Are Mobile Payment Apps Safe?

Mobile payment apps are certainly convenient, and, when compared to other payment methods, quite safe. They allow you to make payments with devices such as smartphones and smartwatches and can be even faster than using a debit or credit card.

That said, you should know a few details before deciding to use a payment app and how to keep your hard-earned cash as safe as possible when using one. This guide will help you with such questions as:

•   What are mobile payment apps?

•   Are mobile payments secure?

•   What are the pros and cons of mobile payments?

•   How do I use a mobile payment app?

What Are Mobile Payment Apps?

Mobile payment apps enable contactless payments by waving a smart device at a payment terminal. This can be faster than pulling out a debit card or credit card from your wallet and inserting it into a reader, and there’s no contact involved. In addition, mobile payment apps allow you to send money to and receive money from friends and family. These apps can be installed on devices such as smartphones, smartwatches, and tablets. Many payment apps are available, but popular choices include Apple Pay, Google Pay, Samsung Pay, and Venmo.

Some mobile payment apps have a wallet feature that allows you to store credit and debit cards and things such as boarding passes and tickets. Instead of having to carry each card individually, you can load them all into your mobile wallet.

How Mobile Payments Work

Typically, mobile payment apps work by connecting directly to your bank account, debit card, or credit card. To connect the app to your checking account, you generally need to enter details such as your bank’s routing number and your personal account number.

To link a debit or credit card, you’ll need basic information, including the card number, expiration date, and CVV (those three or four digits often found on the back of your card). Then, instead of paying with the card directly, you’ll use the payment app on your device. Your device sends the necessary information via what’s known as near field communication (NFC) but without revealing your actual account details, which is a welcome security feature.

Benefits of Mobile Payments

Mobile payment apps have several benefits that can make them preferable in this increasingly connected world. Some of those benefits include:

•   Convenience: On any given day, you may find you need to carry a wide variety of cards. Not just credit cards and debit cards, but also things like loyalty cards, boarding passes, and sporting event tickets. All of these can be loaded into popular mobile payment apps, so you have everything you need in one place.

•   Security: When you wave your device at a terminal to pay with your mobile app, it doesn’t share your card number. Instead, it generates a series of random numbers (called a token) for each transaction you make. Plus, mobile payment apps require you to enter a personal identification number (PIN) or authenticate with biometrics such as your fingerprint or face ID with every transaction. So, even if someone gets access to your device, it’s unlikely they would be able to use it to make purchases.

•   Speed: Paying with a mobile payment app tends to be much quicker than having to open a “real” wallet, fish for the right card, then insert it or tap it to pay. This benefit may seem minor in the grand scheme of things, but it can make a big difference when you’re in a rush.

Are Mobile Payments Safe?

Mobile payment apps are generally secure compared to other payment methods. Much of that security is thanks to the tokenization mentioned in the previous section. Not only are these tokens different from your card number, but they are also encrypted and unique for each transaction.

This renders the “sniffing” of mobile payment data (a common hacking method) virtually useless. Indeed, mobile payments are usually safe in most scenarios in the same way that mobile banking is safe. However, this doesn’t mean that mobile payment apps are completely immune to security issues or other glitches.

Consider this scenario:

•   Most of these apps allow you to send money directly to friends and family to cover, say, the portion of the meal you had together. To be sure, that can be more convenient than dealing with cash.

•   However, there may not always be enough safeguards in place when you send money with a mobile payment app. If, for example, you have several people in your friend group and you accidentally send money to the wrong friend (whose username is just one letter or digit different from another friend’s), it can be difficult to get it back.

This shows that mobile payment apps are more secure in some contexts but not perfect. The answer to “Are payment apps safe?” may never be 100% “yes.” One good way to protect yourself from problems is to always check that your money is going to the right place when paying with a mobile payment app.

Drawbacks of Mobile Payments

Like all technologies, mobile payments have their pros and cons. Here are a couple of the downsides:

•   While the popularity of mobile payments has rapidly expanded, there might still be some merchants that don’t accept them.

•   You may find that a payment terminal has a technical issue preventing it from accepting mobile payments. In this case, you might not be able to make a purchase by simply waving your phone.

•   There are many different players in the mobile payments field, all of which may have different policies. For example, the guidelines can be murky around things such as data sharing. In addition, there are many mobile payment apps available, which can create confusion as people navigate this new technology.

