New technological advances are presenting themselves every day — medical advances, scientific advances, financial advances, etc. Most of these advances go unnoticed by the general public, even though a large number of them are designed for use by consumers. A Digital Wallet, for example, is one of the more convenient technological advances that isn’t utilized by most. A wallet app, for most people, goes unused for reasons regarding concerns with privacy, unfamiliarity, and general apathy for change. However, the use of wallet apps is becoming much more widespread than originally thought, as wallet apps are making online shopping much easier for the smartphone user as it’s now possible to pay for products with your phone.
Mobile wallets are becoming so well-known that the website “Investopedia” is estimating that approximately 2.1 billion consumers will use mobile wallets to make a payment or send money in the year 2019 — more than a 30.7% increase from the 1.6 billion users in 2017. Additionally, it seems that NFC (Near-field communication) and e-wallet companies are seeking to redress the balance of digital vs. traditional wallets by enabling both online and offline options in the future.
What are Digital Wallets?
Digital wallets, also known as “e-wallets”, are a system that securely stores their user’s payment info and passwords for numerous payment methods and websites. Mobile wallets allow the user to complete purchases easily and quickly when used in conjunction with mobile payment systems. They also allow users to create stronger and more complex passwords without the added worry of remembering later. One cool feature about e-wallets, is that they can be used to store loyalty card information and any digital coupons you have, keeping everything you need for purchases conveniently on your smartphone. It must be noted that the data of the transaction is transferred through NFC.
Essentially, wallet apps can actually replace your physical wallet by using phone payments.
Are Digital Wallets Safe?
The biggest question about phone pay services is in regard to how safe the service actually is. Or, what would happen if you lose your smartphone, or, can your information can be hacked during transactions? Here are the answers to those very questions:
What happens if you lose your smartphone?
Thankfully, there is one huge difference when you lose your smartphone (and your online wallet): Any hacker who tries to steal your information from your mobile phone will be blocked by the same security settings that your phone has. This means that if you use biometric verification as a security function for your phone, then the mobile wallet will follow the same protocol; the person that stole your phone cannot get your information without your biometric verification. So, in this case, a digital wallet app is much safer than the traditional, physical wallet.
How safe is using your smartphone to pay for all your personal transactions?
Hackers should be able to intercept your data transfer if they know where to look.
Well the answer to this question is much like the previous question: it is practically impossible for your data to be intercepted during transmission. Most wallet apps utilize a security feature called tokenization to protect their users from data scanners.
Tokenization replaces your credit card or debit card information during the data transfer process (the time in-between you sending a mobile payment and the person receiving the payment) with a randomized string of numbers that are unique to that single transaction. Meaning, if someone was scanning the area in hopes to steal your bank information from your transaction, all they would see is a randomized code that is useless outside of the transaction.
If these two security features aren’t enough to make you feel comfortable about using an e-wallet, you can also install a third-party VPN network that would add an extra layer of security to your mobile wallet.
What are the 5 most popular digit wallet companies?
Listed below are the five most popular phone pay companies that are used today, with the first few companies considered to be the “big three” of e-wallet apps.
PayPal is considered to be the most well-known wallet app and online shopping service on the market today, and it is also considered to be the father of digital wallet apps and services. PayPal started as a subsidiary of eBay that was used to transfer payments between users. Currently, PayPal is used by over 173 million people and companies from some 203 countries and is available in 26 different currencies. Because of its widespread use, PayPal is compatible with all credit and debit cards issued from major banks. Another cool feature with PayPal is that you can store any loyalty cards to your account as wells as your regular debit and credit cards.
PayPal boasts their ability to transfer money both to, and from, any U.S bank account, debit card, or credit card; along with services to many foreign banks. There are no fees to use PayPal domestically, but there are fees to convert between currencies and credit cards.
Google Pay is Google’s answer to peer-to-peer payment services that allows for its users to send and receive money from a mobile device or desktop without service fees. Google Pay is optimized for both online and in-person payments, with money being taken instantly from your account when you pay (although it could take days for the payment to clear at the bank, like usual).
