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More and More, Your Smartphone Is Replacing Your Wallet

You can make mobile payments and store your boarding pass, game ticket, library card — and more

spinner image a person using credit card information on their phone to check out while shopping
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On his iconic 1990s sitcom, Jerry Seinfeld told George Costanza that his pal’s overstuffed wallet was “morbidly obese” and like a “filing cabinet” under half of his fanny. Costanza responded that his famously fat billfold was “an organizer, a secretary and a friend.”

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If these exchanges took place today, Costanza might be referring to his smartphone.

The physical wallet isn’t dead yet, not by a long shot. But the smartphone is steadily usurping the reasons for carrying it.

Some people are finding it much simpler to reach into their pockets for an iPhone or Android handset when buying stuff in stores and tapping to pay at the terminal. Or using a smartwatch to pay. For them, pulling out a wallet to grab cash or a credit card is so, well, 1990s.

While any discussion of a digital wallet is understandably centered around the relative ease of making mobile payments, the fact that you can also use the phone as a repository for all the printed stuff that once fattened your own Costanza-thick wallet — potentially eliminating the unseemly bulge in your pants pocket or freeing up space in your purse — is an added benefit. It’s not just dollar bills but coupons, COVID-19 vaccination proof, insurance and medical information, receipts, snapshots, stores’ loyalty cards, student IDs, transit passes and, soon, driver's licenses and state IDs.

Use your digital wallet to pay

Paying by phone is becoming increasingly popular, but not everyone is buying in. Smartphone users in the United States who make at least one mobile payment transaction in a store over a six-month period will grow from 101.2 million, or 36.4 percent of the population, in 2021 to a projected 125 million (43.7 percent) in 2025, according to Insider Intelligence market research firm.

Millennials and the Gen Z crowd make up the majority of these users, but during the same stretch the boomer segment is projected to grow from 8.8 million to 10.2 million.

Merchant acceptance is on the rise, too. In the U.S., Apple’s Apple Pay system is accepted at more than 9 of 10 physical store locations that can handle near-field communication (NFC) payments, the industry standard technology protocol designed to work only between short distances — in other words, between phone and payment terminal. That’s the same technology that allows you to tap some chip-embedded credit cards on top of payment terminals instead of inserting them.

Learn more live and online

AARP’s free online classes can help you learn more about your smartphone, its capabilities and its apps.

• Senior Planet from AARP has live courses that can help you choose and use the best phone for you.

• AARP’s Virtual Community Center has a Tech Help area with interactive events that include smartphone use.

The Google Pay system is also accepted everywhere there’s NFC in the U.S. Google says more than 150 million people in 42 global markets countries are using Google Pay every month.

You’ll still encounter restaurants, gas stations and mom-and-pop establishments that won’t accept mobile payments or in some cases anything but cash. It’s a major reason why consumers otherwise willing to use their phones to transact won’t ditch their wallets completely.

Reluctance remains a factor

There’s other resistance. Deeply entrenched habits die hard, and persuading people who’ve been pulling cash or plastic cards out of wallets their entire lives to do something different isn’t easy. Security is also top of mind for consumers.

“Do I want all of my very personal information in digital form for someone to have access to it?” asks Gregory H. Moore, 73, a psychologist near Princeton, New Jersey. “Convenience is wonderful, but it allows the nefarious access to way too much about me.”

The reality is that handing a credit card to a waiter or sales clerk is potentially riskier than using a digital wallet built on encryption standards and biometric authentication such as facial recognition and fingerprints. Any point-of-sale terminal can be vulnerable to the surreptitious installation of an identity theft device called a skimmer. For example, whenever you use Apple Pay, your actual credit or debit card number is not shared with the merchant, and Apple says it does not have access to or share data about when or where you use Apple Pay.

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Others say they worry about losing their phone or running out of battery power.

“I’d much rather leave home without my phone than my wallet,” says Dave Migdal, cofounder of Here and Now Public Relations in Carlsbad, California. “[I] don’t have to keep my wallet charged.”

COVID-19 breaks down barriers

COVID-19 has been a catalyst for behavior change. “Customers didn’t want to touch things in stores and at the same time are becoming more comfortable with tap and scan technology,” says Jaime Toplin, senior research analyst for payments and commerce at Insider Intelligence in New York.

