What Are Mobile Wallets? And Do They Make Sense For You?

If you’re wondering what a mobile wallet is, it’s what it sounds like: a wallet housed on your mobile device. It offers a convenient way to pay for items without needing to use your physical cards.

Sure, there are still plenty of convenient ways to make payments, so it’s natural to think “what’s the big deal?” Let’s take a look at how a mobile wallet works and why it might be a great choice for you before going ahead and downloading one.

What Is A Mobile Wallet?

Think of a mobile wallet as a virtual wallet that allows you to pay for goods and services with your debit or credit card via an app. It’s touted as an alternative to carrying around cards and cash. Mobile wallets are becoming more popular since they are so convenient and secure. In fact, many banks may already have a mobile wallet feature in their apps – see if that’s the case if you’re interested in using one.

Since mobile wallets are still relatively new, not all cards are compatible with certain apps. Plus, mobile wallets can only be used for in-store payments at participating merchants.

The Difference Between Digital And Mobile Wallets

Mobile wallets are a type of digital wallet. While these terms tend to be used interchangeably, digital wallets are more for transactions made online and may be via mobile device. In other words, a digital wallet is a term for software to store cards and other types of information such as coupons and loyalty card numbers in the cloud to access any time.

For example, Paypal is a digital wallet since you can use it both online and with your mobile device, whereas Apple Pay is a mobile wallet you can install on your mobile device.

How To Use A Mobile Wallet

To use a mobile wallet, you’ll need to download and install a mobile app of your choosing on a compatible device, then load the cards you want to store, including coupons, loyalty cards, debit and credit cards.

Once complete, you can then make purchases. All you need to do is to find a participating retailer. You can usually do so by looking for a contactless payment sign – look for a WiFi symbol that’s sideways – which indicates that the point-of-sale terminal has near-field communication (NFC) technology (meaning the retailer accepts mobile wallets). 

To pay, open up the app and hold the phone to the contactless reader to complete your purchase by sending your payment information over NFC waves. Depending on the app, you’ll verify your identity by scanning your fingerprint, conducting a face scan, or entering in a PIN number or a password.

Are Mobile Wallets Safe?

The short answer is yes, mobile wallets are safe.

First, the payment information is encrypted as a “token” when it’s sent via NFC waves. That means your payment can be processed without risking your account details being exposed or compromised. Your real credit number is safe – the credit card company will replace your token if it ends up being stolen.

In addition, only you can approve the transaction – whether it’s using your fingerprint, passcode, face scan or PIN number. If someone ends up stealing your phone (or it’s lost), you can remotely wipe your data – Apple, Google and Samsung will let you do so.

What Is The Best Mobile Wallet?

All mobile wallets use secure technology. The best one depends on a number of factors, including whether you have an Android or iPhone. The most popular mobile wallets in the space so far – Apple Pay, Google Pay and Samsung Pay – are great choices and store most credit cards. These apps don't have any differences between them except that you can only use them with a specific type of phone. 

Major banks may have mobile wallets as well, so check yours to see if you already have one. There are also third-party mobile apps, but not all of them offer mobile payment options for credit cards (some offer payment via Bitcoin). It might be a good idea to stick to the major ones for now.

There are also mobile apps for major retailers and brands such as Starbucks, Target and Wal-Mart. These types of apps are useful for frequent customers of the brand – the Starbucks app in particular offers points toward free drinks and food, plus the ability to shorten your wait in line.

Other brand-specific mobile wallets also offer rewards like cash back on purchases, though you can link a rewards credit card with any mobile wallet to receive their rewards as well.

Whichever app you choose, make sure you understand how it works and that you can store your card on it. That way, you can use it confidently next time you go shopping.