Consumers are becoming more comfortable buying online with mobile devices. Approximately half of the sales during Black Friday weekend were from cyber shoppers using smart phones and tablets to process transactions. The popularity of online shopping is demonstrated by a designated day dubbed “Cyber Monday,” an online version of Black Friday, with merchants putting their best deals on display to be snatched up by savvy Internet shoppers. Being able to shop from home and avoid long lines make the concept of a digital wallet appealing, but many consumers are still unfamiliar with the term.
One of the most recognizable trademarks and examples of digital wallet technology is Paypal. A start up business that began in 1998, PayPal is an online payment service that has evolved into prominence in mobile services with nearly 8 million payments processed every day. The success of the venture has meant the establishment of competitors in what is now known as the “digital wallet” market, an important force in the ever-changing landscape of e-commerce. The question is whether using such a service is risky or a benefit to you when shopping online.
Understanding Digital Wallets
For the most part, digital wallets are free services that store your personal information, including credit and debit card data, on a secure server to be retrieved whenever you want to use one of these payment options. By eliminating the need to enter sensitive information for purchases, digital wallet services are generally more secure than filling out payment forms online. For in-store purchases, a digital wallet is an app on your smart phone that is held over a digital reader at checkout. Competitors to PayPal in the digital wallet industry include Google Wallet, V.me and more.
Should I Worry About Security?
Mobile devices are particularly vulnerable payment platforms when not handled with care. So the big question that many consumers have is whether or not digital wallets offer a more secure way of doing business with their phones. While there is no perfectly secure payment technology, digital wallets provide a level of security that goes beyond processing over a wi-fi network by ensuring that the latest encrypted technology is in place. In addition, you can receive alerts about account activity and store relevant information including digital receipts and warranty information.
To help protect your financial integrity, financial experts suggest that a low limit account be attached to digital wallet transactions and that the following precautions be put into place, just as you would for any other sensitive or personal information.
- Be protective of any device that you use for banking or purchasing by not allowing others to use your smart phone, computer, tablet, etc.
- Never share or write down user names, passwords, PINs, security questions and answers.
- Keep information for banks, financial institutions and digital wallet services in a secure place, in case you run into a problem.
The most vulnerable situations involve lost or stolen mobile devices that are digital wallet accessible and not password protected or encryption enabled. An additional step for a lost or stolen device is to have it set up so that you can wipe the data from the device remotely.
Choosing a Digital Wallet Service
One of the downsides of any new product, service or technology that hasn’t been firmly established yet is that it may not be accepted in every circumstance, which is the case for digital wallets. But the convenience and increased security make using a digital wallet worth it, even if it’s on a limited basis. With a variety of different digital wallets to choose from, the key to choosing the best one is to find one that is accepted in more of the places you plan to use it.
- Google Wallet is designed to provide secure storage of credit, debit and gift card information on Android mobile phones and tablets. Use it online, or tap your phone on a PayPass or PayWave terminal to authorize payment.
- PayPal is associated with online auction sites like eBay and thousands of online merchant stores. PayPal also offers a feature that generates a one-time use credit card number with an expiration date and security validation code, allowing their members to use PayPal at online merchants that don’t accept the service for payment. PayPal is in the process of providing their service to all Discover Card retailers as well.
- Cash Star is the perfect way to prevent gift cards from merchants like Starbucks and Groupon from going to waste by digitizing them to one account.
- Open Square Wallet allows you to digitize gift or loyalty cards that can then be accessed without the necessity of having them on hand.
- V.me is a more recent entry into the digital wallet space backed by Visa. Use your V.me account at more than fifty banks and hundreds of merchants without needing to re-enter checkout information. Securely pay by clicking the V.me button on any website, using your associated Visa, Discover, MasterCard or American Express card.
No matter how you feel about the move toward making purchases with mobile technology, a digital wallet is likely something you’ll need to consider sometime in the near future. On the horizon are digital wallets by AT&T, currently available to American Express, Capital One and Chase customers and a MCX wallet backed by major retailers including Target, 7-Eleven and Wal-Mart.