Your smartphone might not just replace your home phone—it also could replace your ATM and even your wallet before long. A range of new smartphone apps for “mobile payments”—some fairly well-known and others less so—enable consumers to use their phones to manage their bank accounts…transfer money to friends…and even scan credit cards, allowing a small business or even someone holding a yard sale to accept payment in plastic. And some stores are starting to accept payments via smartphone, although various kinks remain to be worked out before that practice becomes widespread.

BANKING VIA SMARTPHONE

Online banking has become mainstream. Now an increasing number of banks allow customers to perform many transactions right from their smartphones. That’s handy for people who spend a lot of time on the road or who often need to transfer money between bank accounts, pay recurring bills or check balances on short notice.

Some banks and credit unions even let account holders deposit checks though their smartphones. Just use the smartphone’s camera to photograph both sides of the endorsed check, then submit it through the bank’s app.

Examples: Large banks that offer mobile check deposit include Bank of America, Chase, Citibank, PNC and US Bank. Credit unions include Alliant and Patelco.

Is it safe? Mobile banking transactions are encrypted, and accounts are password-protected, so a thief who steals your phone should not be able to access your bank accounts. Still, digital accounts can be hacked.

What to do: Confirm that your bank does not hold you liable, or at least limits liability, for mobile fraud losses. Avoid making banking transactions over public Wi-Fi connections. Monitor accounts, and report unusual activity to the bank immediately to limit potential liability.

PROCESS CARD PAYMENTS

Several companies now offer low-cost ways to turn smartphones into credit card–processing devices. That means smartphone owners can accept credit card payments at their yard sales, community fund-raisers and part-time businesses.

Examples: Square, a company launched by one of the cofounders of Twitter, offers tiny credit card readers that attach to the headphone jacks of iPhones, iPads and Android smartphones. The card reader and accompanying app are free, but Square takes 2.75% of each swiped credit card payment. The rest of the payment is deposited in the user’s bank account (www.SquareUp.com). PayAnywhere is very similar, but it works with BlackBerry smartphones, as well as Apple and Android devices, and charges 2.69% per swiped credit card transaction (www.PayAnywhere.com).

Is it safe? For the seller, risks should be minimal. Buyers might have some qualms about handing over their credit cards to strangers to scan through their smartphones—though this really isn’t much riskier than handing a credit card to a waiter in a restaurant.

Buyers should use a credit card rather than a debit card for smartphone transactions to limit their liability if the account information does fall into the wrong hands—fraud losses for credit card users typically are capped at $50, assuming that the problem is reported promptly.

PAY FRIENDS

Maybe you dined out with a friend only to discover that the restaurant doesn’t take credit cards and you don’t have enough cash to pay your share…or perhaps you lost a bet on the golf course but don’t have sufficient funds on hand to make good. If you don’t like to have debts hanging over your head—or you’re afraid that the debt might slip your mind—you could use your smartphone to transfer the money immediately.

Example: With the PayPal Mobile smartphone app, you can send money from a BlackBerry, Apple or Android smartphone to anyone else—even someone who doesn’t yet have a PayPal account (though he/she will have to open one to retrieve your payment). All you need is the recipient’s e-mail address or mobile phone number. PayPal will send a message explaining how to claim the money or saying that the money has been deposited in the person’s account if the phone number or e-mail address already has been linked to a PayPal account.

There’s no fee for transferring money this way within the US if your PayPal account is linked to a bank account or PayPal balance. If it’s linked to a debit or credit card, there’s a fee of 2.9% plus 30 cents per transaction. (On www.PayPal.com, search for “Mobile” near the bottom of the page.)

Is it safe? Using PayPal Mobile on a smartphone essentially should be as safe as using the well-established PayPal on a computer. Each PayPal Mobile money transfer requires confirmation with a personal identification number (PIN), so a thief who steals your smartphone shouldn’t be able to make unauthorized transfers. PayPal promises 100% protection for unauthorized transfers, assuming that PayPal is notified within 60 days and certain other conditions are met.

What to do: A high-tech crook who manages to load a virus onto your smartphone might be able to obtain your PIN and make unauthorized transfers. PayPal’s $0 liability guarantee should protect customers if this occurs, but consider linking the account to a credit card rather than a bank account to obtain the additional consumer protections that credit cards provide.

MAKE PURCHASES

We are slowly gaining the ability to pay for purchases simply by waving our smartphone in front of a scanner at the register or typing a PIN into an app on the phone. The credit card, debit card or PayPal account information that we have previously stored in a “mobile wallet” app in the phone is then transmitted to the merchant.

Smartphone payments such as these already are possible at a few retailers, including Foot Locker, The Home Depot, Macy’s and Starbucks. Trouble is, even if you patronize a retailer that accepts mobile payments and you have a mobile wallet app on your smartphone, you won’t necessarily be able to pay this way.

There currently are several competing mobile payment technologies and apps, including Google WalletIsis Mobile Wallet…and PayPal Mobile. Even retailers who accept mobile payments are unlikely to accept them all.

Example: Starbucks has perhaps the most widely used mobile payments program—but it accepts only its own Starbucks app.

Many analysts expected Google Wallet to dominate the sector—Google dominates most of the sectors it enters—but thus far, it has found limited acceptance. Most smartphones lack the “near field communications” (NFC) technology that Google Wallet requires, and as of mid-2012, Sprint is the only major carrier that supports the Google Wallet platform for a variety of phones.

Mobile payments might become more widely accepted in the near future as an increasing number of phones equipped with NFC technology reach the market—Microsoft’s Windows Phone 8 operating system, due out this autumn, will support NFC, and there’s been speculation that Apple’s next iPhone might as well.

But for most consumers, there’s little reason to worry about any of this, at least not until the technology sorts itself out in the coming years. The advantages of paying by phone are not great, at least for now. It might save you a few seconds—particularly if you’re someone who has your smartphone in your hand much of the time anyway—but paying by credit card or cash is pretty fast, too.

Is it safe? Proponents of mobile payments say that loading credit card data into a smartphone is safer than carrying around the card itself—because both the smartphone and the app can be password-protected and because a victim is likely to quickly notice if a smartphone is stolen.

But until mobile payments achieve widespread acceptance, we will have to carry our credit cards around, too, negating those advantages. Meanwhile, security experts have shown that mobile wallet apps such as Google Wallet can be hacked if the phone is stolen.

What to do: If you do use a mobile wallet app, set passwords for both your smartphone overall and the mobile wallet application.

Load credit card—not debit card—account information into the app to take advantage of stronger credit card consumer protections, and monitor that credit card account closely. If your smartphone supports a “remote wipe” feature, install this and know how to use it so that you can clear the phone’s memory quickly if it is stolen.