Is a Mobile Wallet Right for You?

Mobile payments failed to gain any real traction in the U.S. for years, but Apple Pay has given the market a much-needed kick in the pants. Apple’s mobile payment system, which enables users to pay for goods by simply tapping their Apple device against a terminal at the sales counter, is now accepted at 700,000 locations. And while Apple Pay is available only to iPhone owners, recent consolidation among payment providers is helping to alleviate some confusion regarding mobile payments among retailers and consumers, which will give the overall market a boost.

Mobile payments are still nowhere near a mass market, however. Only 6% of iPhone 6 owners in the U.S. have used Apple Pay at a store, according to a recent survey from InfoScout, and 85% of those surveyed have never even tried the app. The slow uptake isn’t exactly surprising, of course. We’ve all become accustomed to using cash or credit cards at the point of sale, and changing consumer behavior is a major undertaking. But there are a few factors to keep in mind when considering whether to use your phone rather than traditional payment methods

Convenience

Early mobile payment systems were a hassle. Few retailers accepted them, and retailers often required consumers to jump through hoops for the “privilege” of using their phones to pay. But retailers are finally embracing Apple Pay and Google Wallet by installing the appropriate technology at the point of sale and educating their employees on how to accept mobile payments. Paying by phone can be even easier than using credit cards or cash.

Loyalty programs

Starbucks’ mobile payment service has been a huge success, primarily because it makes it easy for consumers to track their purchases and redeem rewards. Retailers are increasingly integrating loyalty programs with Apple Pay, Google Wallet and other mobile payment systems, which can serve as a single source for multiple programs. That eliminates the need for consumers to carry a wallet full of punch cards, bar codes and other items that can be cashed in at the point of sale. And retailers can use mobile payment systems to send messages directly to customers, alerting them when they’ve earned certain rewards.

Promotional offers

Vendors and banks are hoping to entice customers to use mobile payment systems by offering cash incentives. Whole Foods, for instance, surprised some early Apple Pay users by giving them a $5 credit, and Google lassoed more than a dozen vendor partners into offering discounts to Google Wallet users late last year. Incentive programs are sure to increase as more retailers accept mobile payments and aggressively target uses through mobile marketing initiatives.

Security

Traditional “swipe” credit cards remain very vulnerable to hackers, as evidenced by the Home Depot breach last year, when as many as 56 million cards may have been compromised during a five-month attack on its payment terminals. But it still isn’t clear that mobile payment systems are any more secure. One analyst recently estimated that as many as 6% of Apple Pay purchases are made with stolen credit cards, which is far higher than the fraud rate of “the old-fashioned plastic swipe,” as The Washington Post reported. Such vulnerabilities will be addressed as mobile payment systems evolve, but security remains a major concern – just as it is with credit and debit cards. If you choose to experiment with mobile payments, monitor your accounts just as you would with any payment method other than cash.

Mobile payments will almost certainly become mainstream in the U.S. within the next decade, but they’re clearly not for everyone in these early days. Many phones don’t support current payment systems, and many retailers still don’t accept them. But savvy smartphone owners finally have some compelling reasons to use their smartphones to pay for things at the point of sale.