When was the last time you went to the ATM for cash or wrote a check to repay a friend? Many of you may not remember. Mobile payment apps are on their way to making these payment vehicles obsolete. But are you compromising your privacy and financial security for the convenience?
How Mobile Payment Apps Work
The integration of technology and smartphones with online payments has introduced a much faster, more convenient method of completing peer-to-peer (P2P) transactions.
One payment app that’s rapidly gaining in popularity is Venmo, a free mobile payment app. Let’s use it to show how these apps work. Venmo simplifies money transfers between individuals by allowing you to quickly pay people in your networks with a few taps on your mobile device. You can also use Venmo to charge people and receive payments. Those payments can then either be put toward your Venmo balance for future use or be transferred to your bank account. There’s one requirement: You’ll need a linked credit card, debit card, or checking account to use the service.
Payment apps can do more than receive or make payments to individuals. Businesses are also beginning to allow payments through Venmo as well as other mobile payment apps. In fact, Venmo can be used just about everywhere its parent company PayPal is accepted!
The Social Aspect: Too Much Information?
Unlike some payment apps, Venmo is also a social app. This means any network of contacts you’ve authorized Venmo to access, such as mobile phone contacts or Facebook friends, could potentially view your payment activity on Venmo’s social feed if they also use the app. Some users may find this entertaining. We know businesses just love having buyers share their purchases over social media for friends to see. Others, however, may not feel comfortable sharing their financial transactions publicly.
There’s another feature to be aware of when using a payment app like Venmo. When you send or request a payment on Venmo, you’re prompted to include a message. Let’s say your friend decides to add a “funny”, but crude, message along with his payment. If your default settings allow your payments to be viewable to your authorized networks within Venmo, then anyone in those networks could log into their Venmo account and see that message! Fortunately, you can adjust your privacy settings within the app so it won’t share transaction information. If you ever use a payment app that includes a social aspect, it is important to understand and appropriately manage the privacy settings.
Are Mobile Payment Apps Secure?
One major drawback of internet-based technological innovations is the threat that the security networks will be compromised. If you’re skeptical of payment apps, you’re likely concerned about the security of your confidential information. Before signing up to use a mobile payment platform, it’s critical to understand how the application is secured and whether your account information is properly protected.
Venmo, our example, uses data encryption and secure servers to protect against unauthorized transactions and unauthorized access to your personal or financial information. You can set up PIN codes and fingerprint authorization to make your mobile application more secure. You can also manually prevent another device from accessing your account online, if your mobile device is lost or stolen. These are features to look for in any payment app.
You’ve seen this phenomenon before. The success and brisk growth in mobile payment app usage have resulted in increased market competition. Everyone wants a piece of the action. Apple Pay, Google Wallet, Amazon Pay, Square Cash, and Facebook Messenger are just a few apps challenging Venmo and parent company PayPal as the pioneer of the industry.
Initially, major financial institutions were caught off guard by the success of digital upstarts. But it didn’t take them long to strike back in a big way with Zelle. Many banks are now integrating the Zelle app into their own branded mobile apps so payments to people with accounts at any of the 60-plus participating financial institutions can be rapidly processed. An example of this is Chase QuickPay partnering with Zelle to allow Chase customers to make P2P payments to non-Chase customers at major U.S. banks.
It’s difficult to imagine that ATMs and checks can ever be totally replaced by mobile money-moving apps. There’s no doubt, however, that mobile payments are the future of P2P transactions and perhaps even retail transactions. Just do your homework and find an app you feel good about before joining the movement!
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