Its not far-fetched to think that someday soon, youll be able to leave home needing nothing more than a smartphone. Even today, more and more consumers are beginning to use payment apps to make purchases online, in-store, and to transfer money to friends, family and other organizations. A report from BI Intelligence predicted usage rates of in-store mobile payments would grow 80 percent year-over-year between 2016 and 2020, meaning mobile wallets and payment apps are likely to become even more common.
The Rise of the Mobile Wallet
Currently, there are two primary categories of payment apps: those that use near-field communication, and peer-to-peer apps. Near-field communication apps, such as Apple Pay, Android Pay (Google Pay) and Google Wallet, store your payment information inside your phone, which you then use in-person to pay for something by scanning the phone to complete the transaction.
Peer-to-peer (or person-to-person or P2P) payment lets you send money to another individual via apps such as Venmo, Square Cash and PayPal. To make things even more complicated, you can also complete many online purchases using PayPal.
Bank of Americas 2017 Trends in Mobility Consumer Report found convenience, time saving and peer influence are the primary motivators for people who have already started using these forms of mobile payment. But are the benefits coming at a risk to security? Not necessarily.
A nonprofit organization called ISACA surveyed 900 cybersecurity experts regarding mobile wallet security threats and found many of the risks surrounding mobile payments had to do with how they were used by consumers. They named use on public WiFi networks, stolen devices and phishing attacks as the three greatest security threats. Essentially, you are at greater risk of user error than you are of app security failure.
So how can you continue benefiting from the convenience of these payment apps, without exposing your identity and finances to risk? Here are seven tips to using mobile payment apps safely and securely:
Actually Read the Apps Terms of Service (ToS)
This isnt the time to scroll through and click accept without reading. Its important to note how the app addresses complaints, settles disputes and how your information will be used and stored before you connect any financial or personal information.
Know Who Youre Paying
Whether youre sending money to an individual, a retailer or an organization, make sure you know who they are and that you can trust them.
Avoid Clicking on Links That Come to You Via Email
If you get an email purportedly from PayPal or Venmo, especially if it looks suspicious (odd formatting, incorrect spelling or grammar), delete it and head directly to your app. If the communication was real, youll likely get notification of it in-app, as well. And if it wasnt, you just saved yourself a lot of stress and hassle.
Link a Credit Card Instead of a Debit Card
If you have the option, it is safer to link a credit card account to your mobile payment app rather than a debit card that pulls directly from your bank account. If you do end up the victim of a payment app scam, a credit card company will be more invested in getting the money back – because its technically their money, not yours. In most cases, youre only liable for $50 of fraudulent charges, maximum. On the other hand, if money gets siphoned straight from your bank account, youre less protected and could end up owing the entire balance.
Create Strong, Unique Passwords and Lock Your Phone
Features like thumbprint or facial recognition are becoming more common on smartphones, and thats a great first step. Make sure your phone lock is as unique to you as possible. When you create a password for each individual payment app, make sure it isnt the same one you use in other places. That way, if one of your cards, apps or accounts is compromised, it wont automatically mean the rest are, too. If your phone is ever lost or stolen, lock it remotely. If you have an iPhone, you can do so from iCloud.com, if you have an Android go to android.com/devicemanager, and if you have a Windows device, visit windowsphone.com.
Try Not to Leave Money in the App
While many P2P apps can act as storage for funds, its safer to transfer money back to your bank account as quickly as possible. While any balance remaining in a P2P account is just protected by the apps policies (which you know because you read the ToS, right?), money in your bank account is protected by federal law and insured by the Federal Deposit Insurance Corp.
Monitor the Accounts the App is Linked To
You should be doing this anyway, but if you arent, its even more important when mobile payment apps have access to your credit and bank accounts. Check your transactions and make sure everything looks correct. If not, start looking into which app or account could have been compromised and how.
Generally, experts consider it safe to use near-field communication to complete transactions in-store and P2P apps to shop online and transfer money digitally. Still, a bit of proactive common sense can go a long way in making sure your money goes exactly where you want it to.