Mobile wallets have terrible UX. That's one problem. 

But more importantly, do they not have terrible security too? It seems like a huge downgrade from hardware wallets. 

What am I missing?

(I hope the answer is not "passkey wallets" because that seems even worse.)

The majority of finance is now on mobile for better or for worse. Also mobile pretty much has the same tech in the hardware wallet.

Where/how? I don't understand. For starters your mobile wallet is connected to the Internet.

Asian countries. Tradfi bank funnels people to manage their bank account/investment on the phone!

Sorry, I mean: where are the mobile wallets giving me the same tech as hardware wallets, or how do I do this?

Oops, I just researched and found out that while the same tech existed on phone/HW wallet, you can't just it with cryptocurrency stuff because it uses different algorithm, and you can't back up the key that generated inside the enclave. If you use the one with Account Abstraction (and passkey) it will use those fancy enclave.