How do mobile wallets work, and are they safer than traditional payment methods?
April 29, 2020
Quick and accessible? Yes. One less thing to grab when you leave the house? Check. They’re making our lives easier and more convenient, but are mobile wallets actually safer than the billfold in your pocket?
According to Pew Research Center, 81% of Americans own a smartphone—a 131% increase in ownership since 2011. This uptick in smartphone ownership has correlated with other devices and their usage. About half of adult Americans own a tablet or e-reader device, and one-in-five use only a smartphone to access the internet at home (Pew Research Center). These smart devices are commonly used to browse the internet, access apps, or communicate with one another. However, a growing number of smartphone owners are using these devices to store their credit cards, plane tickets, and reward cards, otherwise known as a mobile wallet.
Mobile wallets use Near Field Communication (NFC) with terminals to accept payment from a device where you have previously input your credit card information. This contactless payment method works by having you hold your device inches from the point-of-sale terminal. Within seconds, the point-of-sale communicates between an antenna and your smartphone, securely exchanging the information necessary to conduct the transaction (Business Insider). This method of payment is gaining in popularity. Some estimates say that by the end of this year, 64% of consumers will have used a mobile wallet, up from 46% just two years ago (ICBA).
Those still wary of this payment method might question the safety of storing credit card information on your smartphone. Skeptics can rest assured that mobile wallets are not just convenient, they also come with built-in safety measures.
Any information that you share with your mobile wallet is encrypted. The merchant who you are paying does not receive any of your personal information, only a unique token that is good for a one-time purchase. The threat of credit card skimming is eliminated because no one handles your card during the transaction, making this form of payment much safer than handing over your card (Defending Digital). Additionally, the fingerprint or face recognition unlock feature on your smartphone provides an added layer of security. Of course, there is always the concern of a lost or stolen device. Fortunately, there are plenty of apps you can download that will locate a lost phone or will conduct a remote data wipe should you need it. It is also recommended that you change your password and contact your bank or payment provider should you notice any suspicious charges on your account (Credit Karma).
Mobile wallets are likely to gain popularity in a post-COVID-19 world where consumers demand contactless payment methods. Users are advised to download apps to their device that will protect against a lost or stolen phone and to make sure that they have a password on their device for added protection. In spite of this, mobile wallets are considered more secure than carrying a traditional plastic card. The added convenience also means that mobile wallets are here to stay and will become the new normal for consumers.