Are Mobile Wallets Safe?

24 April 2016

Over the past year, the mobile payments industry has undergone an incredible amount of change. Apple Pay led the way with its fingerprint-enabled Near Field Communication technology, and was soon joined by competitors Google and Samsung in offering mobile payment technology in all of its newest smartphones. Google has even begun testing a “Hands Free” payment app that would let shoppers pay with just their voice, already eliminating the need to take your phone out of your pocket.

The wave of innovation has even made its way to dedicated financial institutions, with companies like MasterCard and Visa teasing technology that could one day allow consumers to make purchases at the register with a tap of a ring, verify mobile payments with a selfie and even pay for gas with the very vehicle they’re fueling up.

Consumer Hesitation

With the concept of the wallet transforming before their eyes even quicker than they can keep up with, consumers in Canada have been left wondering: “How safe is mobile payment technology?”

According to a survey by market and consumer information firm GfK, Canadians used mobile wallets to make just 3 percent of their payments in 2015, far less than credit cards, debit cards and cash (42 percent, 28 percent and 25 percent, respectively). While it’s unsurprising to learn that younger, more affluent consumers tend to use mobile wallets most of all, according to the survey, what’s more interesting is just how low the total adoption rate has remained, especially considering the massive amounts of marketing dollars and excitement that seem to surround new mobile payment technology.

Perhaps the most glaring hesitation many Canadians have had to entrusting their financial data to a mobile wallet comes from their concern for its security. The GfK survey found that more than half of respondents say they worry about their personal information when using a mobile payment app. While that figure is down two percentage points from 2014, it still remains a major weight on the public consciousness.

Data Encryption

Smartphone manufacturers have gone to great lengths to ensure their customers’ financial information would be kept secure during mobile wallet transactions. After all, a non-secure system could drive consumers to stop using the solution altogether, or worse, to switch to the competition. For example, Apple Pay uses advanced tokenization to secure user card data, exchanging an encrypted “token” between itself, the merchant and the payment network. In this method, no card data is actually exchanged by NFC, making it difficult for fraudsters hoping to intercept card data at the point of sale. Plus, the iPhone doesn’t ever store financial data either, just the encrypted token. That way, even if the phone gets lost, its owner doesn’t need to cancel his or her cards.

Google Wallet uses a similar system to insulate card details from merchants and from appearing on the app. However, Google stores card and account information on its servers in an unencrypted format, only using tokens when sending payment data. Still, Google’s security system is robust, reflective of its status as one of the world’s leading software companies.

The Bottom Line

Smartphone companies have been responsible in their commitment to protect users’ financial information. That being said, no system is completely airtight. Plus, these payment solutions are still relatively new, meaning new fraud strategies could arrive and poke holes in the mobile wallets’ promise of security. Overall, it is impossible to completely insulate yourself from the risk of credit fraud, no matter what payment method you use.

To make sure your identity theft protection is up to par, consider signing up for a credit monitoring service like Identity Guard Canada. We can monitor your credit file, alerting you if we detect certain activity that may indicate fraud. To learn more, give us a call today.