With a brand new update set to supercharge the Vodafone Wallet app, we've been taking a look at the science behind mobile payments...

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Move over credit and debit cards, there’s a new payment method in town: the mobile payment. But how does it work? And what does it mean for your money? Here’s everything you need to know…

What are mobile payments?

A mobile payment is the use of your smartphone to transfer money from your bank account to a local shop, big business, or even another person – like the pal you owe that fiver to.

How does it work?

Essentially, your mobile device becomes a digital storage for your bank cards, turning the smartphone in your pocket into a digital wallet. That means you can, in theory, leave your actual wallet at home. And we’d all like lighter pockets, right?

Each major smartphone platform has a different way to store your card details (Apple Pay, Android Pay, or Microsoft Wallet), and we have a great payments platform too (Vodafone Wallet), but they all have one big thing in common: a reliance on the same technology to make the contactless payment work – Near-Field Communication (NFC).

Because of this, phones need an NFC chip to be able to make contactless payments, but that doesn’t necessarily mean that all phones with NFC are capable of mobile payments. If only life were that simple! To find out for sure you can check your phone’s documentation. Or, in the case of Android Pay, the Google Play store page for the app, which will tell you whether or not you’re good to go.

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With your card details stored locally and securely (read: kept safe with top-notch security encryption) in your phone, and with NFC switched on, you only need to hold it near a compatible card reader to initiate an instant payment – in much the same way as a contactless debit card.

For an added layer of security, your payments are authorised by either fingerprint scanner (if your phone has one, as per the iPhone 7), a PIN code, or a password.

How long have mobile payments been around?

The main technology that powers mobile payments – NFC – has been long in the making; since the 1830s, in fact. Payment wasn’t its original purpose, though. It was originally designed to be used for ‘electromagnetic induction’, to send energy (rather than data) over a radio wave.

Fast-forward to this century and NFC is much more prevalent. For a good few years now, NFC in phones has been widely used to enable two devices to communicate with each other for the purpose of sending and receiving files, or to easily pair smartphones to accessories like wireless speakers, while the prospect that – one day – people might be able to make payments in stores always lingered on in the distance.

Until now. Google and some other players have been experimenting in the space since 2011, but all this build up only really came to fruition with the launch of Apple Pay in 2014/2015. Working with both banks and big name stores to install the necessary infrastructure all over the world, the stage was finally set for mobile users to leave their coppers at home…

How can I experience mobile payments now?

Those living in a bustling city have probably experienced contactless payments in one form or another already. If you’ve travelled on the London Underground over recent years and used an Oyster Card to get past any of the security barriers, you’ve used contactless payment to do that.

By placing that travel card on the receiver, a small amount of money is deducted from your account in exchange for entry. It’s mobile, and you’ve paid: mobile payment. However, if you wanted to use your mobile device to buy a can of fizzy pop, a magazine, or a Sunday newspaper (could also be any other day of the week, mind) you can do so using one of the following methods wherever you see the VISA wireless symbol:

Vodafone Wallet
Vodafone Wallet just got better with Vodafone Pay, which keeps your credit, debit and store cards safe on your phone, and now even lets you pay – exclusively – via PayPal at more than 400,000 contactless points of sale around the UK! To Get Vodafone Pay all you need to do is swap your standard SIM for a contactless one, and your phone becomes the ultimate shopping companion. You can even make payments when your phone is switched off, out of coverage, or out of batteries. You also be able to pay to travel on the Transport for London (TfL) network and National Rail services that accept Oyster.

On top of all that, Vodafone Pay allows you to keep track of all your payments easily, with messages is sent to the cardholder immediately after payment to confirm your transaction has been successful. You can also check your transaction history in the Vodafone Wallet app, which includes details of the purchase, the place and the date you bought each item. And if you choose to pay via PayPal? All your PayPal transactions will be logged in your PayPal account.

Click here for lots more information on Vodafone Pay and Vodafone Wallet.

Apple Pay
Launched in the UK last July (2015), Apple Pay is baked into the iPhone 6 and 6s ranges as well as the iPhone SE and the Apple Watch. It’s secured using the iPhone’s TouchID fingerprint scanner and Apple Pay can even be used to pay for items within apps.

Android Pay
Google’s Android Pay service arrived last summer too, bringing modern mobile payments to compatible Android devices since May 2015 . As with Apple Pay, you can also use Android Pay instead of an Oyster card on the London Underground.

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Samsung Pay
Not content to let Google have all the Android-powered payment fun, Samsung’s offering works in much the same way but is exclusive to its Galaxy range of devices.

Microsoft Mobile Wallet
Windows 10 Mobile devices got on board the mobile payment bandwagon with its own service this year. Microsoft Mobile Wallet launched in June in the US, and should be coming to the UK soon.

What can mobile payments be used for?

Due to their quick and easy nature, contactless payments have a ‘floor limit’ to help keep your money extra safe. That limit is set to £30 in the UK, $25 in the USA, and €25 within the Eurozone, although this has already crept up from an initial £20 here – so don’t be surprised if it hits £50 in the near future as this way of purchasing becomes more and more prevalent.

What’s coming next?

Contactless mobile payments have finally arrived in earnest, so uptake of this new technology will continue to rise as the price of the necessary NFC technology is lowered and embedded on cheaper (and therefore more accessible) devices.

What’s likely to happen next is that contactless payments will make the jump from your phone to your wrist. We’ll probably see more smartwatches – like the Apple Watch – being imbued with the necessary tech to make mobile payments, meaning we’ll be able to pay for items in a store by just placing our wrist against a card reader. Which will be great for those times when you’ve already got your hands full of shopping bags!

Find out more about Vodafone Wallet… Click here to find out how to make the most of Vodafone Wallet and Vodafone Pay.