Detailed analysis of the mobile wallet market: It is difficult to replace credit cards for the time being

Today, Time magazine published an article on the current status of the mobile wallet market and several popular applications. The following is the full text of the article: Smartphones have replaced maps, health trackers and digital cameras, so why not use them to replace our credit cards? In fact, many Americans have already chosen smartphones when shopping online and using online banking.

But a 2013 survey by financial services company TSYS found that only 6% of Americans would use their smartphones instead of credit or debit cards.

Rajesh Kandaswamy, an analyst at Gartner, a US market research company, said that whether it is signing a form to confirm, entering a password or waving the card over a contactless payment terminal, consumers seem to be very satisfied with credit cards and do not think that using smartphones to pay in physical stores can bring much additional value. "Consumers need some incentive to really use mobile payments." He said. Softcard mobile payment app (formerly known as Isis) offers such a program. Users can get a $1 reward for each mobile payment completed with an American Express Serve card, and the cumulative reward cannot exceed 50 transactions.

The upcoming release of Apple Pay will also provide a boost to this area. The feature will be automatically downloaded to the iPhone 6 and iPhone 6 Plus as part of the iOS 8 update in October and will be compatible with American Express, MasterCard and Visa cards.

"With millions of users' financial information already stored in Apple iTunes, Apple Play could be a catalyst for smartphone wallet adoption by lowering the barrier for millions of people to try mobile payments," Kandaswamy said.

Apple Pay will also gain support from major banks, including Bank of America, Chase and Citigroup, which are less likely to charge excessive fees for Apple Pay transactions than for credit cards, giving more merchants an incentive to offer the service to customers.

Why switch to a smartphone wallet?

Kandaswamy said mobile wallet apps can provide a better way to manage cards, from debit cards to credit cards, discount coupons and membership cards. "Mobile wallet apps can provide better financial control and realize one-stop shopping analysis services," he said.

Using your smartphone to pay can also speed up checkout. Instead of taking your card out of your wallet, you can simply hold your smartphone close to the payment terminal to authorize the transaction, receive discounts, and earn points. This is great news for people who often forget to bring their various cards.

How money flows

Most existing smartphone wallet apps use the "touch and pay" feature, which requires the phone's NFC (near field communication) chip to work. In the iPhone camp, only the iPhone 6 and 6 Plus currently have this feature. Most Android phones using Android 4.0 or higher are compatible with NFC technology, but some apps require a unique encrypted SIM card to store financial information. Therefore, you need to consult your operator to find out whether your Android phone supports digital wallets.

If you use a Windows Phone or BlackBerry device, you may have to wait. Microsoft recently released "Windows Phone Wallet", which can be used to store credit cards, membership cards, coupons and various tickets, but no Windows Phone phone supports the "tap and pay" function of the application. Although Visa recognized BlackBerry's secure payment framework last year, the company has not yet officially launched a mobile wallet application.

But the mobile payment war is heating up. Retail giant Walmart's payment system and other large brands are also making similar attempts. Current C, which is compatible with all smartphones, will not be officially launched until next year.

Candidate Applications

So far, Android and iPhone users can use one of the following apps to turn their smartphones into payment tools.

Apple Pay

Apple Pay will be available for iPhone 6 and iPhone 6 Plus in October this year, and will be compatible with Apple Watch smartwatches released next year. Apple Pay can store credit and debit card information, and iTunes users can directly link to the credit card information they have already stored. Once you activate Apple Pay, you can use it to provide secure payment features such as "tap and pay" in shopping apps and enjoy services such as Uber and Panera Bread, without having to fill in payment and delivery information.

Tap to pay: Touch your iPhone 6 or 6 Plus to the payment terminal while placing your finger on the TouchID fingerprint sensor. When the transaction is completed, the phone will alert you with a slight vibration.

Security: Users don't have to store or send credit card numbers. Apple Pay assigns an account number to the device and stores it in an encrypted form in a dedicated chip in the iPhone 6 and 6 Plus. The account number is issued along with a one-time transaction ID called a "token." "The user's credit card will not be exposed during the entire transaction, and merchants no longer need to store large databases of credit cards, which can be hacked," said Marc Rogers, chief security researcher at mobile security company Lookout. "However, the security of this technology depends on the protection of the token itself and whether it can be stored securely, both of which are currently unknown."

Why you should use it: It's fast. Using your iPhone's fingerprint scanner and touching it to a payment terminal is much faster than signing a check and entering a PIN. And now that major U.S. banks are supporting the service, Apple Pay is going to be popular very quickly.

Where it works: 220,000 stores at dozens of retail chains, including McDonald's, Subway, Bloomingdales and Walgreens.

