Tap-to-pay technology continues to gain popularity, which opens a door of opportunity: Being able to accept contactless payments in various forms, including mobile wallets, can help you reach more customers and grow your business.
Consumer desire for convenience and speed is fueling a shift toward mobile wallet payments—32% of mobile wallet users say they would like to pay with their smartphones all the time.
To incorporate this payment option into your business, you first need to understand what a mobile wallet is, how it works, and what technologies allow you to accept mobile wallet payments.
What is a mobile wallet?
A mobile wallet is a type of digital wallet that holds credit, debit, ID, gift, membership, and rewards cards on mobile devices.
Mobile wallets let consumers make mobile payments using their mobile device, smart watches, or tablet instead of using a physical card.
Digital wallet vs. mobile wallet
“Digital wallet” is a universal term for software that lets you store loyalty and payment card details in the cloud and then access them from a device like a smartphone, tablet, or laptop.
Digital wallets have several uses:
- Storing preferred payment details for online purchases
- Transferring funds between accounts
- Making payments through a mobile wallet
A mobile wallet is a specific type of digital wallet that’s available through an app on a smartphone device.
Customers can use mobile wallets to tap to pay when they’re making payments at physical stores. They can also add other non-payment items like boarding passes and event tickets.
3 types of mobile wallets
There are three types of mobile wallets:
1. Open wallet
Open wallets are the most flexible type of wallet, and they let users transfer funds or withdraw money remitted to their account in cash at ATMs.
Examples of open wallets are:
- PayPal
- Apple Pay
- Google Pay
- Zelle
- Venmo
2. Semi-closed wallet
Semi-closed wallets are more limited in their capabilities. This type of wallet lets users receive money into their bank accounts but doesn’t allow cash withdrawal. Users can transfer funds to others using the same payment portal.
Some examples of semi-closed wallets are:
3. Closed wallet
Private companies or merchants issue closed wallets to customers for direct purchases from the issuing company. You can’t transfer funds from these accounts to a bank account or withdraw cash from an ATM, but you can use money in closed wallets for goods provided by the issuing company. Brands such as Target and Starbucks offer customers their own digital wallets.
Closed wallet examples include:
- Amazon Pay
- Tappit Mobile Pay
- Starbucks app
How does a mobile wallet work?
A mobile wallet allows you to scan an app on your smartphone or smartwatch to complete a transaction. A major benefit of mobile wallets is being able to pay at the point of sale via a digital method, making it unnecessary to carry cash and limiting access to your credit and debit card numbers. For mobile wallets to work, however, you must have the support of key technologies, including:
Near-field communication
Near-field communication (NFC) lets two devices exchange information when in close range. The communication is wireless and based on radio frequencies. NFC mobile payments enable customers to tap their mobile device (as well as many debit and credit cards) for contactless payment processing through NFC readers. This form of transaction offers a layer of security since transmissions are encrypted.
Devices usually need to be placed within a few centimeters from each other to enable connection.
Point-of-sale system
To pay with a mobile wallet, retailers need to purchase a POS system and hardware that accepts mobile payments. For example, Shopify’s POS system accepts purchase mobile payments so customers can choose between paying with traditional chip and PIN methods or through tap-to-pay purchase.
With the right POS software, you can accept payments from mobile wallets, as well as track and manage your inventory, update loyalty programs, and collect customer data for use in marketing campaigns. The merchant’s software system communicates with each customer’s NFC device to recognize the mobile wallet and complete the transaction.
💡 PRO TIP: Skip the manual entries and reconciling for online and in-store purchases with Shopify’s integrated payment processing. Accept credit, debit, and mobile wallet payments and track online and in-store sales and payments from Shopify admin.
Tokenization
Mobile wallets use tokenization to protect sensitive data from theft or manipulation. Payment tokenization replaces sensitive personal data during transactions with a temporary series of numbers called a token. This allows customers to make payments with their mobile wallet without revealing the primary account number (PAN) of the credit card.
