How mobile money transfer works

Payment services using a mobile device are growing worldwide, and the different ways in which mobile money transfer transactions can be achieved are also increasing due to enhanced technologies and easier access to smart phones and mobile networks. Understanding how mobile money transfer works can help you find the most economical, trustworthy, and reliable methods for transferring money across the country and globally.

As mobile technology improves and new developments in the money transfer and global remittance market become more widely available, consumers and corporations are able to transfer money securely and quickly to both individuals and businesses in local and international locations from a mobile device. Especially in the developing world, where mobile money transfers via text payments are commonly used for everything from retail transactions to tuition fees to electricity bills, opportunities are increasing for businesses and individuals to send money transfers from their mobile device quickly and easily, particularly to rural locations where the number of physical bank branches is usually limited. The emergence of smartphones has made the process even easier; With the use of a smart phone and an app downloaded onto the device, or by using mobile browser technology, people can transfer money domestically or internationally with a few simple commands.

Amazon’s textpayme.com and eBay-owned PayPal are just a few of a growing list of services that allow people to transfer money from their mobile device for domestic or overseas payments. While there are a wide variety of money transfer options using these services, some require both the sender and the receiver to have an account, and most charge a small fee. Remote payment is a related, but slightly different mobile money transfer service. Apply Pay is a remote payment service, as it allows the user to pay for transactions in stores using their mobile device and the Apply Pay service, without having to use actual cash. Banks and financial institutions are also beginning to make their traditional banking services mobile compatible to meet customer demand. Currently, the leading mobile payment service in this space is the e-wallet. Offered by Allied Wallet, the e-wallet app enables a user’s cell phone to hold credit, which can then be used for purchasing goods and services which are either downloaded directly to the user’s phone (tickets, digital music) or are physically delivered (clothes and food).

Mobile money transfers work by using communications protocols, an established system of rules which enable mobile phones to communicate with each other. When transferring money by mobile device to another individual, the wireless carrier acts as the intermediary. By using specific keywords, the sender’s cell phone transmits commands that tell the wireless provider to add the specified amount of money to the user's bill. When the bill is paid, the wireless carrier then transfers the amount designated to the recipient specified by the user. If the sender uses a traditional bank and its mobile application for sending a transfer, the bank will not use the sender’s wireless carrier as an intermediary.

Like other financial transactions, mobile phone money transfers are regulated to ensure the safety and integrity of the transactions. Local and national regulatory agencies exist to monitor mobile transfers and payments and the evolution of mobile technology itself is helping to make mobile payments more secure. Technology security companies such as VeriSign provide technical security solutions to mobile money transfer service providers and the latest smartphone apps to help facilitate direct and secure connections between senders and their recipients, as well as to provide authentication services.