Are mobile wallets useful?The last decade has brought significant advancements in the financial technologies (fintech) sector, changing everything from how we budget to even how we pay for goods and services. One of the transformations that’s taken place is that consumers can now use their phones to make payments through mobile wallet apps. While these apps provide many features to smartphone, smartwatch and tablet users, they may be confusing to consumers considering how many mobile wallets exist and the ways they all differ from one another. To help you understand mobile wallets a bit more, we’re detailing what they are, the types of mobile wallets that exist and how they interact with your credit or debit card.

What are mobile wallets?

A mobile wallet is a mobile application that digitally stores your credit card or debit card to let you make purchases online or in person. Some mobile wallets might also allow you to virtually store a number of other payment options, like gift cards, store membership cards, coupons and tickets. While it’s always been possible to use your cards online, mobile wallets make switching between payment options painless and instant when shopping through your phone. That’s because you don’t have to pull the card out of your physical wallet. Instead, you can usually just swipe or click on the card you prefer and complete the online transaction. Mobile wallets also allow you to pay at physical checkout terminals in brick-and-mortar shops and stores. To pay in person, all you need to do is tap your phone against a payment terminal while your preferred mobile wallet app is open.

Why would someone use a mobile wallet?

One of the more obvious upsides of mobile wallets is that they’re convenient and easy to use since you don’t have to pull out your wallet to find the card you plan to pay with. On top of that, they offer even more security than a credit card — a rare instance of security and convenience packaged together. How are they more secure? Well, first, it’s worth noting that mobile wallets are intended to replace “real” wallets, meaning that for users who go all in on the technology, there are no cards for them to have stolen or misplaced. If you’re worried about what happens if your device is lost or stolen, know that most mobile devices allow you to encrypt all your contents with passwords or biometrics and, if necessary, remotely wipe everything.

The killer security feature of mobile wallets, though, is something called tokenization. This is a fancy way of saying that when your mobile wallet communicates with a payment system, it doesn’t provide your actual credit card number. It instead produces a one-time number for your card that’s different each time the card is used. This means that if a vendor is ever breached, all that’s lost is a single-use token which can’t be converted back to your original credit or debit card number. The only parties who will ever really have your card’s details are you and your card issuer. Tokenization in mobile wallets was a bigger deal back when the technology was still new, as mobile wallet apps like Apple Pay, came out slightly before EMV cards were rolled out across the U.S. However, since EMV cards also use a form of tokenization and many payment terminals still don’t support mobile wallets, these apps aren’t exactly a “must-have” technology at the moment. That said, it’s definitely the case that mobile wallets make life easier without weakening your security and, in small ways, they can even enhance it.

It’s also worth noting that these apps don’t impede your ability to earn points and rewards with your credit card spending and, in some cases, your card or the mobile wallet may offer added rewards for paying via mobile wallet. For example, the Wells Fargo Cash Wise Visa Card earns 1.5% cash back on all purchases, but it earns an increased cash back rate (1.8% cash back) for any mobile wallet purchases made during the first 12 months of card membership.

What are examples of mobile wallets?

Navigating the mobile wallet space can be confusing because there are many online payment services that resemble some of the features of mobile wallets. For example, there are services like Google Wallet, PayPal and Amazon Pay, which are better thought of as Internet-based wallets. While you can use your credit or debit card through these services, they historically weren’t designed to replace your card usage at physical payment terminals. Admittedly, however, the lines are starting to blur with developments like PayPal becoming accessible through Samsung Pay and Google Pay (formerly Android Pay), two more “traditional” mobile wallet services. Because of this, experts sometimes simply group mobile wallets and similar Internet-based wallets into a category dubbed digital wallets.

Among the most popular traditional mobile wallet services are Apple Pay, Google Pay and Samsung pay, as these are present by default in most smartphones, watches and tablets. There are mobile wallets offered by companies other than tech giants like Apple and Google too. For example, Walmart and many other major retailers have their own mobile wallet apps. Unlike the mobile apps mentioned before, which can be used anywhere mobile pay is accepted, apps like Walmart Pay and the brand-new Kroger Pay are mostly for streamlining shopping in-person at these retailers’ store locations or on their websites. Walmart Pay can’t be used outside of Walmart, nor can Kroger Pay be used outside of Kroger-owned stores. Banks are also getting on the mobile wallet bandwagon, as even Chase offers its own payment app, Chase Pay, which is compatible with Chase credit cards and debit cards, and it’s designed in a similar vein to Apple Pay and Google Pay.

How to know what cards are compatible with a mobile wallet app?

Another thing that can make switching to mobile wallets difficult is that not every mobile wallet platform supports every debit card or credit card. But the major mobile payment platforms (Google, Apple and Samsung Pay) are pretty similar in that they accept cards from most major issuers and have many of the same features. Mobile wallet apps like Kroger and Chase Pay might be more enticing to consumers because these platforms’ rewards programs can stack with rewards they’re already receiving from their credit cards. The trade-off, though, is that the selection of accepted cards will differ from those of the big three major mobile wallets (Google, Apple and Samsung). When in doubt about what cards a mobile wallet platform accepts, contact your bank or credit card issuer to verify if your preferred platform accepts your current cards.

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