Virtual wallet review: Apple Pay takes on Google Wallet, Softcard, and LoopPay

Apple, the innovative California-based computer maker, talks like it just invented mobile wallets, which let you pay for purchases at the cash register by using your smart phone. "Apple Pay will forever change the way we buy things," said Eddie Cue, senior vice president of Internet software and services, at the early September press promo for the iPhone 6 and Apple Watch.

But Apple is arriving more than fashionably late to a party that began three years ago. Google introduced its eponymous Wallet in 2011, and a joint venture of AT&T, T-Mobile, and Verizon Wireless got in the game nationwide in 2013, with Isis Wallet, which is still in the process of changing its name to Softcard. Meanwhile, LoopWallet, a small start-up, launched its better mousetrap earlier this year.

Now that Apple Pay is up and running, we've updated our comparison and review to include it here. Each key performance attribute detailed below is scored on a 1 to 5 scale, where 1 equals the worst available value to consumers and 5 the best. Our reviewer used one or more of the various assessment tools available, including field tests of the competing products, reporting and analysis, and features and specifications reported by the manufacturers or service providers.

Quick-take scorecard

All mobile wallets don't work on all smart phones. Apple Pay, Google Wallet, and Softcard require phones with near-field communications capability, which enables the wallet to transmit transaction data to an NFC-equipped cash register that can receive those signals. Google Wallet works on hundreds of Android phone models, more than Softcard and Loop. Apple Pay works on exactly two phones, the iPhone 6 and iPhone 6 Plus. But while the GW app can be downloaded to iPhones, the tap-and-pay feature, which is what mobile walletry is all about, doesn't work on iPhones 4, 4S, 5, and 5S because they're not NFC-capable.

Apple plans to expand Apple Pay usability to the iPhone 5, 5c, and 5s. But to make that happen, you'll have to buy the Apple Watch when it becomes available in 2015, because that device holds the encrypted SIM card and NFC that the 5 series phones lack. The Watch will also, no doubt, come with a hefty price tag.

Softcard also works on Android phones and has a work-around for non-NFC iPhones: A special case with an NFC antenna embedded in it. But Softcard also requires a free "secure element" SIM card, and when we went to set up our phone, we got a message telling us we had to tramp over to a Verizon store to get the enhanced card installed, a time-consuming process.

Loop has it's own setup requirements. You have to buy a fob, which plugs into your phone to make it work as a wallet. You can also use the fob without the phone to make payments at the checkout, but either way, it's something else you have to carry on your person to make payments on the go. But Loop also offers a phone case, which replaces the fob when you are paying at the cash register, and the company is working with phone manufacturers to embed it's unique technology (see below) in phones.

While LoopPay and GW work with any cellular carrier, including prepaid and no-contract, Apple Pay only works with the five major national carriers, Consumer Cellular, and Credo Mobile, but no other no-contract or prepaid carriers. Softcard only works on its owners' AT&T, T-Mobile, and Verizon Wireless networks.

Softcard is also limited by the number of participating cards that can be loaded onto it—only those from American Express, Chase, and Wells Fargo. The other two digital wallets can load almost any credit, debit, or prepaid cards. Apple Pay works with only some cards from six major issuers representing about 83 percent of the market, but 500 more have signed on for participation in 2015, Apple says.

A mobile wallet isn't much use if the store in which you're shopping doesn't accept it as a form of payment. That's why we've given this performance attribute added weight in our scoring—40 percent—and that's a big problem for Apple Pay, Google Wallet, and Softcard.

The trouble traces back to the NFC technology necessary to make these three work. Only about 220,000 U.S. merchant locations have NFC, which is a drop in the bucket compared to the 12 to 15 million where consumers can use their old-fashioned plastic payment cards.

LoopPay seems to have overcome this problem in a critically advantageous way. It doesn't use NFC. Instead, it induces a magnetic pulse in the existing payment card readers at about 90 percent of U.S. locations that take plastic. When the Loop device is placed near a card reader's swipe groove, the pulse it generates mimicks the swipe of a card and transmits the data necessary to make payment.

When we went shopping in the San Francisco Bay area, Loop was accepted at seven of eight merchants: CVS, Lucky Supermarket, McDonald's, 7-Eleven, Starbucks, a Shell station, and Target. By contrast, AP, GW, and Softcard were accepted at only two of the eight.

Loop doesn't work at gas pumps, where insertion of a plastic card is necessary to initiate the payment process. The NFC-based wallets didn't work at the pump either. But when we went inside to try to pay the cashier at the gas station, Loop did work on the card reader there, while AP, GW, and Softcard didn't, because there was no NFC receiver.

