Pros and Cons of Using a Mobile Wallet

Don't be so quick to jump onto the mobile wallet bandwagon!

With the wide range of mobile wallets available, almost everyone seems to using at least one. If you’re a traditionalist though, you may be disturbed by the idea of entrusting your cash to a third party. Consider the pros and cons of mobile wallets, before you make your decision:

Pros of using a mobile wallet

• Can be a budgeting aid
• Safer than cash in some circumstances
• Faster and more convenient
• May have rewards for spending

1. Can Be a Budgeting Aid

A mobile wallet, when used right, can be a budgeting tool. One good way to do this is to predetermine the budget for something, and use only the wallet for those purchases.

For example, you might decide to use GrabPay purely for car rides. In this case, you can assign a fixed budget for transport each month, and out it in your GrabPay. When the mobile wallet runs out, you know you have to switch back to public transport.

Mobile wallets also help you to keep track of your spending, as it accounts even for small deductions you may miss.

2. Safer than Cash in Some Circumstances

If you’re going abroad, or travelling alone, it can be dangerous to carry large amounts of physical cash. This is especially true in countries like the United States, where the biggest cash denomination is US$100. By putting the money in your mobile wallet, you can ensure you don’t become a crime target due to the noticeable “cash bulge” in your pockets.

3. Faster and More Convenient

Payment through a mobile wallet can be faster and more convenient. For example, if you are making a purchase online, going through your mobile wallet can be easier than going through a credit card (you may not need to key in all your details manually).

Some mobile wallets now allow you to pay bills, just by tapping your phone against a card reader (e.g. ApplePay). Some mobile wallets, such as PayPal, speed up the process of ordering things online - with stored cash, you don’t need to go through the process of keying in card numbers for every purchase.

4. May Have Rewards for Spending

Some mobile wallets give you reward points for spending, just like credit cards. For example, purchases made through GrabPay earn points, which can be redeemed for ride discounts, movie tickets, or store vouchers.

Cons of using a mobile wallet

The main drawbacks of using a mobile wallet are:

• They can encourage spending
• Giving away sensitive information
• The risk of the mobile wallet failing

1. They Can Encourage Spending

While mobile wallets can help budgeting, they can also end up encouraging you to spend. The most common example is if you’ve already budgeted the money, but end up with an excess.

For example, say you budget to spend S$150 on car sharing rides this month, and allocate this amount to your GrabPay. At the end of the month, you find you still have S$60 left. Rather than save this mount (by topping it back up to S$150 ot transferring it to your savings), you may decide to indulge and get car rides everywhere - even if you don’t need them. This is because mentally, you’ve already“budgeted” to spend the money.

2. Giving Away Sensitive Information

Signing up for a mobile wallet may require sensitive information, such as your credit card number, email address, phone number, etc.

There’s a risk that you’ll be bombarded with advertising material, which is inconvenient. However, you also need to consider the possibility of someone hacking into the mobile wallet, and acquiring your information. This can result in more seriosu consequences, such as identity theft.

3. The Risk of the Mobile Wallet Failing

What happens to the money in the mobile wallet, if the company providing it closes down? Remember a mobile wallet is not a bank; there may be no obligation to refund you if it’s shut down, with your cash still in it. Be sure to read the terms and conditions to check for this.

Likewise, some mobile wallets may have reliability issues. If the wallet is down, you may be unable to access your money until the problem is fixed. This can be a major inconvenience, such as if you’re trying to book flight tickets urgently.

Should You or Shouldn’t You Use a Mobile Wallet?

So long as you do the following, it’s safe to use a mobile wallet:

• Restrict the amount of money you put in the wallet (S$150 is fine, but over S$1,000 is dangerous)
• You can clarify that the company providing the wallet keeps your details confidential; they will not sell the data to marketing companies, for example.
• The mobile wallet is relevant to your lifestyle; there’s no reason to accumulate reward points that you’ll never use.

Overall, the advantages to using a mobile wallet outweigh cash payments. Just as with a credit or debit card, however, you should be cautious not to expose your password or other account details.