May 10, 2014

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Digital Wallet Security: One Credit Card To Rule Them All?

I love the idea of anything that helps organize my financial life or makes online shopping and banking easier and safer. Now, when it’s time to shop online, I tend to reach for my digital device rather than go sit at my computer.

Mobile developers are creating smarter and easier-to-use apps. This in turn has spurred innovation in “digital wallets”–– electronic devices or smartphone apps that hold your credit card, ATM card, and loyalty or rewards information. All of this is amazing, but should we be concerned about digital wallet security?

Are Digital Wallets Secure?

I’m intrigued, but digital wallets give me pause. Will they keep my personal information safe? What if I lose my smartphone? What about hackers?

Recently we wrote about the security breaches at Target and other big retailers. The solution to preventing future security disasters appears to be moving from magnetic strip to microchip technology. After such an overwhelming “fail”, will these nervous retailers consider adopting digital wallets at their registers or on their mobile sites?

In addition, questions remain about how MasterCard, Visa, and American Express will fit into the picture. I am used to seeing these names on the front of my credit cards. These big bank names make me feel safe. They guarantee protection against fraud and loss of the card. But, there are no such guarantees with digital wallets. It’s still a bit “Wild West.”

What Are My Options?

Google Wallet is a mobile payment system that encrypts your debit cards, credit cards, loyalty cards, and gift cards on your mobile phone. It allows you to pay securely at a register that is PayPass-enabled (you tap rather than swipe your card). Google Wallet promises to store your personal information securely, and offers 24/7 customer service. Yes, it seems cool and it will make your wallet thinner, but if your smartphone runs out of battery life or you forget your phone, you won’t be able to use your digital wallet at the register. And, the Google Wallet Purchase Protection Policy does not cover errors made by sending or receiving money through Wallet and Gmail.

Coin, a startup company in San Francisco, will soon offer a new electronic credit card, which will save all the information from your credit and ATM cards. The card will rely on magnetic strip technology and swipe like a regular credit card at any register. The product’s Bluetooth technology lets you synch it to your smartphone. Unfortunately, Coin’s terms of service offers the user zero protection: you are responsible for all losses incurred, whether the device is lost, stolen, or even hacked. At a cost of $55 to $105 for the device, and just a 2-year life expectancy, it seems like a high price to pay and unacceptable level of risk.

iWallet?

Rumor has it that Apple will enter the digital wallet space soon. With the success of the iTunes Store (think of how many credit cards they have stored there already) maybe, just maybe, Apple will be able to transform the mobile payment space. But for now, I am pretty happy using my regular old credit cards and carrying an old-fashioned wallet.

Stay tuned. If there are any revolutionary developments by Apple or another digital wallet innovator I’ll be sure to update you here.

Image courtesy of Andres Rueda.

David Rabinovitz

Identity Protection Consultant at IdentityForce
David is aligned closely with c-level principals and provides them with coaching services focused on strategy, finance, ownership, deal structuring, and shareholder relationships, which led him to join one of his high-growth clients as their CFO. As a high-energy executive with a wealth of experience, David is a versatile corporate “fireman” who skills are often sought after to assess and resolve complex business challenges, as he brings critical insight for business leaders in transition.He is also a long-standing Special Crew Volunteer for Pan-Mass Challenge, an annual cycling fundraiser that strives to provide Dana-Farber's doctors and researchers the necessary resources to discover cures for all types of cancer.

One Response to Digital Wallet Security: One Credit Card To Rule Them All?

  1. Pingback: The Pros and Cons of Digital Wallets | Capital Business

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