The pros and cons of mobile payments

Ivan Franco

Posts: 242   +9
Staff member

Mobile payments are advertised as a quick and convenient way to pay for anything. Just tap your smartphone to the payment terminal and — like magic — your credit card is charged for your purchase. It really couldn't be easier.

However, digital payments are a little more complicated than that. Paying for purchases with your smartphone can be convenient, sure, but the technology causes frustrations of its own. So if you don't know whether you want to tie your credit card to your smartphone just yet, check out these pros and cons of mobile payments, and learn what's required for them to work.

What You Need to Make Mobile Payments

For digital payments to work, several pieces need to fall into place. First, you need a phone that can make mobile payments — typically, a higher-end smartphone with near-field communication (NFC) to let it talk to payment terminals. Then you need to set up your existing credit cards in the mobile wallet your phone supports. Usually, that's Apple Pay for iPhones, Google Pay for Android phones, and Samsung Pay for Samsung phones.

Some payment apps — like Chase Pay and Walmart Pay — work on nearly any phone.

Set up payments through a mobile wallet your phone supports, such as Apple Pay for iPhones, Google Pay for Android phones, and Samsung Pay for Samsung phones.

Next, the bank providing your credit card has to accept your mobile payment platform. And finally, the place you're shopping at needs to accept mobile payments from your chosen payment app. If any of those things don't happen, you aren't making a mobile payment.

Mobile Payment Pros

When mobile payments work the way they're designed to, they're not just convenient, they're astonishingly convenient. What else makes mobile payments so great?

They're fast.
All you have to do to pay is tap your smartphone (or smartwatch) to the payment terminal and authenticate the transaction, usually with your fingerprint. Then you can walk out of the store. You don't have to dig through your wallet, swipe a card, or sign anything. Just tap and go.

They're secure.
Most mobile payment apps are tokenized, which means they don't store or send your credit card information. When you initially enter your card information, the app verifies it with your bank and afterwards, uses a "token" as a stand-in for your personal information. Each transaction is made using that token combined with a one-time-use security code. Even if a hacker got these things, they wouldn't be able to use your credit card.

They're more physically secure, too.
If your phone is lost or stolen, a thief won't be able to run up big credit card bills. Why? Because your payment information should still be secured behind a passcode or biometric authentication (or both). If you're carrying cash or credit cards, your money is as good as spent if a thief makes off with your wallet.

They're widely accepted.
Most major retailers accept some form of mobile payment — though not always the one you want to use. If you're in an urban area, there's a good chance you have a lot of mobile payment options.

Everything's on your phone.
You don't have to carry cash or cards around because everything you need to make a purchase is on your phone (and you're probably carrying that anyway).

They work with rewards programs.
Most mobile wallets let you add store loyalty or rewards cards. When you make a mobile purchase using a credit card in the wallet, it'll automatically link the purchase to your rewards program. Thus, you get all the benefits of a rewards programwithout having to carry the card in your wallet.

Mobile Payment Cons

Once you've successfully used your phone to pay for something, you may never want to go back to digging through your wallet and signing receipts after every transaction. But you may not have a choice, because mobile payments have their flaws, too.

They aren't always accepted.
While mobile payments are accepted at a growing number of retailers, tons of stores don't take them. Apple Pay is the most widely accepted form of digital payment, and even so, only 36% of North American retailers support it. Though another 22% say they intend to accept Apple Pay within the next year, that still means more than 40% of the stores you visit won't accept it.

Apple Pay is the most widely accepted form of digital payment, but only 36% of North American retailers support it.

Even if they are accepted, they aren't all accepted.
A store may accept digital payments, but it's unlikely to accept all of them. So you could walk into a retailer that's digital payment friendly but still have to use your credit card. For example, Walmart accepts mobile payments, but only from its own Walmart Pay platform, which only works at Walmart.

They're easier to track.
Every transaction leaves a digital record, which makes some people concerned about privacy. While these certainly aren't posted publicly, there's always the fear of hackers.

They're only supported by certain phones.
Most mobile payment systems use a technology called NFC to send transaction data to a payment terminal — and not all phones can do it. (Walmart Pay is an exception, however, as it just requires a cashier scanning a QR code on your phone screen.)

