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MoneyWi$e: Safer Spending with Digital Wallets · Talking FACS

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  Welcome to Talking FACS, what you need to know about family,
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  food, finance, and fitness.
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  This nationally recognized, award-winning podcast is hosted by the University
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  of Kentucky Family and Consumer Sciences Extension Program.
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  Our educators share research knowledge with individuals, families,
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  and communities to improve quality of life.
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  Welcome to MoneyWi$e on Talking FACS where we share research-based information
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  to help you improve your financial future.
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  I'm your host, Dr. Nichole Huff, Assistant Professor and Extension Specialist
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  for Family Finance and Resource Management.
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  We are joined today by Rick Sellnow, Digital Literacy Agent in Northern Kentucky
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  with Kentucky Cooperative Extension. Welcome, Rick.
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  Hey, Dr. Huff. So happy to be here and always like talking financial literacy.
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  In another life, I used to work for a credit union, so this is another corner
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  of my nerdy life. Well, good. You're a perfect fit then for one of our
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  MoneyWi$e installments on Talking FACS.
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  All right. So today we're going to be discussing safer ways to spend using digital wallets.
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  And so let's jump in. Can you, I guess, start maybe, Rick, by telling us what is a digital wallet?
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  And then, you know, why would a consumer need a digital wallet instead of,
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  say, spending like they always have?
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  Yeah, of course. Okay, so I'm going to start with the second question first,
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  but I always like to say whenever we're talking about digital literacy concepts,
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  never take the human out of the technology, and so you always have the choice.
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  If someone's not comfortable using a digital wallet, they do not have to.
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  There are many ways to spend and spend safely and different things you can do.
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  So I do just want to say nobody has to do anything, but we're going to talk
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  a little bit today, like you mentioned, what are some of the ways that a digital wallet,
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  could be safer. So first, to talk about what they are, if you've ever seen one,
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  what you've probably seen is Samsung Pay, Google Pay, or Apple Pay.
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  And if you've ever been standing in line at the grocery store and watched someone
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  tap their phone on a reader, they were using a digital wallet. That's how they paid.
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  They've got their credit card in their digital wallet. And so it's a matter of convenience, right?
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  That's a big thing that a lot of major companies and retailers,
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  why they would like you to use a digital wallet.
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  But it can be convenient for you too, right? Like if you left your purse under
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  the passenger seat and you need to buy something and you don't want to go wait
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  back in line again at the store, you can go ahead and do that for convenience.
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  And we'll talk a little bit more about this later, but just to get things started.
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  It's another layer of safety between you and any potential criminal that would
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  get a hold of your information.
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  So a lot of times, like in banking, they'll talk about how many layers there
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  can be between you and any theft.
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  So when we talk about, can't I just do what I've always done? Yes.
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  And what does what I've always done mean? Does that mean you pay for everything in cash?
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  Well, if I drop $20 bill on the floor in Dr.
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  Huff's office and I step out to get a drink of water, that's now Dr.
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  Huff's $20 bill and I can't prove otherwise.
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  Oh, I would return it, though, of course. Oh, of course. Of course.
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  Yeah, yeah, yeah. To the point, that cash could be gone, depending on where
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  you drop it, right? And so digital wallets are different?
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  Yes. So the advantage of a digital wallet, and so we'll step through a little
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  bit of the progression, right?
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  So cash, as you mentioned, I should have used the example of a parking lot.
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  Drop it in a parking lot, and unless you get back there quick enough,
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  even if the wind just blows it away, that's gone, and there's no way to get
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  it back. A little more secure is a check because you can place like a stop order
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  on a check if you misplace it or there's that extra layer.
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  But then you have to worry about someone getting a hold of your account number
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  on the bottom of the check or something. So then financial institutions wanted
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  you to use debit cards, right?
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  But the issue with a debit card is it directly debits your account.
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  So if someone gets a hold of your debit, that is a lot harder for an institution
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  to return that money. Whereas a credit card, let's say it's a credit card issued
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  by, I don't know, Fifth Third Bank, but endorsed by Visa.
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  Well, you're actually spending Visa's money, not your money.
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  So it's easier for the financial institution to get that back for you if that
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  card number is compromised. And
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  now we finally get to the digital wallets where it is yet another layer.
