Most of us carry around any number of cards in our wallets: credit cards, gift cards, rewards cards, membership cards, key cards, and among them, our driver’s license. For mobile device users, there’s a new way of carrying all those cards; it’s the mobile wallet. A mobile wallet is a wallet that lives on your mobile device instead of in your back pocket. Instead of scrambling to locate a card to pay for a purchase, you simply tap your device and be on your way. Only about 16 percent of smart device owners currently use a mobile wallet app to pay for purchases according to a JPMorgan Chase survey. This limited number may be due to lack of consumer awareness, perceived insecurity, or because only 36 percent of US retailers currently offer this payment option. However, more and more merchants are moving towards mobile wallet payment by updating their systems to accommodate consumers. Besides a payment option, they are a new and powerful marketing and loyalty platform for merchants, too.
Since mobile wallets seem to be the moving trend and I have apps on my smartphone that encourage their use, I wanted to find out why I would want or should use a mobile wallet app. Here’s what I learned:
Mobile wallets provide a convenient way to pay for goods and services. The app will work on a smartphone, smartwatch, or tablet.
Mobile wallets eliminate the need to carry around a fat wallet with multiple cards that we may only use occasionally. There are no worries about misplacing or losing a card. And since mobile wallets can store all the loyalty reward cards, there is no need to carry a key chain with lots of store tags attached.
Mobile wallets are potentially safer than physically carrying credit cards or cash. Because information stored in mobile wallets is encrypted, security is superior to magnetic strip or chip (EMV) credit cards. Mobile wallets use what is called a Near-Field Communication (NFC) chip. When payment data is transmitted, actual account numbers are not used; rather NFC makes use of encrypted payment codes. This means that upon transaction, your device encrypts your information taken at the checkout terminal, sends data to the mobile wallet provider who decrypts the information, identifies you, and sends the payment request to the processor, who then requests the money from your bank or pays on your behalf (credit).
Mobile wallets are generally harder to steal or copy than physical cards or cash because your card is never out of your sight and your wallet is never open. To further enhance security, two-step verification should be used. One password, fingerprint, or personal identification number (PIN) to open or unlock the mobile device and a second to get into the mobile wallet app. Even if a thief were to bypass all the security, the risk is low. Mobile wallets require an underlying credit or debit card to fund transactions and those cards limit your liability for erroneous or fraudulent charges; credit cards offer more protection that a debit card since a debit card is linked to your bank account. You can also protect your data by installing an app that will help you located your device if you lose it or remotely wipe the data from the device.
Mobile wallets acceptance is growing throughout the marketplace. Millions of retailers (brick and mortar as well as online) accept mobile wallets and have payment-processing terminals available or have adapted their app systems to mobile wallet technology. While an actual list of retailers using NFC e-transactions does not appear to exist, I found websites that do provide some information. (I will list some of them at the end of the blog.) Ideally, mobile wallets include a locator tool in their apps, to find nearby merchants who accept NFC payments. Look for the contactless symbol used on compatible payment terminals.
Mobile wallets may eventually replace traditional checkout procedures. Apps are being developed that allow one to pay while they walk through the store avoiding checkout lanes completely.
What about risks?
According to Consumer Reports the risks include the possibility of increased fees, sacrificing some privacy, and the potential loss of device battery power or retailer not accepting contactless payment forcing the wallet out of the back pocket and scrambling for cash or an old credit card.
How do mobile wallets work?
Most mobile wallets work through an app on your smart device by scanning a barcode, tapping or waving at the point-of-sale. This means you can make a purchase by positioning your phone or device in front of a terminal at checkout. The phone transmits your payment information and then asks you to verify your purchase by entering a code, entering a pattern or taking your fingerprint. The N-mark (a blue square with a stylized N) will appear on the status bar of your device when NFC is active.
How does one get a mobile wallet?
Mobile wallet apps may be obtained in various ways. Three of the four most widely used mobile wallets are currently device or operating system specific: Apple Pay, Android Pay, and Samsung Pay. A fourth, PayPal, works across all major devices as do retailer or brand specific apps and major bank apps. Start by downloading the mobile app(s) of choice onto your device. Then load the credit or debit card information you want to store along with loyalty cards and even coupons. At point-of-sale, you choose the app that fits the purchase such as Apple Pay can be used only at retail outlets accepting Apple Pay and retail or brand apps can only be used at that retail outlet. Most mobile wallets offer similar features and security measures. The right one for you depends more on personal preference or on the device or credit cards you own.
In summary, mobile wallets appear to offer more convenience and security than a traditional wallet. They are widely used and accepted at retailers around the country. Based on the information I found, I’ve decided to gradually give up my fat wallet and ring of loyalty reward cards and use mobile wallet apps when I can. Is a mobile wallet for you? I’d love to hear your experience with mobile wallets!
Brief list of NFC Retailers: