Tuesday Tip: How mobile payment works

Tuesday Tip: How mobile payment works

Two years of your life. If you’re an average American, that’s the amount of time you’ll spend waiting in line.

Some of it can’t be helped. Like airport security. But some of it is uncalled for and annoying. Like when that person in front of you at the cafe takes 5 minutes to pay for a $3 latte with a credit card to get—what?—a few feet’s worth of airline miles? Aaargh!

Luckily, help is at hand. Mobile payment options speed transactions and shorten lines—and they’re increasingly popular. By the end of 2018, one-quarter of U.S. smartphone users over the age of 14 will have made a mobile payment in a store.

Here’s what you need to know to get started.

What are mobile payments?

A mobile payment means just that: making a payment with your mobile device. The payment can be at a restaurant, grocery store or any other store that accepts mobile payments.

Or it can be person to person, such as paying back a friend who spotted you for dinner or paying an eBay seller for a pair of shoes. Because they happen over the internet, payments can be done anywhere. Just open the app on your phone and tap a few times to send money. The payment may be made with your bank account, debit card or credit card. Popular P2P payment apps include Venmo, Zelle, and PayPal. Paying via your bank account or debit card is usually free while using a credit card will incur a small fee.

What is a mobile wallet?

This is an app on your phone that stores the information from your credit or debit card and enables you to make purchases with your phone, without having the actual card with you. The big three mobile wallets are Apple Pay, Google Pay, and Samsung Pay, which come integrated on their respective devices. iPhones have Apple Pay, Android phones have Google Pay and Samsung phones have Samsung Pay.

You can also download a mobile wallet app from your bank or credit card company. If you have a card from, say, Chase, or Capital One, you can download their wallet app to your device and use it wherever it’s accepted.

Mobile wallets make purchases quick and easy. When you arrive at the register, just open the wallet app, hold your phone up to the compatible reader and you’ve paid. Mobile wallets can also be downloaded to tablets and smartwatches.

What is a merchant wallet?

Megachains like Starbucks, Dunkin’ Donuts and Walmart offer their own “closed loop” payment apps that work only in their stores. For example, you can download the Starbucks wallet app (now the most popular mobile payment app in the world), put money in it, then use it to pay for your coffee.

These merchant apps are particularly popular because they give users rewards, like one free coffee after you buy 100. (If you do go to Starbucks, we encourage you to bring your own mug, since Starbucks paper cups still are not recyclable—although we did recently pressure Starbucks to begin development of a recyclable cup.)

Can you earn credit card rewards with a payment app?

The short answer is yes. The long answer is sometimes not. Yes, if your credit card gives you points, miles or cash back on your purchases, you’ll still earn those rewards if you use that credit card via a mobile payment app, same as you would if you used the plastic card.

But if your credit card gives you bonus rewards when you use it in specific places, like, say, 3% cash back when you use it at a restaurant, your mobile wallet may not categorize the payment exactly and you may not earn those bonus rewards, so check with your card issuer to be sure.

Some mobile wallets offer you their own rewards for using them. For example, Samsung Pay gives you rewards points you can use when you buy Samsung products, in addition to the rewards you get from your credit card company.

Is a mobile wallet secure?

Security is a primary reason more people have not embraced mobile payments. Many fear that when they transmit their credit card information into the atmosphere, some hacker might vacuum it up and go on a spending spree.

In fact, a mobile wallet is among the safest ways to pay. Think about it. When you write a check, a fraudster can easily steal all the private information that’s printed on the front of it: your name, address, bank, account number and routing number. They just take out their phone, snap a photo and it’s theirs.

And when you use a physical credit or debit card, the data can be stolen by a skimmer at an ATM, gas station or restaurant.

Payment apps and mobile wallets, on the other hand, create a random, one-time number—a transaction token—for every transaction. Even if someone is able to learn that number, it’s not valid for other transactions. Although you load your card information into your payment app, your card number is not shared with the merchant when you pay. Many payment apps also require a PIN or your fingerprint to authorize payments, so the app can’t be used by someone else even if your phone is stolen.

One other benefit of mobile payments: if more people don’t use credit and debit cards, that’s less plastic pollution fouling up our planet. Here’s another way you can help fight the plastic problem: try these alternatives to a plastic water bottle.