Payment Apps - Convenient But Don’t Treat Them Like Banks
Mobile payment apps have revolutionized the way we handle our finances, offering unparalleled convenience and simplicity. Still, remember that they are not banks and should not be treated as such. Know their limitations to safeguard your financial well-being.
Habiba AshtonJun 09, 20232671 Shares63601 Views
In the age of digitalization and the increasing reliance on smartphones, payment appshave emerged as convenient tools for managing our financial transactions.
These apps offer a seamless and user-friendly experience, allowing us to send and receive money with just a few taps on our screens.
With their easy accessibility and enticing features, payment apps have become an integral part of our daily lives, transforming the way we handle our finances.
However, as we embrace these convenient tools, it is crucial to understand that payment apps, despite their convenience, should not be treated as banks.
Payment apps are a convenient way to pay for things. But they each come at a cost
Payment apps are applications that enable individuals to make electronic transactions and transfer money using their smartphones or other mobile devices.
They are also known as mobile payment apps or digital wallets.
Regarding the popularity of payments, based on the latest statistics, a June 2023 article published by Techjury.net says:
The top 10 mobile payment apps have 3.37 billion users combined. Payment users in the U.S. will surpass 100 million this year .- Aditya Rayaprolu for TechJury
These apps provide a convenient and secure way to pay for goods and services, send money to others, and manage personal finances.
The table below shows the approximate number of people in the U.S. who used payment apps from 2020 to 2022 as well as the projected number of users from 2023 to 2025, per Insider Intelligence/eMarketer:
Payment apps employ various security measures to protect user data and financial transactions.
These measures may include:
Type of Security Measure
converting sensitive information (e.g., payment details) into an unreadable form
replacing card numbers with unique tokens
use of unique physiological or behavioral characteristics of an individual to verify their identity (e.g., fingerprint or facial recognition)
requiring a code or fingerprint in addition to a password
Well, like banks, payment apps store money - and more and more people are now keeping their money in these digital wallets.
Recently, the U.S. Consumer Financial Protection Bureau (CFPB) wants the public to know that when it comes to protecting their money, banks do a better job than payment apps.
In an article published by the CFPB on June 1, 2023, its director, Rohit Chopra, said:
Popular digital payment apps are increasingly used as substitutes for a traditional bank or credit union account but lack the same protections to ensure that funds are safe.- CFPB Director Rohit Chopra
Federal deposit insurance, as provided by the U.S. Federal Deposit Insurance Corporation, safeguards people’s bank deposits.
CFPB reminds those with money stored in their payment app accounts that such money “often lack deposit insurance.”
That’s why Chopra, who was a former commissioner at the U.S. Federal Trade Commission, added:
As tech companies expand into banking and payments, the CFPB is sharpening its focus on those that sidestep the safeguards that local banks and credit unions have long adhered to.- CFPB Director Rohit Chopra
Based on data as of May 2022 by Insider Intelligence, it’s China.
Every day, 45 percent of adult people in China use mobile app payments. Another 41 percent of adults use them once a week.
In the U.S., a mere 6 percent of adults there use app payments daily.
Percentage of Daily Users
Based on the data by New York-based global financial research firm Jupiter Research, as reported by Merchant Savvy, from 2020 to 2025, the market size of transactions made through payments apps in China and the Far East is almost $4 trillion.
By 2025, it is projected to reach $5.7 trillion (an estimated increase of 59 percent).
The Far East, by the way, refers to Eastern Asian countries, which include Japan and South Korea.
In Europe, by 2025, the estimated market size is $708 billion.