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Mobile wallets are becoming more and more popular among young people, but they have their drawbacks

Posted on by darion

In some parts of the world, super apps provide users with access to a suite of services that in other parts of the world are covered by multiple apps. Shutterstock photos

Data published by chargeback technology platform Chargebacks911 highlights that consumers are increasingly using mobile wallets such as Apple Pay and Google Pay. In particular, Chargebacks911’s cardholder dispute rate sums up why this is the case. Consumers have mobile devices at hand all the time. Plastic credit and debit cards can be easily left at home, lost or damaged. That’s why it makes sense to make phones the center of your financial life. This is especially true when they enable security measures that would not be possible with plastic cards. Overall, it is estimated that by 2025, half of the world’s population will use mobile wallets.

However, the findings also show that mobile wallets have security issues that do not exist with other forms of payment. Then there’s the pressing issue of chargebacks. In some ways, this is easier with digital platforms than with physical cards. It is also true that, due to their association with payment cards, they are not so much an alternative payment method, but simply a different way of accessing the same accounts as plastic credit and debit cards.

Chargebacks911 Cardholder Dispute Index

“Looking at statistics from the Cardholder Dispute Index, we see that mobile banking is more popular among younger consumers than among their older counterparts,” said Roger Alexander, key advisor to Chargebacks911.

“This very clearly indicates that mobile banking will become more popular over time. The number of young people is growing and the number of older people is decreasing. 54-year-olds who use mobile banking more often than not will age and, like many generational changes, will become the norm.”

The rise of super applications

Next, in much of the world, using a mobile wallet is the norm. It is the Western world that is lagging behind. “super apps” such as China’s WeChat and India’s PayTM give users access to a suite of services that are available across multiple apps in other parts of the world.

What does this mean in the real world? First, research from Chargebacks911 suggests that major banks may be headed for collapse. They are less useful when people pay with their phones and manage their accounts through apps. Second, it could mean an increase in chargebacks and app fraud.

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Increased risk of the so-called friendly fraud

Alexander added: “Our Cardholder Disputes Index shows that 72% of respondents consider chargebacks to be a valid alternative to going directly to merchants for a refund. It could be argued that moving the sales experience to a completely digital sphere makes “friendly fraud” (or first-party abuse) much easier. Filing a chargeback with a few taps of the screen is much less hassle than calling a customer service hotline or going to a bank branch. This effect may be part of the increase in chargebacks over the years.”

The study also shows that most cardholders choose the chargeback process because it offers faster resolutions than the merchant’s refund process. And that after one successful chargeback attempt, 87% of cardholders are likely to attempt another one.

“The shift to digital wallets is a boon for consumers, merchants and the entire payments ecosystem,” Alexander said. “But we cannot ignore the flaws. Making payments easier has a knock-on effect of making chargebacks easier. But sometimes buyers have their cake and eat it too. Using AI-powered chargeback solutions like Chargeback911 can allow businesses to prevent illegal chargebacks while still allowing customers to use their chosen payment methods.