With the rise of ecommerce and online selling, cashless and contactless payment methods have seen a dramatic upturn. Cash and credit card payments remain very much alive, but consumers no longer place them at the top of a pedestal. Instead, a growing number of customers are turning to payment apps involving digital wallets, mobile payments, cryptocurrency, and NFC payments for a seamless and more convenient way of paying for products and services.
To keep up with these technologies, the best way for you to attract new customers and improve your cash flow is to simplify the payment experience, regardless of your customers’ preferred payment methods. So if you’re interested in exploring the potential of using payment apps for your business, it’s helpful to understand these programs and how they work.
To help you choose the best payment app, we came up with a buyer’s guide that details all the things you need to know about these programs—the definition of payment apps, their features, benefits, cost, examples, and other buying factors that you should consider before investing in one.
What Are Payment Apps Table of Contents
What Are Payment Apps?
Payment apps are tools designed to help you facilitate payments, whether you are running a brick-and-mortar store, an online shop, or both. These software products make online transactions faster, more convenient, and secure for your staff and customers. Due to their convenience and ease of use, payment apps have become popular worldwide and are used by various kinds of businesses that need to keep track of their finances and receive payments on time.
Payment systems have tremendously transformed the way customers pay for goods and services. Using a payment app can bring various benefits to your business, including faster transactions, greater security, and the convenience of receiving payments online without needing to use costly and traditional POS machines or bulky or inconvenient card terminals. By simply opening a payment app on any device—laptops, tablets, or mobile phones—your customers can make payments directly to your store.
One of the main benefits of using a payment app is it makes your transactions much faster than traditional methods of transferring money. With a payment app, all financial transfers occur through digital devices, eliminating the need for paper money or physical credit and debit cards. A good number of payment apps also allow you to make direct transfers between bank accounts.
Compared to traditional methods of paying, payment apps provide a much faster and safer way to pay for goods and services. Money transfers made through a payment app are usually instant since only digital devices are used to transfer funds between users’ bank accounts. As a result, your customers no longer have to wait as long at your checkout counter before they can pay you back for their purchases made at your store, leading to an increase in sales and more satisfied customers.
Source: Atlanta Fed, PwC (2020)
Types of Payment Apps
Payment apps are becoming increasingly popular for two reasons: speed and convenience. For you to send or receive payments, all you have to do is install the app on your device and link it to your preferred source, a credit card, a bank account, or even a mobile wallet.
Certain payment applications are distinct from one another. Some programs are built for merchant-to-merchant use, while others offer money transfer services from consumer to consumer. Other payment apps for businesses also accept various kinds of consumer payment apps, although some work only between certain types of devices. Take for example Apple Pay, a payment solution that works only between Apple phones.
To narrow it down, here are some of the most common types of payment apps that you can find in the marketplace:
- Mobile payments. These applications store debit and credit card details, allowing your customers to pay for things digitally using their mobile devices. Most banks have also popularized mobile money transfers by leveraging innovative app technologies.
- Digital wallet. On top of money transfers, digital wallets allow users to store cash on their accounts and transfer it to other account holders. These apps also let you complete payment transactions online, as well as in-person payments at the counter by using only your mobile phone.
- NFC payment apps. These are contactless payments that leverage near-field communication technology, or NFC for short, to facilitate payments between two devices. To accept an NFC payment, all your customers must do is tap their device into an NFC-enabled terminal and complete the transaction.
- mPOS. Known also as a mobile point-of-sale system, this type of payment app turns your tablet or smartphone into a cash register. With an mPOS app, you can start accepting payments virtually at any given time.
Features of Payment Apps
Cloud-based payment systems are designed to help you to accept and manage online transactions. It streamlines the movement of your cash flow and helps you to prevent fraud, manage revenue, and drive business growth.
But with so many product options to choose from, how do you know which one can meet the specific requirements of your business? It is important to have a thorough understanding of what are payment apps and how they exactly work, and the features of payment apps that you should look for. Here are some examples of the basic functions that you can find in most payment applications:
Multi-device accounts
Most payment apps support multiple devices, enabling you to accept payments from your customers whether they are making payments using their phones, tablets, laptops, or desktop computers. A payment application also allows you to accept payments more quickly and conveniently using local payment methods, customers’ preferred currencies, and their own digital payment accounts.
Payment processing
Payment apps allow users to send any amount to anyone, whether they need to transfer money to their friends and family, or they have to settle payments with their vendors, suppliers, and distributors. As a business owner, payment apps help you to deliver a more convenient and seamless checkout experience to your customers. Some programs even support international payments, enabling you to expand your business worldwide and accept payments from customers abroad.
Instant payments
One of the best features of payment apps is it lets you collect payments in real-time. Compared to traditional payment methods, such as checks or bank transfers, money sent through most payment systems gets processed instantly, and they usually reflect on your account in no less than a day once your customers complete their transaction.