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  Between you and them. You are putting a credit or debit card into the digital
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  wallet, but it actually uses a technological process called tokenization,
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  which is the attempt to make it safer.
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  So a token is used to pay for your transaction, not your real credit card number.
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  So it's useful because if the credit card is ever compromised,
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  or if there's ever some sort of financial fraud,
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  Apple Pay, Samsung Pay, Google Pay, they will literally just delete the token
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  so that it can no longer be spent at all. That's an extra layer of safety.
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  All right. So do consumers already have digital wallets? You've named some examples
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  that are common in the market.
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  Or is this something they need to go out and obtain and purchase?
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  That's a great question. Okay, so generally speaking, if you have a smartphone,
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  more likely than not, you already have a digital wallet.
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  You do not need to pay for it. So that's something to be aware of.
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  You do not need to go on any kind of app store to buy one. You probably can.
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  There are probably third-party companies offering digital wallets.
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  Maybe they're more secure.
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  Maybe they're different. But generally speaking, if you have a smartphone,
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  you have a digital wallet.
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  The reason for that is there are only two, I shouldn't say only,
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  but effectively only two operating systems in the smartphone market.
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  That's Apple iOS and that's Google's Android OS.
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  So because Google owns Android and obviously Apple owns iOS,
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  those two digital wallets are probably already preloaded onto your smartphone.
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  So you could start using one today if you want.
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  The advantage, like I said, of the smartphone is the convenience.
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  Generally, all of us, for better or worse, always have that smartphone in our
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  pocket wherever we go, which means we would always have access to our funds wherever we go.
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  Here's an example from my youth, right? Like, say you accidentally lock the
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  wallet in the car, then how are you going to pay for things?
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  Well, as long as your phone was in your pocket, you're okay.
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  And then Samsung is the largest manufacturer of Android OS hardware.
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  So any of those three could be used,
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  and it's not something you need to purchase. So I would just be wary.
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  I'm not saying anyone is a scam if they say to go download a digital wallet
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  from a store, but you should not have to do that. You should already have them.
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  Okay, that's very interesting. Yes, so I have teenagers and middle son is 16
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  and he turned me on to the convenience factor of using digital wallets because
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  he knew he'd always have it because he always had his phone.
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  And so trying to then backtrack and teach him how to properly use a debit card,
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  we had to work backwards.
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  But also, yeah, he then had to teach me how to use my digital wallet.
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  So, you got to love the generational differences with technology.
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  What about privacy concerns? I know you mentioned that there's some advantages
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  and safety can be one of them.
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  But what should consumers who are worried about privacy, what should they know?
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  And maybe this goes back to that tokenization concept.
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  It does. And thank you so much for bringing this up. I'm really glad because
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  this is near and dear to my heart.
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  So like Dr. Huff mentioned, I am the digital literacy agent for Northern Kentucky.
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  And when we talk about digital literacy, what we're referring to is understanding
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  how you create, consume, and curate digital information.
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  So if reading the newspaper is analog, then getting your news about the Kentucky
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  basketball team from ESPN.com, well, now you're doing it digitally.
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  So same thing financially, right?
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  Spending with cash or a check is analog and using this digital wallet is obviously digital.
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  But when we talk about privacy, that is first and foremost, when we talk about
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  how you're going to consume things online or how you're going to create things,
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  always be aware of whatever digital trail you are leaving for yourself,
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  especially in financial matters.
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  So that's kind of why earlier I was saying maybe stick to one of the major companies like Samsung,
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  Google and Apple for your digital wallet, because what I can promise you is
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  those three companies probably spend more than almost any company in the world
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  on their digital security.
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  So in keeping your information safe.
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  However, here's an example, right? Some financial institutions,
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  when you use their product to make a digital transaction, they will offer you
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  coupons or rebates and they'll send you little alerts.
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  Hey, go buy Wendy's today and you'll actually get a free small fry just by using here.
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  This is even older tech, right? Like use your fifth third bank debit card at
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  Wendy's and you'll get a free small fries.
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  Well, what's happening there is that company is aware of purchases you do and do not make.
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  So just know that if you are using a digital wallet.
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  Read the terms and conditions, always. Understand what they're doing with your
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  information, and even if they are going to use that information to advertise
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  to you, that's not necessarily the end of the world, because awareness is power.