Payments are tied to your phone.
If your phone is lost or stolen — or even if the battery dies — you're out of luck, because you can't make payments.

The Bottom Line

Mobile payments are convenient when they work. But whether they'll work for you depends on where you shop and even the kind of phone you have. If you regularly shop at stores that accept mobile payments, great! You're on the path to a more convenient future. Otherwise, mobile payments can be a hassle — and they aren't reliable enough yet that you can leave your wallet at home.

Elizabeth Harper is a contributing writer at dealnews. Republished with permission.

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Uncle Al

Posts: 7,244   +5,649
We have seen more than a few scammers that are able to use "readers" to intercept information that is across WiFi from bank cards to gas station readers to your key fob to get into your automobile. Another perfect example of technology being fielded before it can be completely secured and controlled ..... And before you think it, I'm not anti-technology, just anti-bad technology!
 

tipstir

Posts: 2,854   +198
We have skimmers here when you use your CC or DC at the local gas stations. Even if you use tap-in-pay they can steal your card from you as well. It has happen to me 3 times but the bank was told and transaction were diverted. I had used my Paypal Business DC once and the fake Shell Oil Company in Miami was still at it. and told ECS at Paypal do halt transactions from that company. Not only did they say they couldn't stop them but did say all banks fees and money would be returned. But now you can't even use that car to make fuel purchases. Then I was issued a new card and number.
 

vincentyu

Posts: 35   +20
If I put my credit card into Apple Pay, will I still be able to use the physical card? Or is it disabled the moment I put it into Apply Pay?
 

p51d007

Posts: 2,448   +1,717
It's "for your convenience". No, it's a way to get you conditioned into NOT using cash.
The "governments" around the world would prefer you to ditch the cash. Once hard currency
is eliminated, then banks & governments can control you even more. EVERY transaction would
be recorded, and, even more data on your spending habits can be created. Plus, once hard currency
is eliminated, what's to prevent banks or governments from raiding your piggy bank if there is no
gold, silver or other hard currency stashed away somewhere. They've already done that in Greece.
 

Reachable

Posts: 369   +183
When it was cash it was just you and the merchant involved in the transaction.

When it was credit card, it was you, the merchant, and the credit card issuing bank involved in the transaction.

With this, it's you, the merchant, the credit card issuing bank and Apple or Google involved in the transaction.

This is good technology for convenience, and, I'm sure, eventually if not already, security. But with every sticky finger added to the transaction complexity is added as well and more is being siphoned off. Maybe it all works out better. I dunno. I'd hate to see carrying around a phone be required in order to buy something.
 
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ShagnWagn

Posts: 1,297   +1,081
"You don't have to dig through your wallet, swipe a card, or sign anything. Just tap and go."

Do you carry your phone in your hand 24x7? It is much more of a pain to get my phone out and unlock it than just sliding my wallet out and grabbing the card. (I must say the card chip is a joke and is a total hassle) Not only that, but now you have to keep updating the app and yet another password to forget. Then if you lose your phone you have to start all over. No thanks.

Also, as soon as I read the title, I thought - What is keeping all of these phone apps from lifting the authentication for these cards from the phone itself? Am I the only one thinking this?

Credit cards artificially raise the price on EVERYTHING. There is a 3-5+ % transaction fee on everything. Retailers have to raise the price on you to compensate. It is not free. I was a contractor at Mastercard for a short time. It was amazing how many times employees brought up how "dangerous" cash is to their business. They had incentives if you could think of ways to abolish cash because they feel it is a threat. They want cash gone so they can rake in the money and have control. That is unfortunate.

Cash is still king. I use it for all small purchases - usually less than $50. Inflation has devalued money so much that I would have to carry around a lot so I use the card for $100+. It also helps me keep track of spending because I physically see the money going. I can also easily tell that inflation is MUCH higher than the government is telling us. I have to withdraw twice as much from the ATM as I did 10 years ago. The reason can easily be seen in just that restaurant prices have doubled. Groceries, etc etc.
 
