What is a mobile wallet, and should you use one?

Young woman walking and staring at her phone while she wonders, "What is a mobile wallet, and should you use one?"Image: Young woman walking and staring at her phone while she wonders, "What is a mobile wallet, and should you use one?"

In a Nutshell

With a mobile wallet, you can leave your bulky, disorganized billfold at home and make payments with your smartphone.

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Your smartphone can take high-quality photos, store files and access email. And if you use a mobile wallet, it can also take the place of a physical credit card.

A mobile wallet is pretty much exactly what it sounds like: a “wallet” that lives on your mobile device instead of in your back pocket.

So, why might you want one? Because it provides a convenient way to pay for goods and services with your smartphone, smartwatch or another compatible device, like a tablet.

It can manage all your credit cards, loyalty club memberships and reward cards, and it may help to reduce fraud, too, as mobile wallets are generally harder to steal or copy than physical cards and cash.

You can access a mobile wallet through several smartphone apps. Many companies, like Apple and Android, offer versions of a mobile wallet. Most credit card issuers offer their own versions, too, making it easy to connect your cards and accounts.

Before you download a mobile wallet to use, let’s take a closer look at how they work and why you might want to start using this payment method.



The upsides of switching to a mobile wallet

Andrew Daniels is the creator of FamilyMoneyPlan.com, a blog that chronicles his journey to financial freedom, and an avid user of Apple Pay. He says the biggest advantage is that it eliminates the need to carry around a fat wallet with multiple cards he only uses occasionally.

“I like the quick accessibility to payment and the simplicity,” says Daniels. “It’s nice to be out somewhere and have the ability to pay without carrying a wallet everywhere you go.”

John Rampton, founder of online payment platform Due.com, agrees. “The convenience factor of a mobile wallet just can’t be beat,” he says. “I don’t have to worry about losing or misplacing a card. Plus, transactions are so much faster than waiting for someone to get you change or process your credit card.”

Rampton also notes that the increased security makes a mobile wallet a no-brainer for him. More on that in a bit, but first let’s see what a mobile wallet looks like in action.

How does a mobile wallet work?

This one’s simple. Start by downloading the mobile app of your choice onto your smartphone or other compatible device. Then, load the card information you want to store, from debit and credit cards to loyalty cards and even coupons.

When you want to make a purchase with your mobile wallet, you can either:

  • Choose your app and select a card at the checkout screen when you’re shopping online with your smartphone.
  • Tap your phone to a digital payment-enabled terminal at participating merchants when checking out. “Mobile wallets use what is called a Near-Field Communication (NFC) chip,” Daniels explains. It’s the same technology that lets you use contactless payment to pay with a physical card.

Where can you use your mobile wallet?

Many retailers offer updated payment-processing terminals that accept mobile wallets. Samsung Pay, for example, is currently accepted at over 10 million stores in the U.S, while Apple Pay is also accepted at millions of stores — not to mention popular apps like Uber and Airbnb. Even e-commerce companies like Shopify have begun to adapt their systems to mobile wallet technology.

Given how many merchants accept mobile wallets nowadays, you might want to add an everyday cash back card like the Citi® Double Cash Card to your wallet and use it to make daily purchases.

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Are mobile wallets secure?

Information that you upload to a mobile wallet gets encrypted, making it potentially safer than carrying physical cards with you.

“I would much rather use a digital wallet that has tokenization and two-step authentication,” says Rampton. He adds that his iPhone requires his fingerprint to unlock, too, which adds another level of security to each transaction.

One security concern when using a mobile wallet is losing your phone or having it stolen. That’s why it’s smart to use something like two-factor authentication, which could include setting up a personal identification number or a fingerprint requirement to unlock your phone.

You can also protect your data by installing apps that will help you locate your phone if you lose it or remotely wipe the data so a thief can’t access sensitive information or use your mobile wallet. If you see any suspicious or unauthorized charges on your account(s), it’s a good idea to immediately change your password and call your bank to let them know.

Choosing the right mobile wallet for you

Many mobile wallets offer similar features and security measures. The right one for you depends more on personal preference and how you like to interact with your apps. It may also depend, of course, on which devices or credit cards you own.

In terms of performance, there’s little difference between the leading mobile apps.

PayPal Accepted widely online, but less frequently in physical retail stores.
Apple Pay Transaction authentication via fingerprint makes this a great option if you’re concerned about security.
Android Pay Like Apple Pay, but for Android devices.
Samsung Pay Available on some Samsung devices.

Bottom line

Mobile wallets may offer more convenience and security than a traditional wallet. And they’re widely accepted at retailers around the country.

Which mobile wallet you choose will depend largely on the kind of device you want to use it with. Don’t sweat the choice too much: Many of the popular options are similar in terms of performance and the level of security they offer, so you can choose the wallet that pairs best with your smartphone and use it with confidence.


About the author: Kali Hawlk is a writer who’s passionate about using her skills and knowledge to help others. She shares ideas and stories on business, finance, entrepreneurship, and living mindfully and… Read more.