Are Digital Payments a Safer Way to Pay?
The convenience of electronic payments is one reason 55% of high earners use digital wallets, which store payment information on mobile phones or online, according to a 2024 survey by pymnts.com. Yet older consumers have been relatively slow to adopt electronic payment options, citing privacy and security concerns as reasons for sticking with cash, checks, or physical cards.1
"Ironically, electronic payments are now considered the safer option," says Lisa Lang, a senior manager with Schwab's Financial Crimes Awareness team—especially given that check fraud, in particular, has nearly quadrupled since the pandemic.2
What's more, many digital payment services offer a bevy of safety features on top of what your bank or credit card company provides, including:
- Authentication, including both two-factor authentication—which requires a one-time code in addition to your password—and biometric authentication, such as scanning your face or fingerprint.
- End-to-end encryption, which masks your card and transaction information until it's decrypted at its intended destination.
- Tokenization, which provides a merchant with a one-time token rather than your actual card information.
"For many people, it's a question of when, not if, they'll be impacted by financial fraud," Lisa says. "It can take a minute to get up to speed on some of the newer payment technologies, but their security and convenience are hard to beat."
Wallet 2.0
Here are some of the more common electronic payment options and how they work.
Source:
Charles Schwab using information from Amazon, Apple, Cash App, Google, PayPal, Samsung, Shop Pay, Venmo, and Zelle.
1"Got Leather? Almost a Third of Consumers Prefer Carrying Physical Wallet," pymnts.com, 04/03/2024.
2"Treasury Announces Enhanced Fraud Detection Process Using AI Recovers $375M in Fiscal Year 2023," U.S. Department of the Treasury, 02/28/2024.
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