A few weeks ago, we wrote about why Americans shouldn’t jump on the mobile wallet bandwagon just yet. It looks like the country didn’t get the memo.
According to a new study by Javelin Research published this Wednesday, four of five consumers now believe that mobile wallets are safer to use than debit and credit cards. The study, which was designed to probe consumer attitudes about online shopping, discovered that a surprising majority of Americans have serious concerns about “the safety and privacy of using credit and debit cards to make purchases online.” As a result, 6 in 10 online shoppers are more likely to make their purchases at retailers that allow “no credit card required” transactions.
This isn’t exactly a surprising discovery. Experts have been arguing about the safety of online shopping since its inception. What concerns us, though, is America’s willingness to embrace mobile wallets with such unalloyed fervor, despite the security risks. According to the Javelin research data, mobile carrier-based payments now account for a heart-stopping $109 billion worth of annual revenue for the online retail industry. On top of that, a separate study revealed that one-eighth of all American merchants that accept credit cards now accept the Square mobile wallet app.
The problem with all of this is that mobile wallets are still being perfected. While they have the potential to completely replace credit cards in time, they just aren’t ready to bear that burden yet. Case in point, a third study by tech-research firm viaForensics has revealed that Square’s biggest competitor, Google Wallet, leaves a “significant” amount of consumer data unencrypted on Android phones. Although the information available isn’t enough to completely compromise the app, it’s enough to put consumers at risk. According viaForensics chief Andrew Hoog, “If you had that type of information, you could effectively do a social-engineering attack that could get [an attacker] access to an account.”
This is just the latest in a long line of security problems for phone-based payment systems. As the Huffington Post reported in September, mobile wallets are also susceptible to hacking because they rely on the same near-field radio broadcasts that contactless credit cards use to make transactions and that hackers have already figured out how to intercept. By using a modified mobile wallet app, a thief can hijack your information and make fraudulent purchases – just by being nearby when you make a transaction.
As if that weren’t bad enough, mobile wallets are also encouraging thieves to hack entire phones instead of wallets. Now when a thief steals your credit card information from your phone, they can also get access to your email addresses, passwords and photo albums as well. A security breach like that can ruin someone’s life.
In conclusion, we’re not saying that mobile wallets will never be safer to use than credit cards. On the contrary – it’s only a matter of time before carrier-based payment systems make plastic credit and debit cards obsolete. However, there are still kinks that need to be worked out before mobile wallets are ready to become our primary method of payment. Until then, we implore all of our readers to hang on to their credit cards for just a little bit longer. They aren’t ideal, but they’re the best we can do for now.