Life Without a Wallet: Getting By Without Cash, Credit Cards

Life without a wallet is starting to be a very real possibility in the U.S., and the ability to make mobile payments on your phone and even smartwatch is a big reason. Apple's (AAPL) introduction of Apple Pay last year added to Google's (GOOG) (GOOGL) Wallet -- which will soon become Android Pay -- and these services may soon replace credit cards as we know them.

Merchants and credit card processors are rushing to add the products needed for them to accept mobile payments, and the rate of innovation is incredible. Let's look at the benefits and pitfalls of life without a wallet.

What You Need to Go Mobile

It's surprisingly easy to start using mobile payments, and many people don't even know that payment options are available on devices they already have. Apple Pay and the upcoming Android Pay will allow you to save credit card information with just a few taps of a button if you have a participating card. Since over 95 percent of the smartphone market runs on either Apple's iOS or Google's Android, it's likely this is an option for you.

From there, it's a matter of using your smartphone or connected smartwatch to pay at checkout. Tens of thousands of merchants are already accepting such forms of payment.

Innovation in Mobile Payments

In the past few months alone we've seen some big advances that allow mobile payments to play a bigger role in our lives. Mobile payments are now accepted at such common locations as McDonalds (MCD), Nike (NKE), Subway and Walgreens (WBA). Retailers adding mobile payments isn't all that much of a technological shift, since many point-of-sale devices take contactless credit cards, but it's the advances outside of retailers that have made going without a wallet truly possible.

%VIRTUAL-WSSCourseInline-884%Restaurants and bars have always been a big hurdle for mobile payments because tips were hard to add on a traditional point-of-sale device, and even mobile readers weren't all that mobile themselves. But that's changing. Mobile-payment company Square has made a reader that's mobile and software that allows tips to be added as well; that could push other companies to respond and lead to a flood of mobile payment options for restaurants and bars.

If more options like this are introduced from companies like PayPal (PYPL) or Intuit (INTU), the mobile payment revolution could flourish. Until it does, going without a wallet is possible sometimes, but other times it can be risky.

The Downside of Going Mobile

The most difficult thing about going without a wallet today is that it's not clear which merchants accept mobile forms of payment and which don't. There isn't yet a widespread display that says "We accept Apple Pay and Android Pay" like there is with the Visa (V), Mastercard (MA), Discover (DFS) and American Express (AXP) logos found near the entrance of many merchants. So, until you try to pay with a mobile payment system, it's tough to know whether it will be accepted.

Consumers going without a wallet also run the risk of their mobile device running out of battery. If your smartphone goes down, you could be sunk. A backup charger may be needed if you choose to go without a wallet full time.

Wallet-less Life Is Here, but Not Full Time

I've been living without a wallet occasionally for a few months now, and if I know that where I'm going will accept mobile payments, it's not a problem. But going outside of your normal purchasing patterns brings up the risk of shopping somewhere that isn't mobile-friendly, and that alone is enough reason to bring a wallet.

In the long term, I think nearly every payment processor will accept mobile options like Apple Pay or Android Pay; it'll just take time. It'll be like the transition from checks to credit cards, but much, much faster. In a year or two, life without a wallet will be a very real possibility. For now, it's a part-time reality that has a very bright future.

Motley Fool contributor Travis Hoium owns shares of Apple, MasterCard, McDonald's, PayPal Holdings and Visa. The Motley Fool recommends American Express, Apple, Google (A and C shares), Intuit, MasterCard, Nike, PayPal Holdings and Visa. The Motley Fool owns shares of Apple, Google (A and C shares), Intuit, MasterCard, PayPal Holdings and Visa. Try any of our Foolish newsletter services free for 30 days. Check out our free report on one great stock to buy for 2015 and beyond.