M-commerce payment options: 3 critical issues to consider

Average reading time: 8 minutes, 52 seconds

Mobile commerce (m-commerce) sales are booming and expected to explode in the coming years. M-commerce is projected to surpass $488 billion, or 44% of e-commerce, by 2024. There are two key devices driving the m-commerce revolution: smartphones and tablets.¹

For retailers keen on getting a hefty share of this growing m-commerce market, it’s imperative to have a mobile app with a payment system that eager consumers find both easy to use and secure, and that also doesn’t give your back office headaches. The question is, which mobile payment solution should you choose?

Picking and connecting to the “right” payment gateway is a tricky proposition. While there are many things to consider such as audience and business specifics, your decision should be based on three critical issues:

1. Fees: Most online payment gateways and processors have commission/transaction fees. Ensure there are no hidden fees or plan limitations that might force you to overspend. Other gateways might havea setup cost, or recurring subscription fees.
2. Geographic Reach: Your chosen solution needs to work across all of your target locations.
3. Security: Although a hosted gateway could potentially take the burden of security issues off your shoulders, it behooves you to know that they understand which regulations they need to abide by and can demonstrate doing so. GDPR is one important regulation that global gateway providers need to comply with, among others. 

What Are You Selling?

But first we need to distinguish what type of products you’re offering and on which platform you’re selling them. 

If they’re digital—say, videos, ebooks, music, streaming media and the like—and you’re using an iOS app, you have to use Apple’s payment system, which takes a 30% commission on every purchase your customer makes. If you’re selling tangible goods on iOS, you can integrate with compatible third-party payment systems.

Android phones use Google Play to distribute mobile apps, which has a 30% service fee. Merchants receive 70% of the payment for an app, while the remaining 30% goes to distribution partners and operating fees. 

If you’re offering a subscription product, service fees decreased to 15% for any subscribers retained after 12 paid months as of Jan. 1, 2018. If a subscriber has been active as of this date, that time will be counted; so, for example, if a subscriber is active for four months, the service fee will shrink to 15% after eight more paid months.

M-commerce Payment Options

With that in mind, now you can evaluate the payment system options—and there are many already, with more coming. 

Here are some of the most popular and robust ones:

PayPal: PayPal is simple for consumers to use and a reliable seller option with easy setup and quick payment.

• Fees: PayPal’s commission depends on the nature of transaction, the amount of money that PayPal processes for you each month, and whether your transaction crosses international borders or requires currency conversion. In most cases, PayPal charges 2.9% plus 30 cents per transaction. There may be some discounts as volume increases. There’s no monthly or setup fee but there are some extra service fees for things like chargebacks, card verification transactions, American Express card usage fees, and uncaptured card authorization. 
• Geographic reach: It’s one of the world’s most widely used payment systems, handling 25 currencies across more than 202 countries.
• Security: PayPal has a reputation as the most secure and trusted payment system and doesn’t disclose credit card information online.

Stripe: Like PayPal, Stripe is easy to use and global. However, if fast access to your funds is a priority, keep in mind that Stripe takes a full seven days to send you the money. PayPal usually takes only one business day.

• Fees: Stripe charges a flat 2.9% plus 30 cents per transaction without any monthly or setup fees as long as you’re doing under $1 million in volume per year. They don’t disclose high volume rates.
• Geographic Reach: Stripe supports 139 currencies and operates in 25 countries. You can create charges in any currency and automatically convert the funds for a 2% exchange rate fee.
• Security: Because the credit card data customers enter into your payment form are never sent to your server, you don’t handle any sensitive data on your end.

Google Wallet: Customers need to have a free Google account and setup is easy, whether they’re on an Android or iOS device. It allows two options: in-app billing (for digital goods) and instant buy for Android (real goods and services) and all purchases are held via MasterCard’s Zero Liability protection system.

• Fees: Google Wallet doesn’t charge a fee but it works with the primary payment processors (like Visa and MasterCard) that charge industry-standard fees.
• Geographic Reach: Google Wallet is available for merchants in over 160 countries; however using the mobile app for sending and receiving money is available only in the U.S. so far.
• Security: The buyer’s credit card number is never exposed to merchants due to a technology called Host Card Emulation (HCE), which functions like a Secure Element chip but lives virtually in the cloud. It comes with 24/7 monitoring and covers all verified unauthorized transactions.

Authorize.net: Authorize.net is owned by CyberSource, which is owned by Visa. It also offers 24/7 fraud support and several additional options, like recurring billing, fraud detection, and information management.

