December 22, 2015

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Should You Start Using a Digital Wallet?

As the holiday shopping season ramped up, ads for payment apps seemed to become as ubiquitous as decorations and twinkly lights. With digital wallet services from the likes of Apple, Google, PayPal, Samsung and American Express, it seemed like cash was about to go the way of the rotary-dial phone.

So far, however, digital wallets haven’t lived up to the hype. Should you jump in as an early adopter of this technology? It all depends on how you plan to use a digital wallet — and whether it will truly be an advantage for you.

Digital Wallets 101

At a basic level, digital wallets allow users to store information on credit, debit, loyalty, rewards and other types of cards. They can also include a repository of “cash” based on how much you deposit into the account, and most send out coupons offered by stores that embrace digital wallet options.

To use the technology, you either tap your smartphone on a compatible reader at a checkout, or you access the account information and unlock it with a PIN or other identifier.

Given how much people use smartphones, it seems like a natural transition to use a device instead of cards to make payments. But despite the hopes of major technology players, adoption to date isn’t just lackluster — it’s downright dismal.

According to a Gallup survey, only 13 percent of U.S. adults have a digital wallet on their smartphone. Of that group, 76 percent have never used it, and 38 percent don’t see any benefits of having the technology. Ninety-one percent of those who don’t have a digital wallet say they’re very unlikely to start using one in the next 12 months.

Concerns Over Security

Security seems to be on the minds of many consumers. In that same Gallup survey, 55 percent of those who didn’t use digital wallets said they would pass on the technology because of security concerns, including hacking, identity theft and phone loss.

We’ve noted before that while the security standards for digital wallets have a ways to go, some fraud and misuse protections are already in place. In an attempt to improve those adoption numbers, service providers are working diligently to put more safeguards in place, and that’s likely to win over at least some new users.

Potential Benefits

Although digital wallets haven’t yet taken the market by storm, they do have some advantages that should factor into your decision about whether to use the services. Their ability to replace traditional wallets, which are usually full of identifying information that can be used for identity theft, if lost or stolen, is a definite benefit. Digital wallets can also provide you with an extra level of security through the use of fingerprint authentication and multiple security levels.

In addition to the added security benefits, digital wallets can help you take better control of your finances through the use of exclusive coupons and a more streamlined payment and financial tracking system.

Should you use a digital wallet? The answer will be based on your technology preferences and whether you think it will be more of a benefit than a hassle. If you do choose to go digital, just make sure you have the right protections in place so that identity thieves and other criminals can’t target you for high-tech pickpocketing.

Image courtesy of Flickr user Jason Howie.

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Heidi Daitch

Director, Strategic Programs at IdentityForce
Heidi is a busy working mom who juggles many of the same responsibilities and challenges at home and at work - a long list of things to do and not enough time to do everything. With so little time, Heidi tries hard to find simple, but effective strategies to save time for what’s really important – spending time with her family.
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