YONKERS, NY -- While Americans are still using plenty of cash, checks, credit and debit cards to pay their bills, new electronic methods such as paying by cellphone or so-called digital wallets are emerging. Before jumping in, consumers should be aware of the disparity in loss liability and consumer protections they offer, according to Consumer Reports.
Consumer Reports’ latest investigation into these new payment options finds that banks and technology companies are jostling for a greater share of the $50 billion a year in fees generated by everyday transactions. Some services by PayPal, Obopay, Square, Zong, and FaceCash already allow you to pay for purchases with your cell phone, but digital wallet services are scheduled to hit the market soon.
Google said in May that it planned to launch its version this summer. At least three competing digital wallets are planned for launch later this year and in 2012: from Visa in partnership with more than a dozen banks; Isis, a joint venture of AT&T Mobility, T-Mobile, Verizon Wireless, and PayPal Mobile’s point-of-sale technology.
Despite all the hype, consumers don’t seem to be clamoring to pay with their phones yet. According to a recent nationally representative survey by the Consumer Reports National Research Center, only 5 percent of survey respondents have used their cell phone to pay for day-to-day purchases in the previous month. Slightly more use other fairly new forms of payment, including billing to their home or cell phone account.
Most of the new electronic payment options are tied to credit and debit cards, so whatever costs consumers incur by using their plastic will transfer to the new methods. Paying by mobile phone won’t save them money, Consumer Reports warns: Google Wallet merchant transaction fees are the same as those charged on plastic payments, and the same is expected to be true for Visa’s digital wallet. Square and PayPal Mobile charge merchants even more than the average big bank fee, 2.75 and 2.9 percent of the transaction amount, respectively.
Prepaid debit cards can be especially costly, whether you use them by themselves or link them to an alternative payment method. Many prepaid debit cards charge fees for activating and maintaining the accounts, and for transactions, balance inquiries, and reloading.
Copyright 2011 ABC News Radio