Mobile payment apps like Apple Pay and Venmo have grown significantly since their launch. Users are comforted by their ease of use and excellent stability. Despite the power behind such a name, the original and most widely used mobile payment app was developed by a business model far removed from the Silicon Valley tech giants.
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Key learning points
- PayPal’s Apple Pay and Venmo are the two leading mobile payment applications.
- However, Starbucks has created one of the most popular and widely used apps on the market.
- The coffee company sees competition such as cash apps and other mobile apps.
- Payment app developers have worked hard to ensure that mobile payments are just as secure as physical cards, if not more so.
Leader of Mobile Payment Apps
Starbucks (SBUX) has a compelling story that shows how much better your life is when you tap and pay, instead of using a card or even cash. With Starbucks’ free mobile payment app, you can order on the go and then easily pick up your order without having to wait inside (or in the drive-through) and in line. Their mobile payment app will have approximately 22 million active users by the end of 2020.1
In addition, some merchants are upgrading the credit card payment processing equipment they use to make EMV technology more secure, and many smartphones are tap-and-pay ready.
Popular mobile payment services
In addition to Apple and Venmo, mobile payment services have grown. PayPal bought Braintree in 2013, followed by Venmo the year before. Meanwhile, there is Zelle, Cash App and Google Pay.
Many payment apps work the same way, depending on which phone you have. You download the free app, upload your credit or debit card, and tap to collect with your phone at any retailer that accepts this service.
PayPal works the same way and with the same card reader if the merchant has signed up to receive PayPal payments. PayPal is not as widely available in physical stores.
Security
Given the ease with which phone data can be extracted or cloned, one of the biggest questions from consumers is: how secure are mobile payments? The major players have put a lot of time and effort into ensuring that mobile payments are more secure than using physical cards.
First of all, the merchant will never see your credit card number or authorization code on the back of your card, or even your name. And instead of using your credit card number when you make a purchase, a one-time encrypted number token is generated to authorize the purchase. After this it ends.
Even if your phone is lost or stolen, there are layers of protection. Mobile wallets are behind a lock screen and require a PIN or fingerprint authentication to use. Access was therefore prohibited. Additionally, your credit or debit card numbers are not stored on the phone.
Finally, there are features that the company urges you to activate in case you lose your phone: for example, Android Pay users can enable Android Device Manager if the phone is lost or stolen, and be remotely locked when needed. For Apple Pay, the Find My iPhone feature allows you to remotely suspend the mobile wallet.
The Gradual Adoption of Western Culture
Americans behaved in stark contrast to Chinese consumers, who embraced cashless living. Millions of Chinese consumers use mobile payments. They use their cell phones to pay for taxis and food deliveries, at Walmart stores and at market stalls.
In China and other developing countries, many of which have never used traditional banking, many new consumers are bypassing banks in favor of mobile payment services. Alipay users can deposit their money into a money market account that offers investors a higher interest rate than traditional bank savings accounts.
