are mobile wallets safe

Updated: May 18, 2020

Mobile wallets, also known as digital wallets, are everywhere these days from the grocery store to coffee shops to airports, and for good reason: they make payments easy. But like most tech solutions these days, is there a security cost for such convenience? We take a dive into mobile wallets and explore the security of these payment options.

What are mobile wallets?

Before we explain if mobile wallets are safe, you’ll need a general understanding of what mobile wallets are and how they function. Even if you haven’t used a mobile wallet before, you’ve most likely heard of Apple Pay, Google Pay or Samsung Pay, as these are three of the most well-known options, or seen them on your phone — most Android and Apple phones come preinstalled with some form of a mobile wallet. As we’ve explained before, a mobile wallet essentially functions like a wallet but on your smartphone. When you want to make a payment with the mobile wallet, you open the app, select the card you wish to use and complete the purchase by hovering your phone over the contactless symbol on a payment terminal. You can also use mobile wallets to make online purchases by starting the checkout process, then selecting the card you wish to pay with (your mobile wallet cards should pop up when you click into “card number”). It’s no secret that mobile wallets can make your life easier, as you no longer need to carry around your physical cards, but are mobile wallets safe? Keep reading to find out.

Are digital wallets safe?

Like most things in life, the safety of mobile wallets depends on what you compare it to. For example, credit cards are safer to debit cards, but credit cards generally aren’t as safe as mobile wallets. In that aspect, mobile wallets are the best payment options, but it also depends on how you use them. We detail the security features you can expect with most mobile wallets and note some of the security concerns you should be aware of when using mobile wallets.

Security features of mobile wallets

Passcode/fingerprint/face protected: Unlike the wallet in your pocket, mobile wallets require some sort of password or biometrics to use. This protects your mobile wallet from being used by anyone who has access to your phone, as they’ll have to enter the passcode, use their fingerprint or look at the camera to get into the digital wallet.

Your card number stays secure: When a transaction is made with a mobile wallet, the card number isn’t used to complete it. Instead, the digital wallet creates a one-time unique number to complete the purchase — known as tokenization. This process helps prevent fraud because it keeps your credit card number from being shared with the merchant, which means if the merchant’s point-of-sale system is skimmed, your information will not be included.

Payment information isn’t stored on the device: Since mobile wallets use the cloud to store and encrypt your payment information, you don’t have to worry about your credit card information being stored on your smartphone. This also makes it easy for you to add or remove a card from your digital wallet because you only have to do it in the app instead of in every mobile device connected to your wallet.

You can delete a device from your mobile wallet: In the event your phone is stolen, your mobile wallet is protected. That’s because digital wallets allow you to disconnect or delete a device from the account by logging into the wallet from another device. For example, if you lose your phone, you can log into your mobile wallet on your tablet and delete your phone as a connected device, so no one can access your mobile wallet using your phone.

Potential security concerns

Your cybersecurity practices matter: Since mobile wallets live on your smartphone, the safety of the wallet really depends on your cybersecurity habits. This means you need to not only be aware of how you use your devices, but also be sure to use strong passwords and avoid public Wi-Fi, as slipping up on cybersecurity can put your wallet and online privacy at risk. You’ll also want to be aware of any text messages or emails you receive concerning your mobile wallet, as they’re likely thieves attempting to get into your wallet.

No federal fraud protection for mobile apps: While the government provides protection against purchases made with your debit card or credit card, it doesn’t have such laws pertaining to mobile wallet purchases. That said, we don’t feel this isn’t a huge security concern because if you use a credit card through a mobile wallet, you’ll get the federal protections that pertain to credit card fraud, but it’s still worth noting. Still, if fraud protection is something you worry about, we suggest getting a credit card with added fraud detection tools. Not sure which issuers offer such features? We detail a few of our favorites below.

Credit issuers that offer fraud detection tools

Discover

Discover offers a couple of tools to help you detect fraud and protect your card. The first is Freeze It, which allows you to temporarily disable your card from a computer or the Discover app if it’s ever lost or stolen. Doing so will prevent new purchases, cash advances and balance transfers from being conducted. After your card has been located, you can easily unfreeze it and use it normally. The other is free identity theft alerts that warn you when a new credit card, mortgage, auto loan or other credit account shows up on your Experian report. Additionally, it alerts you if your social security number is found on any of the thousands of risky websites that Discover monitors. We should note that you must opt into these free identity theft alerts.

Citi

Citi’s Quick Lock tool functions similarly to Discover’s Freeze It feature. It allows cardholders to temporarily freeze their credit cards in the event that they’re lost, stolen or misplaced. When they find their card again, they can easily unlock it through the Citi website or mobile app.

Our favorite Citi card: The Citi® Diamond Preferred® Card* (a NextAdvisor advertiser) is our top-rated balance transfer credit card because it has the longest intro APR we’ve seen! It also offers a long intro APR on purchases and has no annual fee.

Capital One

Capital One also allows cardholders to instantly lock their credit card via Capital One’s website or mobile app. After you locate your card, you can instantly unlock it and use it as you normally would.

Our favorite Capital One card: If you’re looking for a Capital One card, we like the Capital One® Quicksilver® Cash Rewards Credit Card*. This card comes with a long intro APR and solid cash back rewards on all purchases you make. It also has no annual fee and a nice intro bonus.

American Express

American Express allows cardholders to enable email alerts for purchases made when the card isn’t present. For example, if you use your card to make an online purchase, you’ll receive an email notification detailing the purchase. Cardholders can also report a lost or damaged card using American Express’ website or mobile app.

Our favorite American Express card: The Blue Cash Preferred® Card from American Express (a NextAdvisor advertiser) offers the perfect combination of cash back rewards on everyday purchases, a hefty intro bonus and an intro APR. The card comes with an annual fee, but we think the rewards will more than cover the fee. Check out our Blue Cash Preferred Card from American Express review to see if you agree.

*Information regarding the Citi Diamond Preferred Card and Capital One Quicksilver Cash Rewards Credit Card was prepared by NextAdvisor.com staff. Opinions expressed therein are solely those of the writer and have not been reviewed or approved by any advertiser. The information, including card rates and fees, presented on this page is accurate as of the date of the post.

Disclaimer: This content is not provided or commissioned by the credit card issuer. Opinions expressed here are author’s alone, not those of the credit card issuer, and have not been reviewed, approved or otherwise endorsed by the credit card issuer. This content was accurate at the time of this post, but card terms and conditions may change at any time. This site may be compensated through the credit card issuer Affiliate Program.