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Mobile Wallet

What Is a Mobile Wallet?

A mobile wallet is a virtual wallet that stores payment card information on a mobile device. Mobile wallets are a convenient way for a user to make in-store payments and can be used at merchants listed with the mobile wallet service provider.

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Key Takeaways

  • Mobile wallets are safe apps for storing financial instruments and other documents such as credit cards, bank information, and even driver's licenses.
  • Many smartphones come loaded with mobile wallets.
  • Mobile wallets use near-field communication technology, which requires users to be present when paying for something.
  • Mobile wallets utilize many layers of encryption and security to ensure that transactions are safe.

Understanding a Mobile Wallet

The business-consumer relationship is becoming increasingly digital. From e-commerce platforms to robo-advisors, businesses are transforming the way they operate to meet the ever-changing needs of their clients and their use of mobile phones and devices.

Companies that exclusively offer digital platforms and solutions are recognized as emerging members of the fintech sector. These companies create disruptive tools and services that are easily accessible at a low cost. The payments sector, in particular, has seen some of the biggest developments. Companies and users are adapting to online and offline transactions using devices such as mobile wallets.

The mobile wallet is either a built-in feature or an app that can be installed onto smartphones. A mobile wallet stores credit card, debit card, coupon, or reward card information and connects directly to bank accounts. When the app is installed and the user inputs their payment information, the wallet stores this data by linking a personal identification format such as a number, key, QR code, fingerprint, or facial recognition for each stored card.

When a user makes a payment to a merchant, the mobile app uses a technology called near-field communication (NFC), which uses radio frequencies to communicate between devices. NFC uses the personal identification format created for the user to communicate the payment information to the merchant’s point-of-service (POS) terminal. The information transfer is usually triggered when the user waves or holds an NFC-enabled mobile device over the store’s NFC reader.

Available Mobile Wallet Apps

Today, most smartphones or mobile devices are equipped with NFC technology. iPhones have included Apple Pay since the iPhone 6, Android phones are all equipped with Quick Access Wallet, and Samsung phones are preloaded with their proprietary Samsung Pay app. Despite what comes preloaded on smartphones, third-party mobile wallets have also become very popular.

Some third-party apps include:

  • PayPal. The online payment platform is available for download on both iOS and Android devices. Fees vary for PayPal—check to see if your payment method has fees attached.
  • Google Pay. Google Pay comes loaded on many Android phones, but it's also available for download on iOS phones. Google Pay was once only available for paying retailers and for standardized service providers such as Airbnb and DoorDash, but it has since offered the ability to pay individuals and groups.
  • Venmo. Venmo started as a peer-to-peer app but is slowly making a foothold with retailers as well. Venmo does charge a 3% fee for any purchases made with a credit card linked to the platform. Transactions that draw from a bank account are free.

Benefits of Mobile Wallets

Fraudulent activities, such as identity theft, are harder to initiate with mobile wallets. Though a user’s credit card can easily be stolen or duplicated, smartphones are not so easy to steal. A smartphone that is stolen may be hard to access if there is an access password, fingerprint check, or facial recognition installed. Mobile wallets may also have encrypted keys. Mobile wallets are also useful for retail businesses that experience high volumes of transactions per day because mobile wallets help to reduce wait and payment times. This is a win-win for both the customer and the business.

Because mobile wallets are a digitized version of physical wallets, almost every valuable card stored in a physical wallet can also be stored in a mobile wallet, such as a driver’s license, Social Security card, health insurance cards, loyalty cards, hotel key cards, and bus or train tickets.

Digital Wallets vs. Mobile Wallets

The term digital wallet is often used interchangeably with mobile wallets. However, though they both store payment information, they are implemented differently. Digital wallets are mostly used for online transactions and may not necessarily be used on mobile devices. Mobile wallets are used by people who would rather not carry a physical wallet when making in-store purchases. For this reason, these wallets have to be used on mobile and easy-to-carry platforms.

Apple Pay, Samsung Pay, and Google Pay are examples of mobile wallets that can be installed on a handheld or wearable device. A regular PayPal account is a form of a digital wallet, but when used in conjunction with mobile payment services and mobile devices, it functions as a mobile wallet.

Is a Digital Wallet the Same as a Mobile Wallet?

Though digital wallets and mobile wallets are very similar, they aren't the same. Digital wallets are typically for online transactions, whereas mobile wallets are tied to a smartphone or wearable device. Both connect to bank accounts and credit cards for purchasing on the go.

Can I Use Apple Pay on an Android Phone?

Most smartphone makers use proprietary mobile wallets on their phones. Only iOS devices may use Apple Pay, just as only Samsung phones can use Samsung Pay. For universal use, download a third-party mobile wallet like PayPal or Venmo.

Can I Use My Mobile Wallet on My Smartwatch?

Many tech wearables are now capable of using mobile wallets. Depending on the device, it may come preloaded with a mobile wallet, such as Apple Pay on an Apple Watch.

The Bottom Line

Mobile wallets allow people to use their phones to pay for everyday services. With complex encryption and security features, using a mobile wallet can actually be safer than using a physical card. Most phones now come preloaded with the company's mobile wallet app, but there are options, such as Venmo, that work with all phone brands.

Article Sources
Investopedia requires writers to use primary sources to support their work. These include white papers, government data, original reporting, and interviews with industry experts. We also reference original research from other reputable publishers where appropriate. You can learn more about the standards we follow in producing accurate, unbiased content in our editorial policy.
  1. NFC.org. "How Near Field Communication Works."

  2. PayPal. "Digital Wallet."

  3. Google Pay. "About Google Pay."

  4. Venmo. "Fees."

  5. Samsung. "Samsung Pay: What Is It, Where Is It, and How to Use It?"

  6. Apple. "Devices Compatible with Apple Pay."

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