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A phone that moonlights as a wallet is no longer a thing of the future; it’s very much a financial reality of today.
In the US, 64% of people use their digital wallets as often as traditional payment methods. More than half (53%) of these users rely on mobile wallets more than any other payment option.
Before joining their ranks with a mobile wallet of your own, you must understand what you’re getting into. Here are some of the pros and cons to help you make the decision.
What Are the Benefits of Using a Mobile Wallet
Let’s start this comparison with a list of the perks.
1. Convenience
Convenience is one of the biggest perks of turning on your mobile wallet. You won’t have to lug around a thick wallet any time you leave the house. You only need to remember to bring your phone.
The apps you add to your phone don’t add weight or size to your phone. It retains its usual slim profile despite carrying all you need to make purchases or manage your money.
Many of these financial apps rely on NFC (Near Field Communication) to send your payment details wirelessly to a retailer’s payment terminal. You don’t have to pull out a card or enter a password on their POS; simply hovering your phone over the terminal is enough.
2. On-the-Go Oversight
Spending money isn’t the only thing you can do with your phone. Once you connect all your accounts and cards to this wallet, you have access to these profiles wherever you get a signal. Whether it’s your credit score, phone bill, or bank balance — you have all these financial details at your fingertips.
Knowing your bank account balance on the go can come in handy when facing an emergency expense. The same perk goes for your credit card balances. If you’re short on funds, this quick look can prevent you from sending a payment that would send you into overdraft.
Don’t worry if you don’t have enough money or credit available. You have other options on your phone. You can check out a website like MoneyKey to see if you qualify for a loan by phone. These online loans stand in for your typical credit card or savings account as a safety net in emergencies. If approved, you can cover your expenses upfront, paying off your online loan in several payments.
3. Digital Security
When you stock your wallet with legitimate financial apps, your smartphone provides greater protection than a traditional billfold.
Think about it — if someone nicks your analogue wallet, they get all your cash, plus any access to credit cards until you cancel them. While you can usually dispute fraudulent credit purchases with a great deal of success, that cash is gone.
Legitimate financial apps invest in the latest cyber- and enterprise security methods to keep their customers safe. These apps usually combine encryption with tokenization to conceal your financial account numbers during transactions.
You can also enable biometric authentication that requires your fingerprint or face scan to complete transactions, making it next to impossible for a fraudster to hack these accounts.
What Are the Downsides of Using a Mobile Wallet
Nothing in life is absolutely perfect; the same goes for mobile wallets.
1. Overspending Risk
According to a Forbes Advisor survey, 67% of Americans lose track of how much they spend when using their mobile wallets. That lack of oversight could explain why 47% of Americans spend more money when they use their digital wallets.
It also has to do with plain, old psychology. Like credit cards, mobile wallets don’t involve a physical exchange of funds. Your transactions happen in the cloud. As a result, you don’t actively see your money disappear like you would with cash.
Mobile wallets may also tickle the rewards center of your brain if you use your credit cards to purchase things often. Why? Authors of an MIT study believe shoppers put costs out of mind when they rely on credit, which separates the loss of money from the thrill of getting new shoes or video games.
2. Accessibility Concerns
Your mobile wallet is capable of several financial tasks, but only if it has access to the Internet. Technical issues that interrupt this connection hold your money ransom. Bugs, phone glitches, network failures, and power outages can make it difficult to make payments.
Despite the surge of mobile wallet users, merchants are much slower to adopt the infrastructure necessary to host these transactions. If you only ever bring your phone with you, you can run into trouble when you visit a retailer that only takes traditional payments.
3. Other Security Concerns
All the work payment app developers put into protecting your money in cyberspace may come to nought if you misplace your phone. Leaving your phone behind somewhere or, worse, having your phone stolen puts your entire financial profile at risk. If you don’t protect apps with strong passwords and biometrics, you make it easier for thieves to hack into your accounts.
App security doesn’t protect you against big data breaches targeting merchants. Your finances can be exposed if a retailer’s cybersecurity efforts fail in an attack.
The Takeaways:
The pros of using a mobile wallet are such:
- Paying for things without needing to carry cash, credit cards, and loyalty cards.
- Having on-demand access to your accounts so you know what’s happening at all times.
- Legitimate apps come with robust security measures to protect your finances.
On the flip side of things, a mobile wallet comes with the following cons:
- Easier to lose track of transactions and spend more money than you want.
- Vulnerable to network and software failures, locking you out of your own finances.
- Phones can be easy to steal, and app security has no impact on merchant data breaches.
Compare both sides of things before you start downloading apps.