• Fees: Authorize.net is a little more expensive. It, too, charges sellers 2.9% plus 30 cents per transaction but you’ll also have to pay a $25 monthly fee and a $49 setup fee.
• Geographic Reach: Authorize.net allows you to accept international transactions from customers worldwide, but there is one caveat: your business must be based in the U.S., Canada, the U.K., Europe, or Australia.
• Security: This system utilizes a fraud detection suite which allows it to identify, manage, and prevent suspicious and potentially fraudulent transactions. As part of the Visa brand, it’s one of the most trusted and well-recognized payment gateways for consumers.

Amazon Payments: With Amazon Payments, your customers can log into your mobile site with their Amazon account credentials and pay for their purchase using the information stored in their Amazon account, simplifying the buying experience.

• Fees: Each domestic U.S. transaction costs 2.9% plus 30 cents unless you process more than $3,000 per month, in which case you’ll get a discount.
• Geographic Reach: Currently only sellers with a bank account in the U.S., U.K., or a Eurozone country are eligible to receive money through Amazon Payments.  
• Security: Amazon Payments never records any customer credentials in any database, cookie, or browser session; they just pass them through to the user’s bank to verify the account. Once verified, the credentials are no longer available, preventing the possibility of fraud attacks.  

Square: Originally known for enabling mobile POS payments, Square now accepts online payments. Square has a robust number of tools and interfaces that sync up easily with online stores, invoices, and POS. They offer both hosted and integrated payment solutions.

• Fees: Square has a 2.9% plus 30 cents fee for the total transaction amount for invoices, online store, Square eCommerce API, and eCommerce card on file payments. There are no hidden fees with Square, and every accepted card brand (Visa, Mastercard, American Express, Discover, JCB, or UnionPay) has the same rate. 
• Geographic Reach: Payments with Square are accepted in the U.S., Canada, Japan, Australia, and the United Kingdom.
• Security: Square handles all of the card processing information using end-to-end encryption, which means that data never touches any of your systems. 

Skrill: Originally used for storing and transferring online gambling winnings, Skrill has evolved into a competitive merchant services provider. Skrill is mostly driven by international transactions, and often is willing to take on more risk than other payment processors.

• Fees: Skrill is mainly known for its willingness to work with high-risk merchants. Account setup, maintenance, and fraud screening are all free, but merchants pay a 1.9% plus £0.29 fee on payments made into their digital wallet and via their Skrill Quick Checkout. Skrill also has a currency conversion fee of 3.99%. They also have a £4 fee for transferring funds from their proprietary wallet to a bank account.
• Geographic Reach: Skrill operates mainly within Europe, and is available in a limited number of countries. 
• Security: Skrill was the first licenced e-money issuer in the UK and is authorized by the Financial Conduct Authority. Transmitted data is encrypted according to PCI DSS requirements. 

2Checkout: Also known as 2CO, this payment processor is a strong choice for accepting payments globally. It integrates with over 100 shopping carts and allows merchants to choose between two primary checkout options.

• Fees: There are no setup fees; merchants can choose between three different plans: 2Sell Plan, which is for merchants selling internationally and has a rate of 3.5% plus 35 cents per sale; 2Subscribe Plan, for those selling subscriptions, which has a rate of 4.5% + 45 cents per sale; and 2Monetize Plan, for those selling digital items on a global scale, which has a rate of 6% + 60 cents per sale. 
• Geographic Reach: 2Checkout supports over 87 currencies, eight payment methods, 15 languages, and over 200 markets.
• Security: 2Checkout is PCI Level 1 certified, the highest level a company can have. Otherwise, the company does not explain much about its security on its website.

Conclusion

If you’re a merchant, you can’t look at m-commerce numbers and not recognize that you must be in the game if you want your business to grow. To make the entry process easier, be sure to work with a software solution provider familiar with all the available mobile payment options and gateways. It’s also important to partner with a provider that can make recommendations as well as help design, develop, and launch a successful app.

Softjourn is a global technology services provider with over 10 years of experience working with Cards & Payments service providers. We've built creative solutions or augmented in-house technical teams to provide support and project-specific expertise resulting in revenue-generating features. 

We specialize in enabling and preserving the security of prepaid cards, developing transaction simulators to save roll-out time, and creating repeatable and strategic approaches to managing payment recovery. We help our customers—payment processors, banks, transaction acquirers, and prepaid card service providers—by leveraging our expertise to increase market share.

¹Meola, A. (2019, Dec). Rise of M-Commerce: Mobile Ecommerce Shopping Stats & Trends in 2020. Business Insider.