Mobile Payment

Mobile Payment means: you pay with your smartphone or smartwatch instead of cash or a card. At the checkout, you briefly hold the device up to the reader, and the amount is deducted. The money doesn’t actually come from the phone itself, but from the linked bank account or credit card. So the phone only replaces the card, not the bank. Alongside this, there is a second form: payments within apps or on the internet, where you don’t hold anything up to anything. Paying via a QR code — that square black-and-white pattern the camera recognizes — also falls into this category.

Why the phone is pushing out the card

For customers, the main advantage is convenience. You already have your smartphone with you anyway, whereas the card has to be pulled out separately. On top of that, authorization happens via fingerprint or facial recognition. If you lose the device, that doesn’t automatically give someone access to your account.

For banks and tech companies, there’s more at stake than convenience. Whoever controls the payment app on the phone stands between the customer and the bank. Apple and Google earn money on every transaction or negotiate fees with the banks. That’s why Mobile Payment regularly comes up in business news and before competition authorities.

That’s why the EU put pressure on Apple in 2024, because other providers had long been barred from accessing the payment technology in the iPhone. Cases like this show that this isn’t just a technical detail. It’s about who owns access to the customer.

What happens when you tap the checkout

Most payments at store checkouts run via NFC. That stands for Near Field Communication and means radio transmission over a range of just a few centimeters. This short range is itself a security measure: nobody can trigger a payment unnoticed from a distance. The same technology is also built into modern bank cards.

What matters is what actually gets transmitted. The phone doesn’t send the real card number, but a substitute value. This substitute value is called a token. It’s valid only for this one device and is worthless to criminals if intercepted along the way. In addition, the phone generates a new one-time code for every single payment.

The sensitive data is stored in a specially protected chip in the device, the Secure Element. Other apps cannot access it. A common misconception is that Mobile Payment is less secure than cash. Technically, the opposite is usually true, because the real card number never reaches the store.

From the bakery to the in-app checkout

In everyday life, Mobile Payment is mostly encountered as Apple Pay, Google Pay, or the payment feature of one’s own banking app. In Germany, almost all larger supermarkets, bakeries, and transit operators now accept contactless payments. Buying a local transit ticket on your phone counts as well.

Internationally, the picture looks very different. In China, Alipay and WeChat Pay dominate with QR codes, and cash has almost disappeared in cities there. In Germany, by contrast, cash payments long remained especially common, and the shift only really picked up speed during the Covid era.

Mobile Payment should be distinguished from online banking and from cryptocurrencies. With online banking, you transfer money on a computer or in an app without standing at a checkout. Cryptocurrencies are a separate means of payment with their own exchange rate. Mobile Payment, on the other hand, moves ordinary euros and is essentially just a new way of spending them.