How Safe Are Mobile Payments?

For some consumers, paying at the checkout line becomes a lot simpler when they can forgo the plastic card and pay with their phone. Mobile payment applications like the Isis Mobile Wallet, Google Wallet, Square, and LevelUp turn your cell phone into a payment source: Just store your debit card or credit card information on the phone and scan the device at checkout. "Consumers like the convenience factor," says Sarah Jane Hughes, a commercial law professor at Indiana University. But is this new form of payment safe?

[See Is It Safe to Bank Online?]

Approximately 12 percent of mobile phone owners made a mobile payment in 2011, according to a recent survey by the Federal Reserve. According to the survey, concerns about the security of the technology were the primary reason respondents gave for not using mobile payments. Hughes says one security advantage to using mobile payments is that "your phone normally stays within your line of sight. So unlike the credit card that gets moved to the back room, you're much less likely to let people take your phone away."

Ben Milne, CEO and co-founder of Dwolla, a mobile payment provider, says mobile payments are inherently more secure than using a plastic credit card. That's because most mobile payments are conducted on phones that have GPS, meaning the payment provider can determine who you are and whether the transaction is a legitimate one. "There's a lot of data around the transaction that can actually be utilized to protect people, and that data isn't available with a plastic credit card," Milne says.

[See Debunking 7 Common Credit Card Myths]

Many people may be less likely to try mobile payments simply because plastic credit cards have been around longer, but Milne says that shouldn't be the case. "It makes no sense to make the argument that because the 16-digit account number has been around longer that it's better," he says. "In any event, probably what it means is the system has more problems. To me, if anything, it has probably more known ways of being exploited because it's been around for so long." With Dwolla, for instance, users never enter their credit card number into the app. Instead, the system stores your bank account information and then enables you to make purchases directly from that account.

Still, mobile payment applications are not immune from security threats. Square was hacked in 2011, as well as Google Wallet earlier this year.

[See How to Find the Best Bank Account For You]

While most mobile payment providers are relatively safe, there are extra precautions you can take. Follow these steps to ensure your accounts are secure when using mobile payments:

1. Have a PIN on your phone. A password to access your keypad "adds an extra layer of protection, in the event your phone gets stolen," Hughes says.

2. Use an app that issues an immediate electronic receipt. That way you can check the amount of money you spend right after each purchase.

3. Choose a method that gives you at least a two-factor authentication, such as a password on the phone and another to access the payment application.

4. Reconcile statements regularly. Just as you'd balance a checkbook, make sure to match up your mobile payments with receipts. "Anybody who is going to do a payment through a mobile phone needs to be paying close attention to their account," Hughes says.

5. Report security and payment problems right away. Your mobile payment is typically covered by the Electronic Fund Transfer Act, but the liability limits depend on how quickly you report the problem. "The first two days, you're pretty well-covered. After that, the liability can go up to $500," Hughes says. "And if you don't do it relatively promptly, it can go up beyond $500."

More From US News & World Report

Quiz: How well do you know India's economy?

Question 1

Which of these products is India the world's largest producer of?

Poll Choice Options
  • Wheat
  • Rice
  • Milk

Latest News

  • Gold falls to 2-1/2 week low in thin trade

    Gold fell to a two-and-a-half-week low in choppy and thin holiday trade on Monday, hurt by sharp outflows from the world's biggest bullion-backed exchange-traded fund (ETF) and a stronger dollar. Spot gold fell to a two-and-a-half-week low of $1,281.40, before pruning the losses to trade down 0.6 percent at $1,286.30 by 0641 GMT. "One aspect is that the market is pretty thin today and liquidity is going to be constrained," said Victor Thianpiriya, an analyst at ANZ. SPDR Gold Trust, the …

  • Separatist shutdown partially affects life in Srinagar

    Srinagar, April 21 (IANS) A separatist called shutdown partially affected life in Jammu and Kashmir summer capital Srinagar on Monday. Private transport, government offices, banks and post offices functioned ... …

  • Japan exports growth slows sharply, keeps pressure on BOJ to act

    Japan suffered its worst annual trade deficit in March as exports growth slowed to its weakest in a year, suggesting a rapid loss of economic momentum that may prompt policy makers into early action as a national sales tax hike puts more strain on growth. The Bank of Japan has repeatedly ruled out fresh easing measures in the near term, insisting that the economy is on track to meet its 2 percent inflation target even as recent soft data hit investor confidence. However, the double-whammy of …

  • Nikkei ends flat, profit-taking erases gains after two-week high
    Nikkei ends flat, profit-taking erases gains after two-week high

    Japanese shares climbed to a two-week high on Monday before giving up gains to end flat in thin trading due to the Easter holidays, while nonbank lenders surged on a media report the government is considering ... …

  • Sensex gains 73 points during pre-noon session

    Mumbai, April 21 (IANS) A benchmark index of Indian equities markets gained 73.03 points or 0.32 percent during the pre-noon trade Monday. Good buying was seen in capital goods, auto, metal and banking ... …


  • This might well be India’s biggest Ponzi scam

    It was just too good to be true. Ashok Khital, 45, displays every symptom of a man who knows he's been conned. …

  • India's star studded football league

    High and mighty including Sachin, Salman & Sun Group buy ISL teams …

  • Leaderspeak with Rajesh Janey

    Rajesh Janey, President - India & SAARC, EMC shares many firsts in his life. …

  • Seed of Doubt

    Field trials have been allowed again in India. But two decades after their global launch, genetically modified (GM) crops remain controversial. …

  • Power Hungry

    Gujarat has power round-the-clock. Most other states do not. Why this will matter in the general elections. …

  • Etcetera

    The most keenly watched contest of the current general election will be the one for the Varanasi parliamentary seat, where the Bharatiya Janata Party's prime ministerial hopeful Narendra Modi squares off ... …

  • Economy vs Democracy

    As the country gets election fever, cash comes out of mattresses and turns into liquor, gifts, and food. But it is not bad for the health of the economy, reports Sarika Malhotra from the trenches. …


  • Most Actives
    Most Actives
    NamePriceChange% Chg
  • Price % Gainers
    Price % Gainers
    NamePriceChange% Chg
  • Price % Losers
    Price % Losers
    NamePriceChange% Chg
    Recent Quotes
    Symbol Price Change % ChgChart 
    Your most recently viewed tickers will automatically show up here if you type a ticker in the "Enter symbol/company" at the bottom of this module.
    You need to enable your browser cookies to view your most recent quotes.
  • Recent Quotes News

      Sign-in to view quotes in your portfolios.