•   While rare, money scams and hacking involving mobile payments are possible.

Features of Payment Apps to Look Out For

Because there are so many mobile apps available now, it can be helpful to look for certain features. Here are some key features to keep in mind:

•   Ease of use: One of the most appealing aspects of mobile payment apps is that they tend to be convenient and easy to use. If you find yourself struggling to link your cards or make payments, the app you are using may not be the best choice for you.

•   Security: The other great thing about mobile payment apps is that they sometimes provide greater security than credit cards alone. You’ll want to ensure your payment app has security features such as two-factor authentication and PIN or biometric verification for purchases. It should also never display your full card number in your wallet or payment method screen.

•   Privacy: Privacy is an increasingly important part of any app’s policies, especially as more and more of your data lives online. However, it can be tough to know how your data is being used without diving into documents like the app’s terms of use and privacy policy. Still, it may be helpful to at least skim them if privacy is important to you. If the app sells your data to advertisers, it should be disclosed in these documents.

You may also feel more secure choosing a widely recognized mobile payment app, one with many users and very positive reviews.

How to Use a Mobile Payment App

Each mobile payment app is different, but there are usually just a few steps to using one. Typically, this is how they work:

•   Start by downloading your payment app of choice. Or you may already have a payment app loaded on your device, such as Apple Pay, Google Pay, or Samsung Pay.

•   Once you have your payment app on your device, link the payment card(s) you want to use with it. At this stage, you may have to complete a two-step verification process. For example, you might receive a verification code from your bank, or you may have to call the bank.

•   After completing the verification process with your bank, your payment app should be ready to use with your linked cards. You can use your payment app (or a contactless credit card) if you see the NFC symbol when you pay. There are a few different versions of the NFC symbol, but it usually shows an image of waves increasing in size.

•   Note that payment apps usually require you to add a PIN or a biometric unlock (your fingerprint or face, for instance) to your phone and use it before each payment.

•   Once you unlock and hold your device near the terminal, you will likely see an indication on your phone screen that the transaction is successful. You may also hear an alert sound. When that happens, ta-da! You’ve successfully paid with your mobile payment app.

Recommended: How to Send Money to Someone Without a Bank Account

Tips to Safely Use Mobile Payment Apps

Although mobile payment apps can be safer than other payment methods, there are a few steps you should take to ensure they are secure:

•   Set up payment notifications. These will alert you to any payments on your card, so you’ll know immediately if someone gains access to your information.

•   Enable two-factor authentication. Two-factor authentication is an extra layer of security that makes it more difficult to gain access to your account. For example, it requires you to enter a code from a text message or email to verify it after you link a payment card.

•   Enable automatic updates. Mobile payment apps frequently receive updates, which might include security features. Auto-update is often toggled on as a default setting, but double-check that it’s enabled on your device.

For instance, open the Google Play Store app on Android and tap the menu icon > Settings > Auto-update apps. On iPhone, open Settings > App Store and enable App Updates.

•   Check that you’re sending money to the right person. It can be difficult to get your money back if you send it to the wrong person using a mobile payment app. Before sending money, double-check (and perhaps triple-check) that the details on your screen match those of the person who’s meant to receive the money.

•   Beware of scams. Mobile payment apps are a common way for scammers to get money from unsuspecting victims. An easy way to prevent this is to avoid using a payment app to send money to people you don’t know.

Recommended: Key Features of Mobile Banking

The Takeaway

Mobile payment apps allow you to pay using a smart device such as a smartphone, smartwatch, or tablet and to do so in a fast, contact-free manner. They may also allow you to send and receive money with friends and family. These apps can be safer than other payment methods, including credit cards. However, you should always be careful when sending money.

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FAQ

What are the pros and cons of mobile payment apps?

The pros of mobile payment apps include their convenience, security, and speed of payment processing. Cons include that they aren’t yet accepted everywhere and may sometimes be taken advantage of by scam artists.

Does card fraud happen on payment apps?

There have been some instances of card fraud on payment apps, such as scam artists using flaws in the app’s design to extract money from victims. However, thanks to features like tokenization (the encryption of your personal financial information), most payment apps now make fraud much more difficult.

Are payment apps stealing my information?

Some payment apps might use your information in certain ways, such as to market products or sell your data to advertisers. However, these details are often laid out in the app’s policy documents.

Photo credit: iStock/Ridofranz

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