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FliGuyRyan

Posts: 43   +19
Samsung Pay can be used when tapped against the magnetic strip reader, just like using a credit card. So, not only can you use the Android Pay-like NFC detector, but I use Samsung Pay which can be used in more scenarios than even Apple Pay as it is not dependent on "Android Pay" compatibility. It can literally be used as a normal credit card when rubbed up against the magnetic strip, regardless if the machine accepts Android Pay.

Example... I was about to pay at Bibibop (like Chipotle, but Korean-inspired), and I just held my phone up to the magnetic strip and the cashier states, "Oh, Apple Pay doesn't work here." Then, I heard a "beep-beep" and as the receipt started printing out her face was frozen in amazement. I said, "Apple Pay may not work, but Samsung Pay does..."

A excerpt from NerdWallet's article about phone payment systems echos my sentiments above stating, "Unlike Apple Pay and Android Pay, Samsung Pay can be used at magnetic stripe or EMV terminals in addition to NFC point-of-sale devices." (Source: https://www.nerdwallet.com/blog/credit-cards/mobile-payments-roundup/)

This added functionality makes Samsung Pay far more useful and gives it the crown as the "most widely accepted form of phone payment" in the industry.

Please research this and update the article accordingly...
 
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Hexic

Posts: 726   +703
TechSpot Elite
Samsung Pay can be used when tapped against the magnetic strip reader, just like using a credit card. So, not only can you use the Android Pay-like NFC detector, but I use Samsung Pay which can be used in more scenarios than even Apple Pay as it is not dependent on "Android Pay" compatibility. It can literally be used as a normal credit card when rubbed up against the magnetic strip, regardless if the machine accepts Android Pay.

Example... I was about to pay at Bibibop (like Chipotle, but Korean-inspired), and I just held my phone up to the magnetic strip and the cashier states, "Oh, Apple Pay doesn't work here." Then, I heard a "beep-beep" and as the receipt started printing out her face was frozen in amazement. I said, "Apple Pay may not work, but Samsung Pay does..."

A excerpt from NerdWallet's article about phone payment systems echos my sentiments above stating, "Unlike Apple Pay and Android Pay, Samsung Pay can be used at magnetic stripe or EMV terminals in addition to NFC point-of-sale devices." (Source: https://www.nerdwallet.com/blog/credit-cards/mobile-payments-roundup/)

This added functionality makes Samsung Pay far more useful and gives it the crown as the "most widely accepted form of phone payment" in the industry.

Please research this and update the article accordingly...
I was just going to state this as well - Apple pay is not the most widely accepted mobile payment platform by any means. Too dependent on custom integration, go figure.
 

FliGuyRyan

Posts: 43   +19
I was just going to state this as well - Apple pay is not the most widely accepted mobile payment platform by any means. Too dependent on custom integration, go figure.
It truly is incredible. The other day it saved me when I drove an hour away to a Microcenter to pick up a new NVMe drive for a new PC build. I went to pay and whipped out my debit card and realized it was my co-worker's card and ours has been switched at lunchtime when we payed. I started to freak out until I realized I had my phone with me, and I used Samsung Pay on the magnetic strip and it saved me. I never thought I'd see the day, but it's here and now.

Also, it doesn't work everywhere because at terminals such as gas stations and ATMs where you have to insert the card, I don't think there is a workaround for that, but otherwise, it's good to go.
 
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gcarter

Posts: 102   +37
This article is very American user orientated!

Here in the UK, for any company which accepts contactless payments, you can pay with Google Pay, Apple Pay regardless of whether the store lists either compatible with Google or apple.

Secondly, there are a lot of haters on here... sure there is the aspect of sharing payment details with more and more companies, however technology in general has alway been to

a) Increase the convenience of every day life
b) Provide better ways of doing things (not always but hey)

and yes, I always have my phone with me...often forget my wallet more often then I forget my phone!
Comes in really handy when your without your bank cards... for example had realised that I didn't have my wallet in the office the other day, and would have been unable to purchase lunch, coffee, or fuel for the drive home... a couple of mobile phone swishes later and disaster averted
 
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beachbowi

Posts: 14   +8
There's little argument that making payments with your mobile phone is a convenience, much of the time. However, with mobile payments, more people are involved in the transaction. Less money ends up in the merchant's hands. Thus, the merchant is motivated to increase his/her prices to cover the loss of processing the payments. Ultimately, the consumer pays a higher cost for the convenience. But, the biggest downside, in my view, is this: The more entities involved in the transaction, the greater is your loss of privacy and the greater the opportunity for organized crime/hackers to steal your data/account info/money. I'll wait.