Once payment details are collected and a token is generated, the payment information is stored and the encrypted token is sent to the merchant’s payment processor. From there, it is sent to an automated clearing house (ACH) for processing and verification. If the authorization is successful, the transaction via mobile wallet is complete.
3 benefits of mobile wallets
The use of mobile wallets is on the rise. In the US, per-user proximity mobile spending will nearly double, to reach $7,827 in 2026, as customers shift toward mobile wallets and away from other payment methods. Among the benefits of mobile wallets:
1. Security
Mobile wallets are considered a more secure way to make payments. Mobile wallets use tokenization as a security feature to help protect sensitive account data. Further, mobile wallets are held in a mobile device, which requires a passcode, face identification, or fingerprint scan to unlock before making a payment. If a smartphone is lost or stolen, the mobile wallet company provides the capability for users to delete data remotely.
2. Convenience
PwC research shows that nearly 80% of US consumers consider speed and convenience to be among the most important elements of a positive customer experience. And 43% of customers would pay more for greater convenience, too.
Using a mobile wallet removes the inconvenience of carrying around a bulky wallet with multiple cards. Plus, consumers don’t need to worry about losing or misplacing a payment card. To make a payment, they simply need to hover their device over an NFC-enabled reader.
Luke Lee, the CEO, and founder of Pala Leather, says accepting mobile wallet payments is more convenient for consumers and retailers alike. “Accounting is much easier to do and transferring money is seamless,” says Luke of having mobile wallets as a payment option. “The method also helps streamline the checkout process, reducing wait times and increasing customer satisfaction.”
“Accounting is much easier to do and transferring money is seamless. The method also helps streamline the checkout process, reducing wait times and increasing customer satisfaction.”
Luke Lee, CEO and founder of Pala Leather
3. Speed
Mobile wallet transactions are quicker than traditional payment methods. Customers don’t need to wait for someone to find their change or process their debit card. Shoppers don’t need to shuffle through their wallets to find the right loyalty card, either.
Unlike EMV card payments, where customers need to insert their card, enter a PIN, and wait, mobile wallet payments are often completed in a matter of seconds.
In fact, contactless payments are faster than using a traditional card.
Alexa Allamano, Shopify merchant and owner of jewelry store Foamy Wader, agrees that speed is a big benefit of mobile wallets. “Mobile wallet checkout is lightning fast and sidesteps the often awkward card handling process as customers navigate the payment process on a device they already trust,” explains Alexa. “It’s only a matter of a few seconds, but the speed of mobile wallet payments is remarkable compared to credit card swiping and chip dipping.”
“It’s only a matter of a few seconds, but the speed of mobile wallet payments is remarkable compared to credit card swiping and chip dipping.”
Alexa Allamano, owner of Foamy Wader
Luke adds that many of Pala Leather’s customers expect mobile wallets as a standard payment option: “We’re seeing that nearly half of our customers either ask to pay through their card or their mobile wallets. People have become so used to online transactions that they also expect the same service and speed in physical stores.”
3 examples of mobile wallets
The use of mobile payment apps like Apple Pay and Google Pay is expected to nearly double between 2020 and 2025. The retail businesses providing the best customer experiences accept several types of popular mobile wallets.
Some examples of mobile wallets include:
1. Apple Pay
When asked about which mobile payment brands US consumers had used in 2023, 57% responded Apple Pay:
Consumers can use Apple Pay to complete transactions anywhere that accepts contactless payments. The first step is to download the Apple Wallet app to set up Apple Pay on an iPhone or iPad. Next, use the device’s camera to capture the details from credit, debit, or store cards. A helpful hint: Banks typically need to verify these details before users can start making payments.
2. Google Pay
Google Pay is a mobile wallet that lets consumers make in-app, online, and in-person contactless purchases on Android devices.
Created by Google to make app purchases in the Google Play store easier, it’s now becoming a popular payment method for in-store and online purchases globally. In fact, 38% of US in-store POS purchases were done with Google Pay in 2023.
