Mobile-wallet technology: What to consider

Ever stand at a cashier fumbling through your overstuffed wallet for the right credit, debit or loyalty card? An end to the frustration may be on its way, according to Consumer Reports.

For several years, a number of companies have been trying to get you to input the details of your payment cards into a “mobile wallet” — an app that is stored in your smartphone. Then you can make a payment from the card of your choice and even accrue applicable loyalty points simply by waving your smartphone over a card terminal.

Problem is, there haven’t been many merchants that can actually read the data stored inside mobile wallets. Google Wallet, which was introduced in 2011, and Isis Wallet, backed by AT&T, T-Mobile and Verizon Wireless and launched nationwide in 2013, require merchants to have or buy equipment that includes a technology known as near field communication (NFC), which has not yet been widely adopted. As a result, Google Wallet and Isis Wallet work at only about 200,000 U.S. merchants compared with 12 to 15 million that take plastic.

But now a new player, LoopWallet, launched in February, uses magnetic pulse technology that allows its mobile wallet to work with 90 percent of existing card readers. That might be enough critical mass for the technology to become a viable option. However, a lot of pieces still have to come together for mobile-wallet technology. Allied Market Research, based in Portland, Ore., projects that mobile payments will grow at a compounded annual growth rate of 127.5 percent, reaching a global market size of more than $5 trillion by 2020.

Should you consider making the switch to LoopWallet or one of the others? Here’s what Consumer Reports says to consider:

The benefit. More smartphone owners are finding that their handsets are a convenient payment device, with 30 percent using them to make online purchases, 24 percent to pay bills and 17 percent to pay for store purchases, according to a recent Federal Reserve study. Mobile wallets provide one more payment option in today’s cell-savvy world.

Convenience and fees. For Google and Isis, you need at least some special hardware, including an NFC-capable phone — iPhone is not one of them, but with Isis you can buy a case for $60 to $70 that gives the iPhone NFC capability. For transmitting your card data, Loop requires a $39 device called a fob. The company currently sells the fob with a phone charging case for $99. Though Google and Loop work with almost any payment card, Isis works with only certain participating American Express, Chase Bank and Wells Fargo cards.

Security. Digital wallets are not payment accounts. They’re merely electronic conduits for making payment using your existing cards. (The same consumer protections on those cards apply to payments even when using them through your phone.) All three mobile wallets use encrypted storage for data. They also require a personal identification number to unlock the wallet. But Google and Loop let you turn off the wallet-lock timer, which can leave it vulnerable to unauthorized charges. A nice feature: If your mobile wallet gets into the wrong hands, you can remotely disable the Google and Isis wallets, something Loop doesn’t offer. Overall, Isis is the most secure, using nine of 11 security measures Consumer Reports looked for — more than its rivals.

Bottom line. Consumer Reports signed up for all three mobile wallets and took them shopping in the San Francisco Bay area. Based on its comparisons, Loop was the most useful because it was the most widely accepted by merchants — its shoppers were successful at seven of the eight stores where they tried to pay with it. Google was the easiest to set up and the least expensive because it doesn’t require any accessories and Isis won points for taking the most security measures.

2014 Consumers Union Inc.