Forrester Research recently predicted that 2022 will be a big year for the digital wallet, again driven by the pandemic. “Some people switched almost overnight to online commerce. But even in person, a combination of QR codes, vaccination passes, and COVID check-in tools all weigh in,” the firm blogged.

Eleven percent of U.S. adults online surveyed by Forrester used a digital payment service for the first time in April 2020. A month later 19 percent made such a payment in a store for the first time. Forrester added that 57 percent indicated they are “likely” to continue using digital or contactless payments.

Several states OK digital driver's licenses

The iPhone crowd has able to pay using Apple Wallet since 2014. It not only lets you make contactless payments in person or online — employing the credit cards and debit cards you’ve loaded into the app — but you also can tap and go in some cities to ride subway trains and buses, albeit not necessarily with the commuter discounts available with some transit passes.

In March, Arizona became the first state to launch a digital version of its driver’s license in the Apple Wallet app, which in some cases will also be accepted as proof of identity at Transportation Security Administration checkpoints in airports. Several other states — Colorado, Connecticut, Georgia, Hawaii, Iowa, Kentucky, Maryland, Mississippi, Ohio, Oklahoma and Utah — plan to soon follow suit, as does Puerto Rico. Even in its earliest incarnation, when it was known as Passbook, Apple let you store boarding passes in the app, along with tickets to ballgames, concerts and theaters.

The equivalent Android app is the recently announced new Google Wallet app, slated to launch this summer. In the U.S. and elsewhere, Google Wallet will complement Google Pay, which has confusingly gone through a rebranding of its own through the years — the current iteration was formed in 2018 from the combination of an older Google Wallet app and Android Pay.

Google also plans to let its users store driver’s licenses in Google Wallet starting later this year, along with other forms of ID, event tickets, loyalty cards and more. Both Apple and Google are also opening up their wallets to digital keys that will let people unlock their front doors, hotel doors and car doors.

Android users have other payment options besides Google Pay. Samsung Galaxy owners might choose to use the alternative Samsung Pay mobile wallet system.

How to pay

Despite its rapid adoption during the pandemic, setting up and using mobile payments has a learning curve, especially for older consumers. An initial step involves loading the credit and debit cards you want to use for payment and then getting the hang of the tap-and-pay dance. Toplin says younger users are teaching parents and grandparents how to set up contactless payments.

In general, when you’re getting set to pay, look for the wavy contactless payment symbols at the payment terminal and/or logos for Apple Pay and Google Pay, which sometimes appears as G Pay.

To pay with an iPhone that has Face ID facial recognition, double-click the side button and hold your phone near a compatible contactless reader, assuming that you want to use whatever card you set up as a default. If not, tap the default card in the app and pick any other card you want to use. You’ll see a circled check mark and the word Done when a transaction is complete.

The process is similar on an iPhone with Touch ID except you place your finger on the Touch ID fingerprint sensor.

If using an Apple Watch to pay, double-click the side button, which will open up your default card, and hold the display of the watch near the contactless reader.

To use Google Pay, unlock your device — Android methods vary — and hold it near the reader for a few seconds. A blue check mark confirms that the transaction went through.

People who want to store payment cards, passes, IDs and do tap and pay, will be able to do so via the new Wallet app once it arrives. Users who want deeper payment experiences such as the ability to view and manage their payment transactions, make “peer-to-peer” payments to swap money with family and friends, or save loot with offers they can use the Google Pay app, Google explains.

Google Wallet will also be compatible with smartwatches based on Google’s Wear OS.

With both Android and Apple's iOS software, you can also employ various third-party peer-to-peer apps, including PayPal, Square's Cash App and Venmo.

Keep in mind such apps have different operating rules and lack the same protections and recourse you get with a credit card. Treat these as cash transactions and be sure the person you’re paying is who they say they are. As one security measure, Google says if Google Pay doesn’t recognize someone who requested money from you, you’ll see an alert to make sure you know the person before you send the loot. Apple will serve up a similar warning with its own Apple Cash peer-to-peer option.

Your physical wallet might not be ready to retire just yet, but even minimalists probably are carrying both a billfold and a device, more than they did during the time of Seinfeld.

“The real question is [this]: Are you comfortable enough to leave home without your phone?” asks Natalie Lingo Kerris, 56, a brand marketing consultant and former head of Apple public relations.

This story, originally published Dec. 1, 2021, was updated to include new information on Arizona digital driver's licenses and Google Wallet.

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