Are payment apps and mobile wallets safe?

The other day I saw the headline, “Mobile wallets are safe, yet Americans remain wary.” Mobile wallets and payment apps have the potential to make our lives a lot easier. Yet we have been slow to adopt. Have you reached the checkout line at Target to find you forgot your gift card? Or have you switched up your bags so many times (on the way to the gym, to work, to a soccer match, and then to dinner) that you left your wallet?

A digital wallet would be perfect for many of us. However, we worry about security. Well, you might be surprised to hear that it may be safer to use our phones for many transactions. We’re going to take a look at the security behind mobile wallets and payment apps as well as what we can do to make our phones more secure.

How do mobile wallets and payment apps work?

A mobile wallet is an app that stores your credit, debit and gift card information so that you can make purchases with your mobile device. Mobile wallets can be used on tablets, phones and smart watches. They are incredibly convenient because you do not have to carry all of your cards with you.

Mobile wallets are also quicker than using a credit card or cash. When you want to make a purchase, you open the app, choose your card and then touch your device to the compatible card reader. Before you know it, you’re off with your purchase.

The credit card and debit cards you upload to your device will still have the same reward points and capabilities as the physical card. So, when checking out, make sure you are using the debit card that currently has a deal or a credit card with high rewards. You can cater your shopping to get the most for your money.

The major players in the mobile wallet world are Apple Pay, Google Pay and Samsung Pay. These apps are most likely already on your mobile device, depending on the brand. There are many merchants, such as Starbucks, that are getting into the mobile wallet world. You can upload their gift cards into your mobile wallet so that you never miss out on a free cup of joe.

There are many more players in the peer-to-peer app world, so it is extra important to research those apps. The major players include social media sites, device specific apps, PayPal Cash, Square Cash, Venmo and Zelle. Choose the p2p mobile payment app that is best for you and start sending and receiving money.

When you want to send money to a friend, you will find that there are many different options out there. Even social media apps have gotten in the game. For many apps, you will need to set up an account that includes your banking information. You can be up and running in a matter of minutes.

What’s the security behind mobile wallets and payment apps?

Each mobile wallet transaction involves security procedures used by the retail outlet, the credit card company and the bank or credit union that issued the card. Digital wallets use one of the most secure payment methods that’s out there. Believe it or not, it is more fraud-proof than your regular card because of tokenization. The basic advantage of tokenization is that your information is heavily encrypted. So much so, that when a retailer gets hacked, your credit or debit card number is not compromised. If you want to learn more, we broke down tokenization and how mobile payment services protect you in an earlier post.

What can we do to be more secure?

We have a lot more control over our security than we may think.

Only send money to people you know. Every app encourages you to only interact with people you know and trust. Peer-to-peer apps are not meant for a random Craigslist or Facebook Marketplace purchase. Once your send money to a stranger, you won’t be able to get that money back.

Use a safe, trusted payment platform. It is incredibly important to use only platforms from companies you know and trust. Before downloading from an app store, take a close look at the name of the app. Make sure that the app name matches the merchant name and check the developer. If something seems off, do a quick Google search for more information so that you know you're not downloading the wrong app.

Avoid downloading random apps, especially on public Wi-Fi. As you're probably aware, there are apps out there that contain malware and spyware. Just as you wouldn’t download random files on your computer, you shouldn’t download any-old app. Use the same diligence as mentioned above: take a look at the developer of the app, wait until you are off public Wi-Fi and do a Google search to check that the app can be trusted. Also, if you have kids that are using your device, review any games or apps before they download them. Your device is not only your wallet. It is your window to the entire world. And you don’t want that window unlocked for anyone to crawl in and poke around.

Keep your password private. Just as you wouldn’t share your PIN, you shouldn’t share your password.

Monitor your accounts. Watch your accounts closely, and when you see something out of place, contact your card company right away. If you're a member of Alliant, download the Alliant Mobile Banking App so you can check your balance anytime, anywhere.

Helpful tips for using your mobile wallet and payment apps.

Hopefully I have relieved any fears you may have had in adopting a mobile wallet or payment app. Digital apps can be more secure than some traditional methods. There are just a few more things to note when using a mobile wallet.

Keep your phone charged.  If your phone is dead, you can’t use your wallet. Since you will be even more dependent on your phone, keep an eye on your battery. If you don’t have a charger for your car yet, get one for emergencies. If you know you will be gone for the entire day, watch your usage and be more diligent about closing apps.

Read the app’s privacy agreement. How will your information be used and what will be stored? The mobile payment app may be able to track all of your transactions, which can tell someone a lot about you. If you read the privacy agreement, you will be able to better understand how your information can be used.

Download the app that’s right for you. Now that you understand the security behind mobile wallets and payment apps, download the app that caters best to your needs. Each peer to peer mobile app is slightly different. Knowing the transaction limits, who you can send money to, and the convenience of each will help you pick the best payment app for you.

Katie Pins is a marketer fascinated with finance. Whether the topic is about the psychology of money, investment strategies or simply how to spend better, Katie enjoys diving in and sharing all the details with family, friends and Money Mentor readers. Money management needs to be simplified and Katie hopes she accomplishes that for our readers. The saying goes, "Knowledge is Power", and she hopes you feel empowered after reading Money Mentor.