All of the mobile wallets did well executing refunds. Essentially, they work the same way as a purchase–except in reverse; when you wave your phone or fob near the card reader, the system electronically credits your account with a refund.

All the wallets let you load your store loyalty cards onto them as well, but only Google Wallet and Softcard offer discounts and deals. Apple says your AP transactions are private between you, the card issuer, and the merchant, so they can't know what marketing deals to offer you.

Are virtual wallets easier to use than a plastic credit card? Yes and no.

Yes, if you're standing on the checkout line and already have your smart phone out killing time, by checking e-mails, conducting mobile banking business, or catching up on the news, because it’s no trouble to open the mobile wallet app, punch in a PIN, and hold the phone over the card reader to pay.

But it's not more convenient when the phone is in your pocket and you have to fish it out, unlock the phone, navigate to the wallet app, and punch in a PIN to open the wallet. So the "4" scores on GW and Softcard are actually an average between easier and slightly more involved than swiping with plastic.

But Apple Pay's Touch ID, which uses your fingerprint to authenticate to the phone that you're you, can be activated to work instead of a PIN. That feature made paying with AP more convenient than a credit card, in our estimation, giving Apple Pay the best score on this measure.

To use Loop, you need a clunky fob, either plugged into the phone or carried on your keychain. The fob, while easy to use, is another thing to carry around—in addition to the phone and possibly your physical wallet containing backup cards. So Loop is at once moderately more involved than a credit card and only slightly so; we averaged the two.

The charge case with built in fob is better (we didn't buy or test that option). Loop's CEO, Will Graylin, says phones embedded with the Loop technology will start hitting the market in the first half of 2015.

Another potential drawback: If your cell phone battery runs out, you can't use the phone to pay with Apple Pay or Google Wallet. Softcard tries to solve that problem with its own iPhone case, which has a built-in charger. But LoopPay has a better solution still: That clunky fob is powered independently of the phone, so it can still be used to make payments in button-pay mode, if the phone dies, as long as you instruct the wallet not to lock after a certain period of time (see "security" below). The low-power fob stays charged for about two months and can execute several hundred transactions between charges.

Because you load your existing credit, debit, or prepaid cards onto the wallet, whatever federal regulatory and voluntary industry protections apply to that plastic also cover their transactions as virtual cards. Since these protections vary by type of card (credit, debit, or prepaid), our scores here represent a blend of the protections, and you would be wise to prefer loading credit cards (which enjoy the best federal loss liability protections against unauthorized charges) into your wallet over debit and prepaid card.

Apple Pay stood out on consumer protections, because you can only load debit and credit cards onto it, not prepaid cards, which have the worst consumer protections.

Bigger differences showed up in security. Softcard uses 10 of 13 security measures we examined—more than its rivals–giving it the best score. For example, though all of the mobile wallets use encrypted storage for sensitive data and require a PIN to unlock the wallet, Google and Loop let you turn off the wallet-lock timer. That makes it easier to pay at the check-out, but it also leaves the wallet open to unauthorized charges if you lose it or leave it unattended. On the other hand, Google and Softcard let you remotely disable the wallet if it's lost or stolen.

Apple Pay offers improved security, particularly with its Touch ID fingerprint authentication, that can take the place of a PIN to unlock the phone and wallet. That's important, because users soon tire of having to constantly punch in a PIN and surrender to the temptation to disable the auto locks altogether. The convenience of Touch ID should boost security, even though it can be disabled for the phone and Apple Pay.

Apple Pay also provides great security by generating a unique code or "token" for each transaction, which can't be re-used, and by storing "device account numbers" on the phone's encrypted chip, in place of your actual payment card account numbers. Even if a hacker gets those numbers, they can't be used outside of Apple Pay.

But Google Wallet and Softcard also use dynamic transaction tokens, and Google generates and stores "virtual card" substitutes for your real payment card numbers. So Apple Pay tokenization is not the innovation it's been tricked out to be. LoopPay says it will have tokenization in 2015.

All four wallets also check to make sure that the card properly belongs to the owner of the phone and virtual wallet, to prevent crooks from adding your card to their wallet.

Good news: There are no per-transaction or payment card transfer fees.

Apple Pay, Google Wallet, and Softcard have no required hardware costs, either, where Android phones are involved. (We don't count the cost of a particular phone, though that is obviously a necessary expense.) But if you want to use Softcard's tap-and-pay feature on an iPhone without NFC capability, you must spend $60 to $70 for a case with an NFC antenna in it.

We spent $39 for Loop's necessary fob. The Loop phone charger-case and fob costs $99.