A mobile wallet stores credit or debit card information on a mobile device, such as a smartphone, tablet, or smartwatch. Mobile wallets offer a convenient way to purchase items online or in physical stores equipped to accept payments through the wallet. They may also provide enhanced security compared to physical payment cards due to several layers of encryption and security technology.
Key Takeaways
- Mobile wallets are apps that store financial information and other documents, such as credit cards, bank information, and driver’s licenses.
- Many smartphones come preloaded with mobile wallets, but numerous other apps are available for download.
- Mobile wallets employ near-field communication (NFC) technology, allowing transactions by proximity to a payment terminal.
- These wallets use multiple layers of encryption and security to ensure safe transactions.
Understanding Mobile Wallets
A mobile wallet can be either a built-in feature or an installable app on smartphones. Mobile wallets store credit card, debit card, coupon, or reward card information and can connect directly to bank accounts.
Examples of major built-in mobile wallets include Apple Wallet, Google Wallet, and Samsung Wallet. These apps not only store payment card information but can also house documents such as event tickets, vaccination records, or airline boarding passes. They integrate seamlessly with their payment services (Apple Pay, Google Pay, and Samsung Wallet), facilitating easy payments. You might not differentiate between Apple Wallet and Apple Pay due to their integration.
When making a purchase or payment, the payment app utilizes a technology called near-field communication (NFC). NFC uses radio frequencies to communicate between devices, transmitting payment information to the merchant’s point-of-service (POS) terminal as the user waves or holds an NFC-enabled mobile device over the terminal.
For example, suppose you add your debit card to Apple Pay and use it at McDonald’s. You would hold your phone next to the card reader, which uses NFC technology to communicate with your phone. Apple Pay activates using a verification method, such as face recognition or a passcode, prompting you to confirm payment through the default method stored in the app. Alternatively, you could select a different card within the app. Payment information is transmitted via NFC technology.
The terms mobile wallet and mobile payments are often used interchangeably, but there are slight differences.
Special Considerations
Common concerns about mobile wallets include how card information is handled and their security level. Debit card information is never stored directly on the device. When you sign up, this information is encrypted and stored on a secure chip. During purchases, a token—a unique, randomly generated number mapped to your original data—is used. If intercepted, the token is useless to a thief.
Types of Mobile Wallet Apps
Most smartphones and mobile devices come equipped with NFC technology. iPhones include Apple Wallet and Apple Pay, Android phones often come with Google Wallet and Google Pay, and Samsung Galaxy phones are preloaded with Samsung Wallet and Samsung Pay. In addition to preloaded wallets, there are popular third-party wallet apps:
- PayPal: Available for download on both iOS and Android platforms, fees vary—check payment methods for fees.
- Google Pay: Preloaded on many Android phones and available for download on Apple (iOS) devices.
- Venmo: Initially a peer-to-peer app, it has expanded to retailers. Venmo charges a 3% fee for purchases using a credit card; transactions from a bank account are free.
Benefits of Mobile Wallets
Mobile wallets reduce the risk of fraudulent activities, such as identity theft. Unlike a physical credit card, smartphones are difficult to steal and often have security features like passwords or biometric checks. Moreover, mobile wallets don’t store card information on the phone, using encryption and tokenization for secure transactions.
Using a mobile wallet can be faster than using a chip card. Almost every valuable card from a physical wallet can be digitized in a mobile wallet, including driver’s licenses, Social Security cards, health insurance cards, loyalty cards, hotel key cards, and transit tickets.
Digital Wallets vs. Mobile Wallets and Payments
Digital wallet is another term often used interchangeably with mobile wallet or mobile payments. However, digital wallets are primarily intended for online transactions and may not necessarily be used on mobile devices.
Mobile wallets are designed for users who prefer not to carry around physical wallets for in-store purchases, thus they operate on mobile, portable platforms.
Apple Pay, Samsung Pay, and Google Pay are examples of mobile payments, and they can be installed on handheld or wearable devices. Regular PayPal accounts are digital wallets, but when paired with mobile payment services and mobile devices, they serve as mobile wallets too.
Is a Digital Wallet the Same as a Mobile Wallet?
While digital wallets and mobile wallets are very similar, they differ slightly. Digital wallets are typically for online transactions, while mobile wallets connect to smartphones or wearable devices to facilitate in-store purchases. Both are linked to bank accounts and credit cards for streamlined purchases.
Can I Use Apple Pay on an Android Phone?
Mobile wallets are generally proprietary to their respective device manufacturers. Apple Pay is exclusive to iOS devices, just as Samsung Pay is exclusive to Samsung phones. For universal use across different devices, opt for third-party mobile wallets like PayPal or Venmo.
Can I Use My Mobile Wallet on My Smartwatch?
Many tech wearables now support mobile wallets. Depending on the brand, devices may come preloaded with a mobile wallet app, like Apple Pay on an Apple Watch.
The Bottom Line
Mobile wallets empower users to utilize their smartphones for everyday purchases. Thanks to complex encryption and security features, mobile wallets can be safer than physical cards. Most phones come preloaded with the manufacturer’s mobile wallet app, but alternatives like Venmo offer compatibility across all phone brands.
Related Terms: digital wallet, secure transactions, encryption, tokenization, NFC technology
References
- Apple. “Make Purchases Using Apple Pay”.
- Apple. “Apple Pay Security and Privacy Overview”.
- Venmo. “A Quick Look at Our Fees”.
- National Credit Union Administration. “Mobile Payments and Mobile Wallets”.
- Samsung. “Samsung Pay Supported Devices”.
- Apple. “Devices Compatible With Apple Pay”.
