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How does mPayment work?

For many, the smartphone has become an indispensable everyday companion. And cashless payment is also popular as a practical and convenient payment option. In this respect, it was actually only a matter of time before a solution was found that combines both.



The so-called mobile payment or mPayment for short means mobile payment in German and means paying at the checkout with the smartphone. In Germany, mPayment is still in its infancy. However, that should change very soon.

A large discounter has been offering its customers cashless payment options with their smartphones since summer 2015. It can therefore be assumed that other retail chains in Germany will follow suit and also introduce the payment system.

But: how does mPayment actually work?
And what is needed for this ?:

The technical requirements for the mPayment

The mPayment is usually implemented using Near Field Communication, or NFC for short. This technology has been in use since 2002 and enables two chips to exchange data wirelessly over a distance of a few centimeters. If customers want to make cashless payments with their smartphone, they need an NFC-enabled smartphone on the one hand and an NFC SIM card from their mobile phone provider on the other.

The retailer, in turn, has the corresponding counterpart with the NFC terminal. With newer smartphones, NFC is now mostly part of the standard equipment. Older models, on the other hand, are often not NFC-capable or the technology is limited to the manufacturer's own payment service. However, it is not necessary to buy a new smartphone right away if the previous smartphone does not support NFC. Because almost all providers provide an NFC sticker that can be attached to the smartphone or the case.

All data required for the payment process is stored on the sticker. The NFC terminal at the cash register can then read the data from the sticker. Unlike an NFC-enabled smartphone, the NFC sticker otherwise only offers a limited range of functions. An NFC SIM card can be requested from the mobile operator free of charge.

In addition to a smartphone that supports NFC or makes it available via a sticker, and an NFC SIM card, the customer also needs an app that is linked to a bank or credit card. Such an app is also known as a wallet app. All major mobile phone providers in Germany offer their own wallet app. There is also the “mpass” app, which can also be used to process payments in many places. The mPayment solutions of the leading smartphone manufacturers, on the other hand, have not yet been accepted as a payment option in German shops.


The money transfer with mPayment

Payment via the wallet app is based on the prepaid method. The customer pays a credit onto his bank or credit card, which is then used for the payment process. Depending on the provider, however, additional costs arise. A monthly or annual fee is usually charged for using the service. In addition, a fee can be charged for topping up the credit.

The registration process with the respective provider is often quite extensive. For example, the customer has to legitimize his bank or credit card, provide a wide variety of information and clarify various conditions. On the other hand, this is about payments. In order to ensure the security and protection of the customer, many points have to be processed in the course of the application process. Ultimately, the entire effort is therefore to the benefit of the customer.


The possible dangers with mPayment

Like all other applications on a smartphone, a wallet app can also be targeted by malware. If a virus infects the application, the data on the NFC chip could, for example, be read and misused.

However, this risk can be minimized by using an operating system that is regularly updated and an up-to-date anti-virus program. Sometimes there is a warning that unauthorized persons can latch onto the data transmission and read or manipulate data on the smartphone via the NFC chip. According to the current state of knowledge, however, this risk is practically non-existent. Because the NFC chip in the smartphone is designed in such a way that it does not have access to the data in the device. Therefore, the NFC chip is not able to independently read and send data stored in the smartphone. And as soon as the smartphone's key lock is activated, the NFC function is also switched off.

If the smartphone is used as a means of payment, it is no different with the smartphone than with the wallet, bank or credit card: If the payment method falls into the wrong hands, there is a risk of major financial damage. Especially with mPayment, however, the security precautions in the event of improper use by third parties are higher than with cash or bank and credit cards.

A security PIN must be entered so that payment can even be made. Some retailers do not ask for the PIN for smaller amounts. Since these amounts are a maximum of 25 euros, the financial damage is limited.

In addition, the customer himself has the opportunity to increase his security. A locking mechanism using a PIN or a fingerprint, for example, reliably protects the smartphone from access by third parties. If the smartphone is lost, a call to the provider ensures that the mPayment user account is blocked immediately.

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  • Topic: How does mPayment work?