As mobile wallets continue to grow in popularity in the US and around the world, merchants should be ecstatic about the extra security it brings to their customers and to themselves.
Mobile wallets are becoming a standard payment option for customers. When customers use their mobile wallet, there is a convenience factor for customers and a security factor for merchants. We will take a look at who is using mobile wallets, and how it benefits both customers and merchants.
What is a Mobile Wallet?
A mobile wallet is when an app on a smartphone, smartwatch, or tablet creates the capability to hold payment card information and make purchases in-store, in-app, or even on websites accessed through mobile phones. Digital wallets essentially replace the need to have physical cards or wallet to make a purchase. Inside the mobile wallet app, cardholders can upload whatever credit or debit cards they would like. Some of the most popular mobile wallets are Apple Pay, Samsung Pay, Android Pay, and PayPal.
The Rise of Mobile Wallets
There has been a rise in mobile wallets used around the world. By 2022, it's estimated that the transaction value of mobile payment apps will reach $14 trillion. There are a lot of people using mobile wallets, but the United States has been slow to adopt and use this technology. An eMarketer mobile payments study forecasted that 79.4% of smartphone users in China had made a mobile purchase over the past six months, compared to the US, which is only at 25.3%. They explain that the US's hesitation of the mobile payments is that US consumers are just more comfortable paying with a credit card instead. Even though the US is behind other areas in mobile wallet adoption, there is still continual growth. Apple announced in 2018 that half of all retailers in the US now accept Apple Pay, which is incredible growth compared to just 3% of merchant accepting Apple Pay in 2014.
Do Mobile Wallets Help Protect Merchants?
There are many benefits of using a mobile wallet for cardholders. Some of those same benefits can help merchant's as well. Here is how mobile wallets protect and help merchants:
Protection Against True Fraud Disputes
True fraud is when a fraudster obtains stolen credit card credentials. The fraudster then uses these credentials successfully at a merchants store. The fraudulent transaction results in the legitimate cardholder disputing the charge as fraudulent, and a new card is issued. On the merchants' end, they will be held liable for the true fraud dispute cost. It is the merchant's responsibility to prevent the acceptance of any fraudulent transactions. True fraud disputes are not winnable by submitting a response, so it is essential for merchants to avoid this type of fraud from ever happening. Mobile wallets are one way that customers and merchants can prevent true fraud.
Mobile wallets transactions are more secure than just using a standard credit card for a couple of reasons. Mobile wallets utilize tokenization when the purchase is made. Tokenization is the process of taking important information and turning it into a randomly generated "token," which is a string of characters. The advantage of tokenization is if the data gets breached, the tokens cannot be used or understood.
Another way that the mobile wallet protects from fraud is by requiring two-factor authentication to make a purchase using the wallet. Usually, this requires that the cardholder must enter another ID, password, or biometric credentials. There is no way for a fraudster that doesn't have these credentials to make a purchase using a stolen phone. Whereas if a physical card gets stolen or lost, a fraudster could use it to make purchases (especially ecommerce purchases) easily.
Keeps Purchases Organized
Mobile wallets make it easy to keep track of receipts and purchase made. For example, Apple Pay allows cardholders to look at recent transactions through the Passbook App. This easy access makes it as simple as tapping "more info" on a card to see all the latest transactions. The information that is shown includes the merchant descriptor, where the transaction was made, and at what time. By reminding a cardholder about where and when a purchase took place, it can help prevent friendly fraud dispute from ever happening.
Friendly fraud happens when a cardholder is confused about a transaction and disputes the charge even though they did authorize the purchase. There is no malicious intent to dispute the charge. It is simple forgetfulness or a miscommunication.
What Keeps Cardholder Safe, Also Keeps Merchants Safe
As mobile wallets continue to grow in popularity in the US and around the world, merchants should be ecstatic about the extra security it brings their customers and themselves. Preventing fraudulent transactions and accidental disputes allows the customers and merchants to maintain a great relationship and avoid the unnecessary loss of revenue.