Can Mobile Wallet Affect Your Credit Score?

03-Nov-2017 written by : FSI-Team

Can Mobile Wallet Affect Your Credit Score?

Mobile wallets or e-wallets are becoming increasingly popular. A large number of traditional banks (SBI's State Bank Buddy, Axis Bank's PayGo), e-commerce platforms (Amazon's Amazon Pay, Flipkart's PhonePe), and even tech companies like Google (Tez) have launched their own versions of these digital products.

Since mobile wallets are quickly becoming the most preferred way of sending and receiving payments, it begs the question- do they affect the result of your credit score check? The answer is "yes" and the following are some of the ways how:

Banking Security

Although most financial companies give full assurance regarding the security of their e-wallets, you should take these claims with a pinch of salt. This is because nothing is 100% secure on the Internet.

Tech wizards have shown to find ways to breach the security measures of these companies and hack into their databases. So, if they get their hands on your e-wallet, they can initiate unauthorized transactions and damage your credit report easily.

Another way your mobile wallet's security can be compromised is by losing your phone itself. Studies have found that people who pick lost phones often try to access the personal or business data stored in them. A portion of these people are also the ones that try to access the financial data available on the devices.

Since your mobile wallet is directly connected to your bank's account, a person who finds your lost phone could directly withdraw funds from your account into your mobile wallet and use it for unauthorized transactions. In a way, it’s a form of identity theft that can easily damage your credit and lead to bad results from a credit score check.

Damage of Your Own

Mobile wallets can affect your spending habits, which in turn can affect your creditworthiness and force you to struggle for a loan.

For starters, psychology plays a big role in the way you spend your money. When you buy a smartphone that costs Rs. 40,000 with physical currency, it's difficult to let go of that money. It's because, in this kind of situation the transaction has a visual element to it. In other words, you can actually see your money changing hands and you feel the loss. However, when you spend your money through credit cards or mobile wallets, the transaction takes place electronically which is basically just changing of numbers on two ends. So, you don’t feel as much bad as you do in case of physical cash.

Since e-wallets make it easier to spend your money recklessly, you can easily develop bad finance management related habits that affect your credit score.

Credit Rating Agencies Considering Alternative Data

The top credit rating bureaus are aware of the shift that is taking place in the financial services industry. A new type of sector called Fintech is emerging on the surface which is a marriage of finance and technology.

As people are adopting new ways of managing and spending their money, especially online, credit rating agencies have started using alternative data sources for assessing the creditworthiness of the people with higher accuracy. These include activities related to mobile wallets, e-commerce, payment of taxes, etc.

So, the people who are not being careful with how they use their e-wallets are at the risk of damaging their own credit rating. In a year or two from now they can easily end up with no option but to find a loan for low CIBIL score.

By now, you must have a clear understanding of how your e-wallets can affect your credit report. So, be sure to pay heed to the following if you want to keep it in a good shape:

  • Contrary to what you may think, avoiding mobile wallets altogether could be a bad idea. This is because these may contribute to your score to some extent and taking them out of the picture can rob of that benefit.
  • Use your mobile wallets within limits. Don’t overspend, but don't underspend either.
  • Keep an eye on your bank account. If you identify any unfamiliar transactions, report to your bank immediately.

Mobile wallets are an important aspect of your financial profile, make no mistake about it. Although at this point it's more of a grey area, it's best to be prepared nonetheless.



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