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Should I or Shouldn't I? Mobile Payment Apps and How to Use Them

The General Fear About Financial Technology

Despite the convenience it offers, many consumers are hesitant to use online technology to manage their finances. This remains true no matter how safe a given technology has become. Many people are still hesitant to send money online for instance, despite the high level of digital security used by reputable firms. And even as we seem to inch closer and closer to a cashless society, many Brits remain uneasy about using their smartphones to make retail purchases. Even apps that offer something as innocuous as currency services can inspire security fears in a large segment of society, much less using a mobile payment app for everyday purchases. Some of these fears are well founded, but others can be overcome with a little care and knowledge. This will of course become easier with time, as the technology continues to improve and become more available. Let's have a look at the mobile payment app phenomenon.

How Mobile Payment Systems Work

If you don't already know, a mobile payment system is a smartphone (or tablet) app that lets consumers execute financial transactions without using cash or credit\debit cards. With just a few taps, the money is deducted from your account and deposited into the merchant's. Mobile payment apps function using a technology called Near Field Communication or NFC. Essentially, NFC allows two devices to exchange small bits of data when they're within a few centimeters of one another. When makings payments, the user unlocks the app with a thumbprint and holds it up to the merchant's NFC receiver. In some ways, a payment app is like a credit/debit card that doesn't require the physical card. Once the transaction is finished, the app deducts the funds from whatever account you've linked to it -- either your debit/credit card or an account that's only used for the specific app. And just like your credit/debit card, the app keeps track of your purchases, so you'll always know where your money goes. Lastly, payment apps allow you to integrate your loyalty cards and vouchers for each separate vendor. This means convenience and less clutter in your purse or wallet. Unfortunately however, both parties -- consumer and merchant-- must be equipped with NFC technology. Most older phones (on both Android and IOS) are not equipped with the necessary technology. And although their numbers are growing, especially among national chains, most retail stores do not have NFC capabilities either. But bear in mind that the technology involved is constantly evolving. Some companies offer non-NFC options as well.

An Increasing Variety of Options

There was a time when only heavy hitter corporations like Google, Apple, and PayPal offered mobile payment apps. This has changed in recent years however, as literally dozens of smaller companies now offer them, along with many major banking institutions. The following list is far from exhaustive, but here are some of the most popular options. But remember -- it's absolutely crucial that you do detailed research before deciding whether or not to use these or any mobile payment apps.
  • Android Play PayPal Mobile Apple Passbook Lemon Wallet Square Wallet Dwolla Samsung Pay
Most of these companies' payment apps are similar regarding the basics, but there are important differences between them as well, most of them concerning merchant acceptance. This is yet another reason to do ample research before making a decision.

Well, Should I or Shouldn't I? Payment Apps and Digital Security

As we said earlier, there is a perception in the consumer world that mobile payment systems aren't secure enough for everyday use. And although this perception does not seem completely accurate, there is a sizeable percentage of experts who view payment apps with suspicion. The naysayers, whose concerns are nicely summarized here, worry that using public WiFi, stolen or lost phones, and weak passwords make users vulnerable to fraud and identity theft. These experts do believe that there are ways for consumers to protect themselves, however. Perhaps the real question is whether they will or not. On the other hand, other experts believe these concerns to be unfounded. Citing advances in technology, they seem to believe that using a payment is at least as safe as using a credit/debit card. The decision is up to the individual user of course, but a cursory look at the research seems to suggest that expert reviews have been improving over the last 12 months or so. Education is certainly the key to protecting yourself, especially staying up to date on what safeguards developers put into place. For a variety of security reasons, we still suggest prepaid travel cards for international travelers, but depending on your level of risk acceptance, using payment apps within the UK might be a different story. In the end, it seems inevitable that the payment app will eventually be the preferred choice in retail purchasing, but in the meantime take the same precautions you would with any investment choice.

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