How Do Mobile Payments Work and Are They Safe?

So, you’re sitting in the drive thru, waiting for your coffee and breakfast sandwich. Your hands are rummaging around for your wallet so you can pay when you get to the window. Uh oh! You forgot your wallet at home! This is embarrassing; now you can’t pay for your order and you’re holding up the line for no reason. But wait! You have mobile pay set up on your smartphone. Your breakfast order (and your pride) is saved. This is just one way that being able to pay with your smartphone, a feature available on almost all modern devices, can make our lives more convenient. But how do mobile payments work and are they safe to use?

• How does payment work?
• Is it safe?
• What are the risks?
• How can I make it safer?

How Does Payment Work?

Payment with a smartphone occurs when two compatible devices establish contact with one another. This is possible with NFC technology, which stands for near-field communication. It’s the next evolution in a similar technology called RFID (radio-frequency identification). When two NFC-enabled devices pass within four inches of one another, they can create a connection. This connection allows users to share photos, files, contact information and, of course, payment.

NFC technology is what enables us to tap credit and debit cards to pay, and is now integrated in a wide variety of smart devices as well (smartphones, smartwatches, etc.). In order for a smartphone to make mobile payments, the device owner must set up an account within their app of choice. Popular options include Apple Pay, Google Pay, Samsung Pay, Venmo, and more. When users connect their banking information to the app, it can then securely transfer that information to the receiver in order to make a payment.

Is it Safe?

In many ways, mobile pay is actually safer than traditional payments made with credit and debit cards. In the case of card payments, wallets can be stolen and card numbers may be saved to digital databases which can be hacked. Mobile payments, on the other hand, usually require two-factor authentication. Even if the phone on which they are enabled is stolen, the thief is unlikely to know the associated PIN or have the necessary bio-encryption (ex. a fingerprint scan). Data about your banking accounts is usually also “tokenized” when it is transferred. This process replaces sensitive data with surrogate data so businesses don’t have any information to save. Add in the fact that payment can only be made when two devices are within four inches of one another and mobile pay is one of the most secure payment methods there is. However, all technology does come with some risks.

What are the Risks of Mobile Payments?

No matter how you pay, there are risks involved. Even paper money can be ripped or fall out of a pocket. So, what are the most common risks associated with mobile pay?

• Losing Your Phone: Just as a person may lose their wallet, the same can occur to a smartphone. If your mobile payment app requires two-factor authentication, you may be better off than if you lose your wallet with tap-enabled credit cards inside. However, if your app does not require two-factor authentication, then there is a risk that someone could use your money for their purposes. As with lost payment cards, call the companies who provide them and have those cards shut down. If you have the ability, also consider remotely wiping your smartphone or resetting it to factory default so all data associated with your financial accounts is erased.
• Spoofing: In order to use mobile payments, you must upload financial information to the payment app. Any reputable mobile pay business should securely store and encrypt that information. Most also tokenize data when sending payment, to prevent card numbers from being compromised. Unfortunately, even with the best security, there is always a chance that a cyber-criminal can breach the walls protecting your data. In some cases, they can even “spoof” a payment provider’s registration page to trick you into uploading card information. This gives them complete access to it and your money.
• Malware: Finally, although it’s fairly uncommon, smartphones can be infected with malware. Some types of malware can commandeer your phone to give a hacker full access to it. Others scan for and transmit sensitive data away from your device. This data could include information stored in a mobile payment app.

How Can I Make Mobile Payments Safer?

Using your smartphone to make payments is already a very safe process but there are ways to make it safer. All users of this feature can benefit from knowing these methods. A few ways to increase the safety of a mobile payment include:

• Use Trusted Apps: There are a few big names in the mobile payment industry. The reason they’re big names is because they’ve created a trustworthy and reliable payment solution. If you set up mobile pay on your phone, use an app from these companies. They’re usually safer than small brands whose app hasn’t been vetted as thoroughly.
• Use Safe Search Practices: The threat of mobile malware is small but does exist. To avoid accidentally infecting your device with malware, always follow safe search practices. Don’t click suspicious links. Only download apps from trusted sources (such as the official app store of your operating system manufacturer). And keep an eye out for spam in your emails.
• Enable Two-Factor Authentication (2FA): Two-factor authentication is a second layer of security to ensure data is protected from malicious use. In the case of mobile payments, 2FA ensures that a device coming into proximity with another NFC device isn’t enough to transfer a payment. Instead, you have to approve that payment a second way. Methods include entering a PIN or password, using fingerprint scans, or using facial recognition. This way, if your device is stolen or lost, a stranger can’t authenticate payment.
• Monitor Your Credit Account: Another method of increasing mobile pay security is to regularly keep an eye on your transactions. If you notice payments on your bank statements that you know you didn’t make, then you’ll know that your information has been compromised and needs to be changed.

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