Iowa League of Cities Cityscape, June Issue
Smartphones have become an essential part of most of our daily lives. The Pew Research Center reported that nearly two-thirds of all adults in the U.S. own a smartphone, up from 35 percent in 2011. Far from being used to just make and receive phone calls, smartphones provide a multitude of functions that once would have required many separate physical devices: stereos, cameras, video records, calculators and now the wallet. Mobile payment technology now gives us immediate access to make and receive payments securely.
What is a mobile payment?
Mobile payments can be confusing. Banks, retailers, mobile carriers and technology companies have all developed technology that allows consumers to complete transactions using a mobile device rather than cash.
For the merchant, mobile payment acceptance allows you to accept credit cards without being stuck in an office. By plugging in a card swipe device and installing a mobile app, cities can take a payment at a concession stand or on the job site. This payment method provides flexibility to engage citizens and business owners where they are, instead of making them come to you.
How do they work?
Regardless of technology all mobile payments generally work in a similar way. The customer creates an account and links one or more payment sources – such as a credit card or bank account – to fund transactions. When a citizen is ready to complete a transaction, they present their device, select the payment application they want to use and authenticate into the application. From there the customer waves, scans or taps the merchant’s device. The smartphone creates an unique encrypted token, then depending upon the technology used, the token may be transmitted using near field communications (NFC) or over the air (OTA) signals. The service provider then takes that token, decrypts the payment information, processes the payment through their gateway processor, and deposits the funds into the merchant’s bank account.
The alternate mobile payment method enables cities to process credit or debit cards using an encrypted plugin device on a smartphone or tablet. When the application launches, it engages the preconfigured codes enabled on the device before the transaction. These codes allows the gateway processor to know where the funds are to be deposited. Then once the staff person has created the order, the application enables the mobile swipe device to pass the card information through the audio input. The application then sends the encrypted information to the gateway processor via Wi-Fi or cellular connection. Once that information authenticates the authorization is passed back to the device and a receipt is emailed or printed.
Are mobile payments secure?
Several experts state that payments made using a mobile device are more secure than a check or even a credit card payment with the new EMV chip. How can that be, you ask? During the authentication of the payment at the point-of-sale, many of the providers utilize biometric scans for authentication, which lessen the likelihood of payment information use without citizen’s knowledge. Also, many of the device manufacturers have taken additional steps to protect the storage and transmission of payment information.
The Payment Card Industry Security Standards Council (PCI SSC) released guidelines to educate merchants about the risk factors involved with using mobile point-of-sale terminals. These guidelines contain recommendations that affect all mobile point-of-sale systems and protect credit card data. When considering mobile point-of-sale transactions, make sure that the vendor can provide you with a recent audit information that demonstrates they are following all PCI SSC guidelines.
Mobile payment technology can provide cities with new opportunities to interact with their citizens in a more innovative and efficient manner. These payment options give cities the flexibility and security that citizens have grown to expect.
Jason Johns is the president and general manager of Iowa Interactive. He can be reached at (515) 323-3468 or firstname.lastname@example.org.