Take out your wallet and look at the contents. Go ahead, I’ll wait. What do you keep in there? Here’s what’s in mine:
- A few credit and debit cards
- Washington State driver’s license
- Health insurance card
- Washington State Ferries pass
- Alaska Airlines Boardroom pass
- A building security card
- Starbucks card
- Some random business cards from past conferences
You will notice that I don’t have any cash listed above, because I rarely carry it. Could I replace my wallet with my smartphone and leave my pockets empty? That’s the question I aimed to find out when I talked with Jeff Kalibjian at HP Discover.
Is a Digital Wallet Secure?
Any time I tell people I’d love to replace all the functions of my wallet with my smartphone, the most common concern I hear is security. What’s interesting about this being the first question is the current collection of physical objects we call a wallet isn’t secure.
If you are separated from your current wallet, all your methods of payment are readily accessible. There’s no encryption key to prevent your cash from being used. For most forms of purchase with a credit card (including in-person where ID is rarely requested) all the necessary info is readily available when someone has your wallet. Starbucks and gift card vendors will never check to see if you are the rightful owner of the card.
A driver’s license may be useful for some data thieves, but generally speaking it won’t do the thief any immediate practical good, unless they also happen to look like you. Health insurance information is another data point for data thieves, but probably not very beneficial.
A building security card probably retains its security, unless you happen to have something with the associated building address (like your own business card) in your wallet. It would be impractical for a thief to try the building pass in every building until they found one with the right keyless-entry system.
My Alaska Airlines Boardroom card might be the most secure thing in my wallet, because you need an accompanying boarding pass to use it in virtually all instances.
On the flip side, digital wallet solutions tend to have some level of encryption. NFC-based digital wallets will very likely store the data surrounding payment information in a secure memory space with encryption, making it hard to access the information. Even with existing iPhone and Android options, you can create a complex layer of access by having a pass code on your phone, as well as strong passwords on any app that stores cash value in some way. While I’m not suggesting it would be impossible to crack any of those protections, they are far less readily useful than $100 in paper money in your current wallet.
Can You Have a Digital Wallet Now?
NFC phones exist and are available, but very few stores accept them as a payment method. With some creativity, you can use your phone for many functions of a wallet today.
LevelUp offers a payment solution at restaurants in 17 cities. Dwolla payments are available in many major metropolitan markets throughout the United States. TabbedOut adds even more locations where you can pay with a phone app. You need a funding source for all of them, but once you set that up, you can pay by phone all day long.
If I had a major gripe about these services it would be the need to have all of them so I’m guaranteed to have the required method of payment. There isn’t one smartphone payment solution that’s everywhere I want to be.
Stored Value Apps
Tango Card allows you to organize gift cards, which adds another layer of payment options to your phone. The big question mark with Tango Card is whether or not a merchant will allow you to use them.
Assuming you live near a Starbucks, all your coffee purchases can be made via the official Starbucks card app. I specifically recharge my card manually because I don’t trust having a credit card linked to the app, but in theory, you could make the Starbucks app bottomless by linking the app.
A trip to Home Depot for everything from a new refrigerator to lumber to lawn care can be paid for via Paypal without needing an app on your phone at all. You simply need your phone number and a pin.
I’m fairly certain I could scan in my ferry pass and scan the screen each time I walk through the turnstile, rather than keeping the paper version in my wallet.
What Can’t Be Digital?
In virtually all instances, a scanned version of a health insurance card is more than sufficient, because the provider really only needs the information not the card.
This leaves only my driver’s license as something that wouldn’t be recognized in digital form at this point. Hopefully the various government paperwork reduction initiatives will make a digital copy of a driver’s license something we can look forward to in the near future.
I know I’m ready to give up my physical wallet for something closer to a completely virtual one – how about you?
No, I wont bet using a electronic wallet soon. If I drop my wallet it doesn’t stop working. Even it I don’t drop my wallet I don’t have to replace it every 3 years to keep it compatible with all the other wallets. If I get a hint of water on my cash a merchant will still take it and the government will even exchange it if I have about 50% of the bill after a fire. When a policeman pulls me over for a speeding ticket, he specifically asks to be handed only my license and registration not my wallet. I was born in Chicago and we had a Chicago Wallet that consisted of your Drivers License , Insurance card and a $20 bill paper clipped between them. I got off with more than a few street fines and a warning receiving my DL and IC without the paperclip. Have you ever tried to paper clip a $20 to a smart phone or are you expecting Police to start taking PayPal. I dont even want to think about having a Street Cash(C) App where the policeman bumps his phone against mine for the transfer of funds isnt going to happen soon.
As far as access to my home, my business and my car security systems all come from different Vendors. My wife has an Android Phone and I use an iPhone. Getting common access apps to the systems from these 5 vendors will probably take longer than the system life of the phones.
NFC is a protocol and an wireless integration but it is all the systems in the business and the volume of solutions on the consumer side that will be the biggest challenge to the inertia of the paper based wallet.
Maybe I’ve been lucky, but I’ve never dropped my phone to the point that it wouldn’t work. Cracked a screen, yes, but never rendered it non-functional. In most cases, phone insurance (like Apple Care) allows you to get a replacement quickly.
The probability of ending up with a non-functional phone is probably not too much different than the probability of losing the wallet you have now, which will contain things you can’t simply re-download. 😉
The NFC stuff is being built on existing standards, so it should be highly compatible, once the point-of-sale solutions are implemented. As for corrupt policemen – I’m sure someone will create a “bribe the cops” case for your phone.
Jake, As a small business owner I see the percentage of non-cash I take in go up every month. I’ve gone from paying $250,00 per month for credit card use to over $1000.00. This is what I pay the processor. and it represents a 2% of my total monthly sales. I hsve to recoup this charge some how. So I raise my prices 2% to cover it.You and everyone else that doesn’t want to carry cash pay more but you do look cooldoing it!
When my choice is often pay $3.00 to get money from an ATM (which is 3% if I get $100) or pay with a credit card, I’ll take paying with a credit card. I’m guessing everyone pays the same 2% increase, which would mean I’d pay 3% to get the money, plus the 2% higher price for the product.
Also, many banks charge a fee to merchants for depositing cash and checks, so either way you slice it, getting money to the merchant results in a component of cost of goods sold.