobile payments work by using something similar to radio frequency identification (RFID) technology, which uses radio frequencies to securely communicate between devices within inches of each other. But, peer-to-peer mobile payments work a little differently because they use cellular data to transmit information from one bank account to another and are essentially a quick, easy way to transfer funds between financial institutions. There are essentially three types of mobile payments:

Mobile Payments via an App

When you use an app like Apple Pay or Google Pay, you connect either a bank account, credit card, or debit card, through your credit union, that allows you to make payments without having to swipe or insert your card. The data transferred from your phone to a Near Field Device is encrypted with a very secure, unique code.

Mobile Payments via a Mobile Wallet

A mobile wallet is exactly like it sounds, it’s a place where you can store multiple cards to use for a mobile transaction either in-store or online. This allows you to easily make mobile payments via several different cards or accounts without having to carry physical cards.

Peer-to-Peer Mobile Payments

Apps like Venmo and even Facebook Messenger make it easy to store your card or bank account and send a quick payment to friends and family or even peers you’re making a transaction with (like at a garage sale). Using cards often comes with a transaction fee, but transferring money between bank accounts is typically free.

Are Mobile Payments Safe?

Woman using a mobile payment at a point of sale terminal

Mobile payments are safe in that they prevent card skimming, which is when a device placed on a card reader steals the card’s information when it is swiped or inserted. This happens at ATMs, gas stations, and even big box retailers. But, if you never insert or swipe your card, your card number can’t be skimmed. Because in-store mobile payments use NFC, which is based on radio frequencies, they are far more secure than physical cards.

Mobile payments are also safer than using a card because your card’s information isn’t what is transferred during a transaction – it’s actually a code, not your card’s number. When you set up your mobile payment for the first time, your bank sends over a randomly generated token to the app. When you use transactions, this token is what’s used, so your bank account information is never shared and can’t be stolen from the code.

For these reasons, mobile payments are a preferred choice for many consumers. They’re faster, secure, and really convenient. To set up your mobile wallet with your Community First accounts, simply follow these instructions.

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