To use Google Pay, customers need to connect a payment card or bank account to their Google Pay account. Then, they can use their mobile as a payment method anywhere that accepts contactless payment.
3. Venmo
Venmo is a popular mobile wallet that lets users send and receive money. Often used between family and friends, users “Venmo” each other to split bills, pay for goods, or even tip restaurants. Retail businesses can also use Venmo to take payments for goods both online and in physical stores.
To use Venmo, retailers need to add some personal details and link a bank account or debit card. It’s easy to send Venmo payments by searching for users by name, email, or personal QR code. Customers simply choose the recipient, add the correct amount, and send the payment.
How to accept mobile wallet payments
It’s becoming increasingly important for retailers to have the capabilities to accept contactless and mobile payments. Around 47% of consumers say they won’t shop at a store that doesn’t offer contactless payment. And in 2022, 53% of merchants plan to expand their mobile payment options.
Want to give your customers more convenient payment options? Here’s how to accept mobile wallet payments successfully.
Get the right POS
All you need to start accepting mobile wallets as a payment method is a point-of-sale system that has the right technology to process these payments.
The best POS system enables you to accept multiple payment methods like mobile wallets or NFC cards. Many POS systems come with this technology built in, so it may be a case of simply activating the feature.
Additionally, look for POS systems that are able to track key sales data, create detailed customer reports, and manage your inventory. Shopify’s POS system lets you process purchases, includes POS hardware, and accepts mobile payments so you can provide more payment options to your customers, streamline the checkout process, and reduce wait times.
💡 PRO TIP: Shopify POS has a fully customizable checkout experience. Create shortcuts to keep your most-used apps, promotions, and products at your fingertips so you can fly through checkout.
Advertise that you accept mobile wallets
Inform customers that they can pay with their mobile wallets. Advertise in your physical stores by adding retail signage at the payment terminal explaining which mobile wallet types you accept. Do the same for your window display to attract foot traffic.
Also, remember the importance of customer engagement at time of payment: Ask if they’re interested in paying with a mobile wallet. And consider posting a simple contactless logo alongside the names of the mobile wallets—it just may be enough to encourage customers to use them when paying at checkout.
Start accepting mobile wallets at your store
As mobile wallets continue to grow in popularity, merchants have the opportunity to expand their reach and customer base while retaining the loyalty of existing customers. By meeting customer expectations of added security, quick and seamless payments, and convenience, you are better poised to drive business growth and embrace the efficiencies of accepting this type of digital payment.
Given mobile wallets are simple, intuitive, and secure for smartphone users, it’s worth exploring how you can use the tech within your retail business. All you need is the right POS system to start accepting mobile payments from customers.
Read more
- What Is PCI Compliance and What Are the 12 PCI Requirements?
- Fraud Prevention: How to Kick Bogus Transactions to the Curb
- Merchant Services: Everything Retailers Need To Know
- Merchant Account: Benefits, Types, and How to Open One
- What is an EPOS System and How Does it Work?
- EMV Chip Cards are Coming to the U.S. (Here's What Merchants Need to Know)
- Payment Tokenization Explained: The End-to-End Process Of Safeguarding Digital Payments
- Chip Credit Cards and Payment Transactions: What Merchants Need To Know
Mobile wallet FAQ
How do you use a mobile wallet?
- Download a mobile wallet app from your phone's app store.
- Create an account and add your credit or debit card information.
- Use the app to make payments. This can be done in stores or online.
- Check your balance, add funds, and manage your account settings on the app.
- When paying in stores, scan the QR code or tap your phone against the payment terminal.
- Confirm the payment, and you're done!
What are mobile wallet examples?
Mobile wallet examples include Apple Pay, Google Pay, Samsung Pay, and PayPal.
What is considered a mobile wallet?
A mobile wallet is a virtual wallet that allows users to store, send, and receive digital currency from their mobile device.
