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 yesterday's 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, and it's mobile wallet brand won't be up and running until next month. Since the future is already here, we compared three mobile wallets that are available right now.
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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 changing its name this month to Softcard. Meanwhile, LoopWallet, a small start-up, launched its better mousetrap earlier this year.
All mobile wallets don't work on all smart phones. 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. 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.
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 (see photo) 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 Loop and GW work with any cellular carrier, including prepaid and no-contract, 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.
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 Google Wallet and Softcard.
The trouble traces back to the NFC technology necessary to make GW and Softcard 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.
Loop Wallet 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, 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 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.
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.
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 Google Wallet. Softcard tries to solve that problem with its own iPhone case, which has a built-in charger. But Loop Wallet 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.
But differences showed up in security. Softcard uses nine of 11 security measures we examined—more than its rivals. 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.
Good news: There are no per-transaction or payment card transfer fees.
Google Wallet and Softcard have no required hardware costs, either, where Android phones are involved. 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.
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