It will be a long time, yet, before this technology is universally accepted as a safe and reliable alternative to the old-fashioned credit card which, itself, is a cost raising, privacy pilfering convenience. But, one most people have grown comfortable with. In my humble opinion, CASH IS STILL KING!
 

gcarter

Posts: 102   +37
"Less money ends up in the merchant's hands. Thus, the merchant is motivated to increase his/her prices to cover the loss of processing the payments"

Thats not true in most cases, as when people pay cash, there is the extra charges to the company for physically handling the cash.
From small companies where a member of staff will need to physically "cash up" at the end of the day, and then arrange for the cash to be taking to the bank, to the larger companies who have to pay for those Cash courier firms (those guys in helmets in their secure vans)
 
We have skimmers here when you use your CC or DC at the local gas stations. Even if you use tap-in-pay they can steal your card from you as well. It has happen to me 3 times but the bank was told and transaction were diverted. I had used my Paypal Business DC once and the fake Shell Oil Company in Miami was still at it. and told ECS at Paypal do halt transactions from that company. Not only did they say they couldn't stop them but did say all banks fees and money would be returned. But now you can't even use that car to make fuel purchases. Then I was issued a new card and number.
What you describe are NON TOKENIZED transactions. The digital pay apps only do Tokenized transactions, as teh article states, and why they are more secure than a physical card transaction.
 
The article states that Apple Pay is accepted by more retailers than either Google or Samsung Pay. I've used Samsung Pay successfully in many stores that told me they don't accept that. You should see the surprised look on the cashiers face. Samsung will work even on Non NFC capable terminals. I have found that it's hit or miss at Walmart. Sometimes it works. I believe Walmart has "most" of their terminals programmed to reverse the charge if it not from their card, as my Samsung log shows the charges being approved and cancelled within a second. The cashier gets a "declined" message. Their equipment is capable but they have blocked its use.
 
"You don't have to dig through your wallet, swipe a card, or sign anything. Just tap and go."

Do you carry your phone in your hand 24x7? It is much more of a pain to get my phone out and unlock it than just sliding my wallet out and grabbing the card. (I must say the card chip is a joke and is a total hassle) Not only that, but now you have to keep updating the app and yet another password to forget. Then if you lose your phone you have to start all over. No thanks.

Also, as soon as I read the title, I thought - What is keeping all of these phone apps from lifting the authentication for these cards from the phone itself? Am I the only one thinking this?

Credit cards artificially raise the price on EVERYTHING. There is a 3-5+ % transaction fee on everything. Retailers have to raise the price on you to compensate. It is not free. I was a contractor at Mastercard for a short time. It was amazing how many times employees brought up how "dangerous" cash is to their business. They had incentives if you could think of ways to abolish cash because they feel it is a threat. They want cash gone so they can rake in the money and have control. That is unfortunate.

Cash is still king. I use it for all small purchases - usually less than $50. Inflation has devalued money so much that I would have to carry around a lot so I use the card for $100+. It also helps me keep track of spending because I physically see the money going. I can also easily tell that inflation is MUCH higher than the government is telling us. I have to withdraw twice as much from the ATM as I did 10 years ago. The reason can easily be seen in just that restaurant prices have doubled. Groceries, etc etc.
Several of your statements are just not correct. The discount rate for credit cards that you quote only applies to the Mom and Pop stores. The big guys pay way less than this. The statements about the app - most phones that can run the app will use your fingerprint to unlock it, and upgrades are automatic and seamless. Also, losing your phone is probably not any more likely than losing your wallet. If the phone is lost, you are inconvenienced, if your wallet is lost, your cash is gone and your credit cards are out there. As for a terminal lifting the authentication, as per the article, it can't happen.