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  If you just know that, then maybe you can resist, wait a minute,
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  why are you telling me to go to Wendy's?
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  I don't even want Wendy's, I packed my lunch today. So just that kind of thing.
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  That's what I would keep in mind there. However, they are telling the truth
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  when they say that Audi's work is safer.
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  So, for example, Apple and Google, their two digital wallets use NFC RFID.
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  So that's Near Field Communication Radio Frequency Identification.
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  Basically, it's a very weak radio signal that only works on proximity.
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  So for example, if you have a credit card stored in your Apple wallet and you
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  put your iPhone close to that card scanner at Kroger, it makes that connection.
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  But if you were holding your card scanner, I don't know, in the shampoo aisle,
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  it's not going to read it at all.
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  It's too far away. So that's a way that your information is not being necessarily
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  broadcast across the internet. It's not going up necessarily into the cloud.
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  It's only going within that small radio bubble.
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  Now, Samsung's a little different. They use a technology called MST,
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  that's Magnetic Secure Transmission, but it's similarly secure.
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  This works by sending a magnetic signal to the card reader, much like when you
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  swipe your card at the terminal, right?
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  So it's that same thing, that connection needs to be made. So if we're talking about privacy,
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  that's one helpful thing is that the signal is only operating in proximity as
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  opposed to if someone gets a hold of my debit card number and my zip code and
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  security gear, my CVC at the back of the card.
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  They could make an Amazon purchase. They can be in, I don't know,
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  Boise, Idaho, just as easily as Manila in the Philippines or here in Lexington,
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  Kentucky. It doesn't make a difference. Yeah.
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  So are there disadvantages then to using a digital wallet?
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  Yeah. So if your phone is dead and the only way that you have access to those
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  financial instruments is your phone, that's problematic, right?
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  So always useful to have a second, I don't know, whatever, method of payment around.
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  I think back in the day, my dad always used to tell me growing up and driving
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  through rural North Dakota, funny story. It's like one gas station every 50 to 60 miles.
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  So he was always like, you don't know if they're going to take your debit card.
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  You always got to keep 20 bucks in your glove department, right?
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  That was just him saying, have a backup.
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  But old man Sell Now's advice was not bad and is still not bad today.
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  It's not, right? No, I say something similar to my son.
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  That's great that you have this convenient form of payment, but make sure that
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  you have another form just in case.
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  Because do all major retailers take digital wallets? or are there still some that don't?
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  Or how likely is it that a retailer would take a digital form of payment like this?
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  No, that's a great point, right? Depending on where you are,
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  they might not accept it now.
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  Some things have improved if a business, especially small businesses,
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  very often use Square or Clover.
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  Y'all may have seen those before, especially if you like to go to art fairs and things like that.
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  Yeah, they're little cubes that people can plug into their phone and tap things.
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  So like it is more likely nowadays days that someone will be able to accept
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  it because those things are so convenient. But that is not everyone, right?
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  And there are alternatives digitally, like you can use Venmo or Cash App to
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  pay in those situations, or just make sure you have cash or a traditional debit card.
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  But the same way that there are still places in the world that will not even
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  accept a debit card, it's important to kind of be multifaceted.
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  The convenience matters, but it's not universal. Also.
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  Your cell phone is okay because it's probably going to use 5G.
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  But for instance, when we had a major ice storm last year in Lexington and a
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  lot of the city lost power, those readers at stores might not have 5G access.
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  They might be wired in. They might be hardwired in it at one because it's more
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  secure, two because it's more consistent of a signal.
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  But if, for instance, that business is running on a generator,
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  so they are not going to waste electricity on their Wi-Fi, then you're just
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  not going to be able to make a payment.
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  All right. So like we say in finances in general, diversification is sometimes key, right?
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  We plan and then we have backup plans because technology is great when it works
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  and sometimes it doesn't always. And so to always be prepared.
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  100% agree. Yeah. Thank you so much, Rick.
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  This has been very interesting and enlightening in terms of understanding
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  what is a digital wallet and how they work and the safety and advantages to them,
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  but also how that factors into digital literacy and understanding and being
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  a wise consumer when it comes to using a digital wallet.
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  So thank you so much for joining us today. We really appreciate having you on the show.
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  Yeah, thank you, Dr. Huff. This was a lot of fun. If you are just tuning in,
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