The announcement a few weeks ago that Starbucks would begin taking mobile payments through payment processor Square was a big moment for mobile payments. But before America starts paying for everything via their mobile phones, there are some bugs that need to get ironed out, says Jim Van Dyke, founder and president of Javelin Strategy & Research.
The biggest one is security, Van Dyke says.
"Security, we think, is important from a marketing metrics perspective," he says. "People think about safety and identity theft and all that all the time."
Right now, there are major vulnerabilities in some mobile payments systems that could make customers reluctant to use them. That's particularly true of the mobile apps that retailers such as Starbucks have created, he says.
"When you have a phone with a Starbucks payment app in it, generally speaking that thing is in the 'on' position all the time," he says. "It's like walking through a parking lot and that car's engine is running all the time and it is open. So if you leave your phone around and, assuming it is not password-protected, that app is ready for you to just charge away."
Mobile payment systems that allow you to load cash into your phone such as Google Wallet can also be a problem, he says. In particular, transferring a balance from your old phone to a new phone can create serious issues.
"When I upgraded from a year-old phone to the latest Google phone, I had to make three customer service calls to get a balance of like $65 to move over to the new phone. It was not easy," Van Dyke says.
Still, there's a lot to like about mobile payments over conventional debit cards, credit cards and cash, he says. First off, many mobile phones allow you to track them down if they're lost, a feature most wallets don't have.
Mobile payment systems also allow easy monitoring, he says.
"The advice we give to consumers is, use their mobile device security to advantage, which means monitor the accounts more," he says. "Just do not open an account and ignore it."
And unless you have a very high-tech wallet indeed, it probably can't be locked with a PIN. One problem though: A lot of people still don't bother putting a pass code on their smartphone, Van Dyke says.
"Only 38 percent of smartphone owners use passwords on their home screen," he says. "If you leave your iPhone or your Android laying around and I pick it up, and it has got a Starbucks app on it, I may have just found $100 laying on it, just ready to be used at a Starbucks."
What do you think? Are you ready to replace your wallet with a smartphone? Have you done it already? What's been your experience?
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