Photo (cc) by Jason A. Howie
This post comes from Josie Rubio at partner site Dealnews.com.
Mobile payment has been slow to take off. But with Apple and Samsung announcing their apps, this year is poised to be the year of the mobile wallet.
Oddly, security is both the biggest reason consumers have been reluctant to embrace the concept, and what just might drive the shift toward mobile wallets in the end. Last year saw security breaches at big retailers like Home Depot and Target; and mobile wallets seem more attractive because many use “tokenization,” a transaction process that substitutes credit card numbers with one-time secure tokens. This is meant to make your credit card data immune to those types of databases hacks, because the stores never have your card numbers.
The recent flurry of data breaches is also driving the replacement of the current swipe-and-sign credit card with chip and PIN cards (also called EMV), which create single-use codes and sometimes require the entry of a PIN for added security. As stores switch to the EMV system, these updates are also very likely to include compatibility for near field communication (NFC), the tap-to-pay technology used by many mobile wallets that allows customers to pay by holding their phones in front of a device at the register.
This past October, only 2.4% of retailers that accepted credit cards had the NFC technology to accept the then-new Apple Pay. That’s likely to be very different this October, when the deadline for retailers to update to the new EMV system comes.
Security isn’t the only draw of these services: They promise increased deals, savings, and convenience too. Companies that are trying to make it easier for retailers to turn their ads into clickable deals for Apple Pay, Google Wallet, and other mobile wallets, and for shoppers to receive coupons when they’re near a store.
A comparison of all the major mobile wallet options
Thinking about switching to a mobile wallet? Here’s what you should know about the top contenders, and their pros and cons.
The October launch of Apple Pay put the spotlight back on mobile wallets. By early March, the number of retailers that accept NFC mobile payments jumped to 700,000, with as many as 50,000 Coca-Cola vending machines. Apple Pay is also reportedly doing well on app and online purchases; according to a recent Fortune.com post, Apple Pay is the top payment method at Staples.com. A recent study, however, found that only 6% of iPhone 6 and 6 Plus users had used Apple Pay so far.
Setup: Apple Pay is set up through the Passbook app installed on Apple devices. Apple Pay is compatible only with newer devices: the iPhone 6 and 6 Plus, the iPad Air 2 and Mini 3, and the upcoming Apple Watch.
Payment: To pay, put the device near the store’s reader and place your thumb on the device’s Touch ID sensor to confirm your identity. You can also easily pay within apps.
Loyalty programs, gift cards, and coupons: The PassBook app was originally designed to hold loyalty cards, gift cards, concert and movie tickets, and coupons.
Security: Apple Pay uses tokenization for secure payments, and the info is stored on a chip within the device itself. Apple doesn’t store transaction details and doesn’t collect information about what you buy. If the phone is lost or stolen, use Find My Phone to put it in Lost Mode, which will suspend Apple Pay. Or you can completely erase all information, including credit and debit cards, from the phone.
While Apple Pay users’ information is safe, identity thieves are using Apple Pay to set up iPhones with stolen information and then using the system, often to buy high-price Apple items and re-selling them. However, a recent article by The New York Times says the problem may be the banks, as they are responsible for approving the cards loaded to the mobile wallet. Verification has often been the last four digits of a social security card — something ID thieves often have. (Mashable notes the issue might not be unique to Apple Pay.)
When Google Wallet launched in 2011, it failed to take the world by storm, partially because many major wireless providers instead supported the Softcard (formerly Isis) mobile wallet and even blocked Google Wallet from working on their phones. Earlier this year, however, Google acquired Softcard and announced that Google Wallet will be pre-installed on Verizon, T-Mobile, and AT&T Android devices. (If you’re wondering about Android Pay, it’s not a consumer app, but an API for developers to use Google technology to create their own payment apps.)