Security
All payment transactions involve confidential information, such as the personal information of your business and customers, as well as credit card details, bank details, and more. To make sure that your financial records are safe, most payment apps leverage sophisticated technology and security that makes money transfers safe and secure all the time.
Financial reporting
A good payment application comes with analytics and reporting features. These can help you to learn more about your business operations, as well as the financial health and performance of your company. Most payment apps also provide you with the data you need about customers’ payments so you can track and chase any outstanding balances that are yet to be settled.
Stripe is an industry-leading payment app.
Benefits of Payment Apps
Thanks to constant technological advancements, online payment apps have witnessed a sudden revolution in the 21st century. Key online payment statistics reveal that payment apps are now providing more sales opportunities to businesses. To best answer what are payment apps, they provide customers with more options to complete their transactions and settle payments, businesses that use payment apps gain a competitive advantage over their competitors who stick to traditional payment methods.
Needless to say, using a payment app can bring various benefits to your business. Here are some examples:
Seamless checkout experience
A recent report by Atlanta Fed and PwC reveals that mobile or online purchases of products and services more than doubled since 2019. From only 17%, the growth of mobile and online payments, whether made in-person or through online sites, increased to 24% in 2020 and 42% in 2021. Now that consumers are paying more bills online, a seamless and convenient checkout experience can help you gain more customers and retain existing ones in the long run.
By using payment apps, the checkout experience becomes less daunting for customers. For those owning a physical store, the main purpose of payment apps is to reduce friction at the checkout counter. This also increases the likelihood of repeat customers. for those running a physical store.
Getting paid faster
So why use payment apps? Whether you have a brick-and-mortar location or an online sales website, online payment systems allow you to receive your money immediately. This eliminates the need to send out invoices and wait days or weeks before customers can process their payments and settle their outstanding balances. A payment app also gives you the capability to track the status of each payment transaction to ensure that your business gets paid on time.
Secure transactions
Most payment apps leverage industry-grade and a greater level of security for their data encryption. This reduces the threat to financial transactions and ensures that your business and your customers’ financial information are safe from potential and data breaches. Moreover, some payment apps offer dispute resolution and purchase protection to protect you against unauthorized transactions made on your account.
Examples of Payment Apps
To help you narrow down your product options, we looked at some of the most popular examples of payment apps today and assessed how does a payment app work. Here are some of the leading payment apps used by various kinds of businesses today:
Stripe
Stripe is a cloud payment solution ideal for ecommerce and web-based businesses. It allows you to process online payments and streamline your checkout processes. Stripe also supports international transactions, allowing you to accept and manage payments from your customers abroad. To ensure safe and secure transactions, Stripe provides an additional layer of security and authentication to its user accounts.
Paypal Payments Pro
Paypal Payments Pro is a payment processing solution that lets you accept credit card payments, as well as mobile and retail credit cards from your customers. It also provides a virtual terminal that enables you to facilitate payments via phone, fax, and email. Additionally, Paypal Payments Pro lets you customize your online store’s checkout interface, from its theme, colors, to design, and layout. This helps you provide a unique and positive checkout experience to your shoppers.
2Checkout
2Checkout is another leading global payment platform that you can use to process online and mobile payments from local and international customers. It supports multiple languages and currencies to help you to increase conversions and drive more sales. It also accepts various types of payment methods, including MasterCard, Discover, Visa, JCB, Diner’s Club, American Express, debit card, and even PayPal. Moreover, 2Checkout’s integrates with hundreds of online shopping carts and invoicing systems to help you to streamline your online payment processes.
Amazon Payments
Purposely built for Amazon merchants and shoppers, this payment app is a fast, easy, and reliable payment solution. It is packed with a range of tools and features that helps you to streamline your ecommerce processes and improve customer loyalty. In addition, it lets you deliver a fast and speedy checkout experience on thousands of sites and apps to your customers.
BlueSnap
BlueSnap is an end-to-end payment solution designed to help you simplify complex payment processes. It lets you process and accept payments from local and international clients with it vast global network of acquiring banks from all over the world. This also helps you to generate higher revenues while reducing cross-border fees. Furthermore, BlueSnap offers a virtual terminal to support invoice payments, manual orders, marketplaces, subscriptions, and mobile and online sales for your business.
2Checkout is a fast and reliable online payment solution.
Cost of Payment Apps
The cost of payment apps is an important factor that you should consider before deciding on which payment app you should use for your business. Some payment apps have tricky pricing, so it’s important to carefully consider the fees that the vendor charges for each transaction or pricing plan.
Although most payment apps are free to use, some of them may charge fees so you can receive payments in real-time. You may also find payment solutions that require processing fees, especially for payments that need to be converted into your local currency. These fees often vary based on the amount, type, and location of the transaction.
For payment apps accepting credit cards, most vendors typically charge fees around 2.5% to 3% for each transaction that you make.
