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How does mobile payment processing work?

Mobile payment processing has become a hot topic in recent years, particularly following Apple’s launch of the iPhone 6 and Apple Pay. But to grasp what mobile payment processing involves, you have to figure out how credit card processing generally works. Most people are aware that when they swipe a credit or debit card at a retailer checkout terminal, the terminal sends purchase information to a bank, which then requests payment from the customer’s financial account. The amount of time it takes for that transaction to complete is called authorization hold time or auth hold time.

Mobile payment processing operates in a similar fashion, except it uses a customer’s mobile phone to process the transaction. Most people already understand that when you use Apple Pay or other NFC-based solutions at a retail terminal, you’re using an app (or the native operating system) on your phone to read your credit card number and send that information to the terminal. However, few people understand how long it takes for that transaction to complete or what happens while your payment information is being processed.

Typically, mobile payments are deducted from a pre-paid account on your phone rather than debited directly from your bank account. With Apple Pay specifically, transactions are made using an existing credit card number, stored within the Apple wallet app, and a unique one-time Device Account Number (DAN) is generated. This DAN is sent to the terminal, encrypted by the near field communication (NFC) chip in your phone, and then routed through Apple servers to be decrypted before it arrives at the intended retailer’s point of sale system.

As with traditional credit card transactions, Apple Pay also includes an authorization hold time to ensure the payment information has been successfully received by the intended recipient before completing the transaction. The standard amount of time for this is usually 15 seconds but can vary, depending on how busy a retailer’s network is at any given time. During that hold period, the retailer is not able to authorize any other payment information, which means there might be a delay at the register.

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While Apple Pay and similar mobile payments don’t require sharing your credit card number with retailers (which can make you vulnerable to data breaches), it does mean that those unique DANs need to be stored somewhere on your phone. Apple Pay and Android Pay store the DANs in an encrypted fashion, but it’s still possible for someone to hack into your phone and extract them. Payment information is typically stored on a retailer’s servers as well, so another breach of that data can lead to customers’ financial information being leaked – or worse, stolen by hackers.

If you’re still unsure how mobile payments work, we recommend visiting one of our favorite retailers and testing it out for yourself. Not only will you learn more about mobile payment processing but you’ll also be able to see what using Apple Pay looks like in action before you decide if any other security concerns make it a dealbreaker.

For many years now, mobile phones have played an important role in our everyday life. They are no longer the devices we only use to make phone calls or text, but rather multifunctional tools that can do almost anything. And among their many features, for instance, they also act as a payment device.

Mobile payments are integral part of our modern way of life and the way we pay for things. Instead of carrying your credit cards, you can now use your mobile phone to make payments in a matter of seconds. It’s quite amazing how much our world has changed over time!

Red Note: 3 June 2022

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Michael Caine
Michael Cainehttps://amirarticles.com
Michael Caine is the founding member and Marketing Manager of First SEO Paper , also owner of Amir Articles and Mods Diary, 2 most powerful platform with thousands of published articles in different categories. You can contact him at aamritri@gmail.com for any business related inquiries.

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