How Mobile Payments Actually Work

October 31, 2018

Cell phones have evolved through the years to from being a brick-sized device only capable of making phone calls, to an advanced technological breakthrough that has come to replace our calendars, cameras, and even computers. With all the advancements in cell phone industry has also come mobile payments, allowing customers to use their smartphones in replacement of debit and credit cards.

The technology behind mobile payments is complex and difficult to explain, as with most modern technology upgrades. But, explaining how mobile payments actually work, and the safety measures in place when using them, is actually quite simple!

Mobile Payments 101

There are a number of variations on the standard mobile payment system, but for now lets focus on the basics. Mobile payments allow smartphone owners to make purchases through digital wallets – a term that refers to apps such as Apple Pay, Google Pay and Samsung Pay. Digital wallets use advanced tokenization technology to securely store the information about debit, credit and even gift cards within the device, so that a smartphone can replicate the information transfer that happens with a card-based payment. Like other contactless payment options, mobile payments are currently only possible for purchases under $100 Canadian.

Near-Field Communication

So how does a payment terminal know that a smartphone payment is going to happen? Most mobile payment solutions rely on near field communication (NFC). NFC is enabled on smartphone devices as well as most standard payment terminals, and when two NFC enabled devices are within a close distance of one another, they can transfer data between them. NFC isn’t unique to mobile payments either, as most debit and credit cards in Canada are also NFC enabled, which allows you to ‘tap’ your card on a payment terminal.


And how do these payments stay secure you ask? Digital wallets rely on tokenization, a process where a cardholders’ personal information is made secure by replacing the information with a unique data strand that’s near impossible to decipher unless you’re a payment processor. This means that a smartphone doesn’t keep the card information stored on the device, and the information sent to process the payment has no intrinsic value to anyone but a payment processor.


In lieu of entering a PIN to authenticate a purchase, mobile payments rely on biometric technology instead. Simply put, this means using a fingerprint, Face ID, or other identification technology to confirm that you are the cardholder you say you are when using the device. If your smartphone were to be lost or stolen, a mobile payment couldn’t be made using the device, as you’re not there to authenticate it.

Mobile payments can sound like a risky payment type, but in actuality they’re just as secure as tapping your debit or credit card. If you want to learn more about mobile payments, make sure to take a look at our blog The Top 4 Most Popular Payment Apps.  

The information in this article is provided solely for informational purposes and is not intended to be legal, business or other professional advice or an endorsement of any of the websites or services listed. 

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