Smartphone manufacturers are making a big push into digital wallets but the cost to consumers and merchants could lead to higher prices at the register and less protection for consumers.
Services currently offering or preparing to offer digital wallet products include Google, PayPal, OboPay, Square and FaceCash among others and while most of those services do not directly charge customers (other than Obopay) they do bring extra costs to merchants.
In some cases the cost of doing business increases when digital wallets are used, for example PayPal and Square charge merchants up to 2.75 and 2.9 percent per transaction, far more than charged by the average bank card. As more merchants begin to offer payment processing from those company’s the margin typically found in items may need to be increased to make up for profit loss, causing the cost of items to increase.
In other cases customers could pay out of pocket, for example Obopay charges consumers a flat fee of 50-cents for payments over $10 that are taken directly from their Obopay account, while a fee of 1.5 percent is charged if an Obopay customer has directly linked their credit or debit card to their Obopay account.
One in four Americans in a recent survey say they have found unauthorized charges, billing errors and other issues on their credit and debit cards, issues that may be harder to resolve as our smartphones become a commonplace form of payment transactions.
Consumers could also face issues with direct-to-phone bill charges since rights for that area of credit are not defined at this time by lenders and are controlled solely by wireless carrier contracts, according to a new study no wireless carrier provides protections for mobile payment transactions that are as strong as laws regarding direct credit card or debit card purchases.
It’s important for Smartphone users to realize that their protections under Digital Wallet agreements may fall far short of their current card purchases using the traditional credit card method and therefore it’s important that terms of service agreements are fully studied before users take advantage of digital wallet products.