Article summary: Payment apps can make it easy to send and receive money using your smartphone. Find out what makes them special — and how pairing one with your banking app could be helpful.

Sending and receiving money is easier than ever thanks to payment apps. These apps, which you can download to your smartphone or tablet, let you transfer money electronically to other users or vendors — often in seconds. So, friends can pay you back for pizza night, or you can buy goodies from your favorite food truck, with a click or a tap.

In a recent study by Pew Research, 76% of Americans said they have used a payment site or app. (These apps include Venmo, Cash App, PayPal, and others.) But does that mean a payment app is right for you? What can a payment app even do? More importantly, do you even need a banking app if you have a payment app?

Let’s look at some key differences between payment apps and banking apps, learn what they have in common, and see how they might work together to give you more control over your finances.

HOW ARE PAYMENT APPS DIFFERENT FROM BANKING APPS?

Both payment apps and banking apps can help you manage your money, but they have different purposes. Because of that, what you’re able to do with your money is different depending on which type of app you’re using.

Payment apps. These focus on peer-to-peer digital transactions. That means people who use these apps can quickly and easily send money to — or request money from — other users without using physical cash or cards.

Some payment apps like Venmo, Cash App, or PayPal are widely accepted by online and in-person shops. This makes it easy to use payment apps to buy the things you want or need. Payment apps may also let you connect multiple accounts, and you can then specify where the money comes from or goes to for each transaction. This might come in handy if you have multiple bank accounts or cards to choose from.

Banking apps. Your bank’s mobile app is primarily designed for managing your bank accounts, transferring funds between accounts, and paying bills. It can also give you access to other products and services your bank offers, like financial planning and investments. The bank’s app may also make it easy to budget and track spending.

Some banks may integrate a payment app as part of their services. If you make a payment from or receive money through your bank’s payment app, the transaction will be tied directly to an account you have with that bank.

PAYMENT APPS AND BANKING APPS DO HAVE THINGS IN COMMON

Payment apps and banking apps have distinct purposes, but they do share some common features and functions.

  • Security. Both types of apps have security features to prevent others from accessing your financial information or using your account without your permission. These are things like encryption and multifactor authentication, which requires the person logging in to prove they are the account holder. These features also keep your transactions safe.
  • Ease of use. Payment and banking apps are both typically easy to set up, connect to your accounts, and use.
  • Convenience. Users can access payment apps and banking apps using smartphones or tablets anywhere there is an internet or mobile connection.

Typically, the easiest way to access money in a payment app is to connect it to a bank account. You don’t need a bank account for some payment apps, but there may be restrictions or fees when transferring money in or out of your payment app balance.

ARE BANKING APPS MORE SECURE THAN PAYMENT APPS?

Both banking and payment apps prioritize security and protection of users’ financial information. However, banking apps may offer extra protection through federal bank regulations, like the Federal Deposit Insurance Corporation (FDIC), which insures deposit accounts, up to $250,000 per depositor, per ownership category at FDIC insured institutions. Also, banking apps often provide features like fraud alerts to lower your risk of theft or fraud — and they may let you freeze a card if it gets lost or if you notice unauthorized transactions.

Some payment apps might allow you to deposit a check or receive direct deposits from your employer. But since a payment app is not a bank account, any balance you have in the app is not insured by the FDIC.

Here are additional ways to stay safe when using banking and payment apps:

  • When choosing a payment app, choose a well-known app from a trusted source, like your smartphone’s official app store. Also, read the app’s reviews to make sure it’s right for you.
  • Use strong passwords for your app to lower the risk of someone logging on without your permission. Avoid using birth dates or names for your password.
  • Turn on extra security like multifactor authentication, which requires you to prove you’re the person who should be using the app.
  • Monitor payment activity on the app to make sure no one is accessing your financial information without your permission.
  • Watch out for fraud, which could include strange emails, texts, or phone calls asking you to provide private information.
  • Lock your device when you’re not using it. Also, turn on login features that require a code, fingerprint, or facial recognition to unlock your device.

WHICH TYPE OF APP SHOULD YOU USE?

Banking apps and payment apps each fill different needs, depending on the situation. Which one you choose depends on what you’re trying to do. It’s important to remember that a payment app cannot do everything a banking app can, but having both could give you more control over what you can do with your money.

For instance, you could deposit checks and monitor your account balances with your banking app. You could even use it to make payments to friends and family. But if you need to send funds to friends or make purchases using a payment method outside of your bank account, a payment app may be useful.

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