Paying With Your Smartphone: Friend or Foe?

Melanie Brooks  |  January 6, 2020

Paying for things via smartphone is so easy these days — maybe too easy. Before you replace your wallet full of cash and cards with your phone, here’s what you need to consider. 

It’s late at night. You’re scrolling through Instagram, smiling at the clever memes and cute photos your friends are sharing in their stories… Then it pops up. That thing you never knew you needed, but now you cannot live without. “Swipe up,” the ad encourages, and seemingly moments later, the package is already on its way to your doorstep… Wow, you think. That was easy! 

Yes. Perhaps too easy.

“I’ll see an Instagram ad and totally get sucked in,” says Laura Shick from Alexandria, Virginia. “It’s so easy to click a link to shop, and buy using PayPal. I can do all that in seconds via my phone from anywhere… like when I’m laying in bed with insomnia or stuck on the metro. And I never have to pull a credit or debit card out of my wallet.” 

Shick’s experience is a perfect example of how smartphones make it easy to forget that you’re spending money at all. We don’t even have to handle a credit card to complete a transaction anymore. But there are consequences.

The price of convenience: Increased spending

Consumers actually spend more money — and make more frequent purchases — when shopping on a smartphone, says Yuqian Xu, a professor of business administration at the Gies College of Business at Illinois. 

Xu studied data from China’s Alipay, the largest mobile payment system in the world, and found that people who pay with their mobile device make 23% more purchases and spend, on average, 2.4% more per transaction. “I expect a similar number in the U.S. in the near future,” she says. (Here are nine other things that may drive you to overspend.)

Already Apple Pay has supplanted Starbucks as the most popular mobile payment app in the U.S.. The firm eMarketer, a research company that specializes in digital markets, predicts that by the end of the year, nearly half of all mobile payment users in the U.S. will use Apple Pay, which allows online and contactless payments. (Contactless means just that: You simply float your phone within 4 centimeters of a reader in a checkout line, and your payment is made.)

Total spending is expected to reach $100 billion this year, which translates to the average Apple Pay customer spending roughly $1,500 a year using the app. That’s an increase of more than 24% over 2018, with Millennials representing the majority of mobile payment users, says eMarketer forecaster Vincent Yip.

It sounds like before long we’ll all be using our phones — but should you resist completely making the switch? 

The advantages of smartphone payments

Is pulling your phone out of your pocket and waving it over a point of sale system easier than pulling a debit or credit card out of your wallet? Maybe. It’s definitely easier than getting out of bed or off the couch and rummaging around in the next room for your credit card. And if it’s snowing outside and there’s a cat on your lap… forget it. 

With most reputable contactless payment apps, like Apple Pay, Samsung Pay, Google Pay, and Starbucks, you’re not compromising safety by paying through your phone. “It’s a secure form of payment because it uses tokenization,” explains Bill Hardekopf, CEO of “Credit card numbers stay the same all the time. Tokenization gives you a unique set of tokens every time you use your phone to pay. If someone steals those numbers, the tokens are only good for that one purchase.” 

Reasons to be wary 

Other than overspending due to convenience (which, let’s be honest, that’s a big checkmark in the “con” column), the biggest risk of enabling smartphone payments is that it adds to the dizzying amount of data and information already on your phone. 

What if you lose your phone? What about viruses, malware and the general loss of privacy? (Here are seven steps to take when you lose your wallet.)

You’re especially exposed to fraudulent charges on payment apps that don’t require the user to login each time before making a purchase or payment. Hardekopf suggests using all the safety features available on your phone — passcodes, touch ID, or facial recognition — before enabling mobile payments and purchases. 

And even though convenience is a big selling point for mobile payments, not all retailers — especially small businesses — are equipped to accept your money that way. If your favorite corner cafe doesn’t have a system at the register for you to brush with your phone, you’ll have to use a card or (gasp!) cash. 

MORE ON HERMONEY: What if you could only use cash for a week? What if you were forced to go cashless? In Trading Space: Cash vs. Credit, Jean and Becca trade places for a workweek and see what it’s like to use a totally new method to pay for every purchase.

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