Payment Apps Buying Factors
On top of understanding what are payment apps and their pricing plans and transaction fees, there are also various factors that you should consider before investing in an app. Here are some of them:
Security
The first line of defense for protecting your financial transactions is to make sure that you are using a payment app with industry-grade security features. A good payment app leverages powerful security layers to protect your business and customers’ financial data. For instance, most payment solutions require you to use a personal identification number (PIN) before you can open the app or transfer money. For added security, some even offer two-factor authentication (2FA) to account users.
Ease of use
The best payment app is one that’s easy to use and simplifies complex payment processes, especially when you need to facilitate payments from international clients. Cross-border transactions can be quite daunting if you are not using a payment app that supports multiple currencies and languages. As a payment gateway tip, choosing a payment solution with user-friendly features can help you to deliver a seamless payment processing experience to all your customers.
Amazon Payments is ideal for ecommerce store owners and online sellers.
Payment Apps Trends
Businesses can reap the many advantages of payment apps. And for a growing number of customers, online payment apps have become a preferred way of paying for products and services. Whether they are buying from retail stores or ecommerce shops, customers are finding payment apps more convenient to use than traditional payment methods. Here are some payment app trends that indicate newer opportunities for businesses leveraging payment apps:
Increasing Demand for Mobile Point of Sale
Mobile point-of-sale systems, known for short as mPOS, are becoming increasingly popular among merchants and retailers who want to streamline their payment processes. According to recent POS statistics, the mPOS industry is expected to grow at a 19% CAGR between 2020 to 2026. This shows absolute proof that mPOS technology is making a huge difference in the payment processes of business owners.
mPOS offers a wide range of tools that liberate merchants from their brick-and-mortar locations and in-store operations. Aside from payment processing, mPOS systems also offer inventory management, invoicing, financial reporting, and tax compliance features.
Machine Learning and AI-Powered Security
When it comes to payment transactions, security is the top priority of customers and business owners. Thus, payment app vendors are leveraging machine learning and AI capabilities in developing top-grade security features for their programs. In a recent AI trends report, detecting and deterring security intrusions are found to be the most popular use of AI among companies from all around the world.
Potential Issues with Payment Apps
Payment apps have many advantages, but they are not exactly foolproof. Below are a few examples of some online payment problems that store owners face on a regular basis:
- Outdated system. To keep up with the rapidly evolving payment technologies, some applications may require the installation of new hardware, such as terminals that support NFC payments and tap-to-pay options.
- Poor customer support. Technical issues, fraudulent transactions, and other mishaps can be inevitable for digital payment processes, so it is essential that your payment processing provider has a reliable customer service system.
- Limited currency options. A payment app that does not support multi-currency options can also limit your opportunities to transact with international clients.
What are the compliance and regulatory requirements for payment apps?
Understanding the compliance and regulatory landscape is essential for businesses using payment apps. Adherence to these requirements ensures secure transactions, protects customer data, and minimizes the risk of fraud. Here’s a look at key compliance aspects payment app users and providers need to consider:
- PCI-DSS Compliance: The Payment Card Industry Data Security Standard (PCI-DSS) is crucial for apps that process credit card payments. Compliance with PCI-DSS ensures that sensitive card information is securely handled, reducing the risk of data breaches and fraud. Businesses should verify that their payment app provider is PCI-compliant.
- KYC (Know Your Customer) Protocols: Many payment apps, especially those handling larger transactions, require businesses to follow KYC procedures. This involves verifying customer identities to prevent fraud and comply with anti-money laundering (AML) laws. KYC protocols vary based on jurisdiction and transaction volume.
- GDPR and Data Privacy Regulations: For businesses operating in or handling data from the EU, compliance with the General Data Protection Regulation (GDPR) is mandatory. Payment apps should offer options to manage data consent, secure user data, and handle data deletion requests in line with GDPR.
- Anti-Money Laundering (AML) Requirements: Some regions mandate AML compliance to prevent illegal financial activities. Businesses using payment apps should be aware of AML requirements, especially when dealing with high-risk or international transactions.
- Tax Compliance: Payment apps should offer features that help businesses remain tax compliant, especially for sales tax or VAT. Integration with tax calculation services can help ensure accurate tax handling, reducing the risk of audits or penalties.
Choosing the Best Payment App
Once just an option for those in the minority, payment apps appear to have caught on with consumers in a big way. Due to its convenience and simplicity, the use of payment apps to purchase products and services from merchants has now become a norm, replacing traditional payment methods for faster and more secure payment transactions. Online store owners and retailers are leading the way to digital transformation with innovative payment apps, serving as a vital part of everyday life for millions of consumers.
With payment apps, you can simplify payment processes and provide customers with a seamless checkout experience. There are many options out there for you to use, but it can be confusing to pick one that suits the specific needs of your business. The key is to get to know the product by doing product research or signing up for free trials or demos of the apps. In this way, you can easily find one compatible with the size and type of business you have. Make sure also that you choose a payment service provider that is reliable and trustworthy.
Now that you know–What does a payment app do?–you can also check out our guide to the top payment gateway systems.
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