Because Google is such a widely used product, many companies have integrated Google Pay into their services, such as McDonalds, American Eagle, Walgreens, Aeropostale, Best Buy, Chick-fil-A, and over 100 other merchants. Google Pay is also unique in their ability to send money from people without a Google Pay account — as long as you have their phone number or email address, you are able to send money to them.
Apple Pay is the contactless payment service for iPhone, iPad, and Apple Watches and uses a feature called “tap and pay”. Currently, Apple Pay can be used at millions of merchants, including Apple’s own App and Music store. Apple goes beyond lengths to protect their user’s information by utilizing tokenization security measures. Apple Pay is unique in the fact that the service does not save payment details on the devices used, nor do they keep, or even scan, the receipts for the transaction. Furthermore, Apple Pay does not give any details about the transaction that could compromise your information, such as the location where the transaction was made, or the merchant the transaction was made to.
Venmo is owned by PayPal and works in much the same way as PayPal. However, Venmo is designed to be a more social media payment service, as it allows you to have social connections within the app. Since Venmo was designed to be a social networking payment service, you are able to connect your Facebook account to your Venmo, broadening the scope of people you can send money to and receive money from.
With Venmo you are able to link a debit card, a bank account, or a credit card to your account to send and receive money. While sending money to your linked bank account or debit card is free, sending money to a credit card has a 3% senders fee. One disadvantage of using Venmo is that you can only send money to, or receive money from, someone with a Venmo account.
Square cash is a mobile credit card processor that also specializes in peer-to-peer payment services. It is very similar to Venmo in its social aspect, but you are able to request money from anyone with a Square Cash account.
Square Cash also gives their users the option to own a Square Cash Card, allowing them to have their own personal debit card linked to their Square Cash account. They do offer personal payment services and standard deposits for free, however there is a 1.5% instant deposit fee and a 3% sender’s fee with credit cards.
Square Cash is only offered in the 50 states and does not include any US territories; accordingly, this app is only compatible with US issued AMEX, Visa, MasterCard, and Discover debit or credit cards. Another disadvantage to using the Square Cash app is that it is only available for the latest versions of iOS and Android devices.
What are some things to know about digital wallets?
A few key things that you should remember about online wallets are:
- E-wallets are considerably safer to use than a debit or credit card as they use encrypted software to keep your information safe.
- Wallet apps can utilize biometric security features much like any smartphone, adding to their security level.
- All payment information, such as debit and credit cards, are in one convenient location right at your fingertips. Because your payment information is kept in one spot, you don’t have to continually add your information to each merchant individually, when you make a purchase.
- There are no additional costs to use a phone payment system or e-wallets to make purchases, however you may incur sender’s fees when depositing money to your linked bank account or depositing money to a credit card.
- There is no single application that is used everywhere: While wallet apps make online shopping extremely convenient, it gets a little more complicated when you want to use your app for anything other than phone payments. To actually replace your physical wallet, you will have to have multiple mobile wallet apps since there is such a large disparity between what places accept what payment services.
- While e-wallets are considerably safer than debit and credit cards, they are not safer than paying for things with cash.
- Wallet apps are not compatible with every phone, or at least they aren’t currently. As seen above, Square Cash is only compatible with the latest iOS and Android devices. Venmo can be used on any US-issued phone that can send/receive text messages from short codes. Apple Pay can only work for Apple devices – including iPads, iPhones, and Apple Watches.
- Despite wallet apps boasting that using their services are free, there are some hidden fees when you choose to instantly transfer money from the app to your debit or credit card. Most apps have an added 3% service fee when using a credit card or sending money to a credit card. Square Cash also has an added 1.5% service fee to instantly deposit money into your bank account.
In conclusion, digital wallets are the new frontier of online shopping services. Online wallets are a more convenient and safer option than physical wallets, as wallet apps have more security features than traditional debit and credit cards.
While wallet apps are not used widely currently, their use is expected to blossom in the coming year — projected to be a 30% increase in users in 2019. The most promising mobile wallet apps are PayPal, Google Pay, Venmo and Square Cash, all of which are considered peer-to-peer mobile payment services.
Hopefully this article has cleared up any questions or concerns you may have about the technology behind mobile wallets, including if they are considered safer than traditional debit and credit cards (yes, they are). Hopefully, you now feel well equipped to make the decision to start looking into getting an e-wallet.