Mobile wallets - secure applications software that enable consumers to transform their smart phones, watches and laptops into mobile funds-transfer devices - are moving deeper into the electronic payments mainstream.
The term “mobile wallets” is a catchall for services like Apple Pay, Samsung Pay, Google Pay, Paypal, Venmo, Zelle and more. While unlikely to replace cash anytime soon, a survey found six in 10 Americans claimed to rely on digital currency of one kind or another – credit or debit cards and mobile wallets.
Introduced 25 years ago to pay for Cokes via text message from a Swedish vending machine, these contactless packets of financial-technology payments software downloaded to your smartphone or other mobile device are becoming commonplace due to their convenience.
Worldwide, there is an estimated 3.4 billion mobile wallets in circulation in 2024 and they are projected to reach 5.2 billion wallets by 2026.
Becoming more than digital payments tools
Digital payment tools make it easy to deposit or transfer funds between your deposit, loan and investment accounts, and also to pay bills, to shop in-store or online, and to dine in or out.
But mobile wallets are expected over time to show their potential as more than just facilitating the electronic transfer of payments between consumer and vendor.
Someday soon, you and your family may be using mobile wallets as a “virtual ID’’ to store and access information about you from driver’s licenses, health care records, credit and debit cards, even Covid-19 vaccination and testing status.
What are the advantages of using mobile wallets?
The number one reason is perhaps obviously the convenience of this payment method. With consumers doing more banking, shopping and other funds payments online – a trend that Covid-19 hastened – mobile wallets augmented the traditional payment methods of cash registers and point-of-sale terminals.
Information on transactions made with mobile wallets is stored electronically, making it easy for the budget-conscious to meticulously track their spending.
Wallet issuers and their marketing partners often encourage frequent wallet users with discounts on products and services and other promotions.
Also, the contactless nature of mobile wallets is reassuring for users with concerns about the spread of germs from contaminated hands and surfaces.
What are the limitations of mobile wallets?
Though the appeal of mobile wallets has risen, they still aren’t fully embraced. Threats to the privacy and security of wallet users’ personal information remains a hurdle (more on that below).
There’s also the limited number of retailers and services providers who are equipped to accept digital currency, mainly due to the cost to acquire and support the specialized terminals and scanners needed to process payments.
Also, some cashless payment apps impose fees on users for each transaction – an expense that can quickly add up for frequent users.
How secure are mobile wallets?
Mobile wallets boast of multiple layers of security. For one, mobile-wallet providers rely on digital “tokens’’ to track and protect their users’ identities. More levels of security kick in, including the software application that powers it. Add to that the firewall protection from the retailer, the credit card company, and the financial institution issuing the mobile wallet.
Funds in certain mobile wallet accounts, like those from Google Pay, Cash App and Zelle, are federally insured through their banking partners. Others, like Venmo, have no such coverage on funds held in their digital-wallet accounts.