Supported phones: iPhone 6 and iPhone 6 Plus.

Google Wallet

Google Wallet also stores credit, debit, coupon, and loyalty card information. You can transfer funds to a stored-value card called Wallet Balance. If you have an Android 4.4 phone with NFC, you can pay in stores. Tap and go doesn't work on iPhones or Android phones running Android 2.3 or older. However, those users can still use other Google Wallet features, including sending money, one-click checkout at online stores, and tracking orders from linked payment cards.

Tap to pay: Open the Google Wallet app on your phone and enter your PIN before touching the payment terminal.

Security: Google encrypts your financial information and stores it on its servers, and the app is password protected. If someone steals your phone and guesses your password, Google claims it can use fraud protection to reimburse any "unauthorized transactions."

Why you should use it: Google Wallet supports many loyalty programs and coupon sites. Even if you forget your coupons or membership card, you can still easily earn points and discounts when using the app.

Where to use: Any store that accepts contactless payments.

Supported mobile phones: Android 2.3 or above; Android 4.4 and above can use Touch Pay; iOS 6 and above can also be used, but Touch Pay is not supported.

Softcard

Softcard was developed by AT&T, T-Mobile and Verizon, so you must be a user of these three major operators to use this service. In addition, you must have an Android phone compatible with NFC. The app supports credit cards from American Express, Chase Bank and Wells Fargo, as well as a few membership cards and discount cards. You can create an American Express Serve account and use it to complete payments with any debit card, credit card or US bank account.

Tap and pay: Like Google Wallet, you need to open the app, enter your password, and then hold your NFC smartphone near the payment terminal.

Security: To use Softcard, you need a secure SIM card to store your financial information so only the Softcard app can access it. (If your phone is Softcard-compatible, you'll need to ask your carrier for one.) A one-time token is created for each transaction so that card information isn't sent to the merchant. Like Google Wallet, the app uses a password to protect your data.

Why you should use it: Softcard lets you scan nearby merchants offering deals and discounts, then check out and pay using the app.

Where to use: Dozens of chain stores, including Urban Outfitter, Subway and Walgreens. See Paywiththis.com for a complete list.

Supported phones: Android 4.0 or higher.

LoopPay

LoopPay is a Kickstarter project that includes a smartphone app and a Loop device - you can choose a mobile phone pendant ($39, compatible with iPhone or Android phone) or a charging case ($99, compatible with iPhone 5 and 5s). Credit cards, debit cards, membership cards, loyalty cards and driver's licenses can be scanned and stored in the Loop app. Most phones with Android 4.2 or higher can support Loop, but some have compatibility issues. To check specific conditions, you can visit the official compatibility page: //resources.looppay.com/android-compatibility.htm#compatible

Touch and pay: Hold the mobile phone pendant or charging case close to the payment terminal, then turn on the phone screen and tap the pendant button to complete the payment. If you need to show your ID (for example, when buying alcoholic beverages), you can tap the ID icon on the phone screen and show the scanned copy.

Security: All payment information is encrypted and stored in the security chip of the Loop pendant or charging case and protected by a password.

Why you should use it: LoopPay supports 90% of retailers worldwide, making it more widely available than other apps.

Where to use: Anywhere there's a credit card reader.

Supported mobile phones: iPhone and Android 4.2 or above.

Other applications

Starbucks

Starbucks' iPhone app integrates membership and prepaid cards into a "tap and pay" app that tracks points and the number of coffees required to upgrade to the next level. Starbucks has made a lot of money - $6 million in transactions are completed using the app every week.

PayPal

If you're in a store that accepts PayPal, you can log in to the app and see where you are. Then you can take your purchases to the checkout counter, tell the cashier you want to pay with PayPal, and complete the payment process on your phone screen. This is not a replacement for your wallet, but it can be a great solution if you really forget your wallet. The app can automatically scan nearby merchants that accept PayPal.

Ensuring information security

Using a mobile wallet is safer than using a credit card because your wallet app doesn't send as much sensitive information (such as credit card number and expiration date). Lookout's Rogers said that to ensure the security of mobile payment apps, you should follow these steps:

——Set a password for your phone.

- Download an app that can help you find your phone if you lose it. When your phone becomes your wallet, it can be even more troublesome if you lose it.

Only download mobile payment apps from sites you trust (this applies to all apps). Check app ratings and permissions, and read reviews before downloading to make sure a lot of people use and trust the app.

——Turn off your phone’s NFC connection when not in use.

-- Be extra careful when using NFC payments: you might accidentally pay someone else's bill.

Would you replace your wallet with one of these apps? If so, which one would you choose?