Last updated on May 13th, 2020
The traditional leather wallet, pocketbook or purse accompanies us to work, to the mall, to the grocery store – wherever we go, our wallet goes with us too, except for when we leave it at home, or when we lose it. Without a physical debit or credit card, can you purchase any of the necessities you’ll spend money on over the course of an average day like gas, lunch, a snack at work, groceries? The answer may lie with digital wallets. Consumers expect their smartphones and tablets to make life easier, as more and more apps are available to help us simplify and improve everything from tracking expenses, booking flights and getting directions, to ordering food or even groceries to be delivered to our homes. In fact, paying for items online is becoming increasingly common; purchases can be made at millions of online stores. Using a digital wallet to make these purchases – both online, and in person – is not only fast and convenient, but it’s a safe way to make transactions without exposing your personal information. You won’t even need a physical credit card, as your account will be linked to your digital wallet.
What is a digital wallet?
Simply put, a digital wallet is an electronic device or an online service that enables the user to make electronic purchases online (over the Internet), or with a smartphone or other device in-person at a brick and mortar store. Often known as an “e-wallet,” a digital wallet provides a convenient, hassle-free method of payment for all kinds of goods and services. Think of it as a digital version of your credit and debit cards, stored in an app or online service that is easily accessible. Most people want flexibility when it comes to making payments, and a digital wallet affords us all a safe and easy way to pay for a variety of things.
How does a digital wallet work?
There are three major components that make up a digital wallet: the system (the electronic infrastructure provided by the issuer), the application (app) or software, and the device used by the owner of the wallet. A great example of a digital wallet is Apple Pay®, which allows its users to make payments in person, via iOS apps, and on the web; Apple® makes it easy, since their digital wallet can be used with many of their products including the iPhone, iPad, desktop Mac and even the Apple Watch. In this case, Apple’s technology would be the system; the devices listed above come with the app included in the iOS (the app/software), and the iPhone or iPad would be the device. As you could imagine, this means that paying for items with the digital wallet from Apple extremely convenient when you use their other products. When you sign up for your digital wallet service, you’ll be asked to enter personal information like your address, your credit or debit card number, and other relevant info. This payment information is stored in the app itself, not on your phone or computer. As an additional precaution, many of these apps require secondary authorization like a PIN or passcode, or a fingerprint. The app assigns each credit and debit card entered a unique virtual card number that is associated only with the digital wallet and mobile device you are using. The encrypted account information can only be accessed by the user, and if you lose your phone or tablet, you can lock your digital wallet remotely by signing into the service you use from a desktop or another device. This ensures that your information is protected, and that potential thieves will have a difficult time grabbing your information.
How do I get a digital wallet?
Digital wallets are fairly easy to obtain and are available to consumers free of charge. Many of us already use smartphones on a daily basis, and you may be surprised to discover that your device already has a digital wallet app on it. If not, you can download one from your online app store and follow the instructions to add your credit or debit information. Your credit card issuer may also offer their own version of a digital wallet service through their banking app, and of course you can utilize online searches through Google or Bing to find digital wallet providers. If doing all of this online makes you uncomfortable, you can also sign up for a digital wallet in person. Some banks, and many stores make this easy when you get to the register or teller, with applications ready for you to fill out and further instructions that detail how to set up a digital wallet account.
I signed up for a digital wallet. How do I use it?
An e-wallet is extremely easy to use. If you’re linking it to a smartphone, simply hold your device near a compatible payment terminal to make a purchase; alternatively, you can use an app for the transaction if you’re shopping online. Many of these digital wallet services make use of Magnetic Secure Transmission (MST), which is a technology that allows your digital wallet to communicate with most traditional payment terminals and even some ATMS. Look for stores and merchants that feature the contactless symbol, or who accept payments through your app or digital wallet service. Often, the service will provide a list of participating stores.
How safe are digital wallets?
While you’re not technically paying for a cash advance, you are withdrawing money against your credit card account, and that’s money that you’ll have to pay back. As mentioned above, cash advances bear high APRs, transaction fees, and no grace periods, so you will almost always end up paying more than what you took out.
What is the difference between a digital wallet and a mobile wallet? And, are mobile wallets safe too?
While the term “digital wallet” is often used interchangeably with “mobile wallet,” there is one important, albeit slight, difference between the two: A digital wallet is accessible via desktop, laptop or mobile device, while a mobile wallet is typically housed in an app on a mobile device like a smartphone or tablet. Don’t worry, though – mobile wallets are just as safe to use as digital wallets are, too – they function the same way, and are also encrypted and secure.
Digital wallet systems enable the widespread use of mobile and online payments via digital transaction systems, connecting the you and I (the consumers) with retail vendors, banking systems, and financers. As our technologies advance, so do the ways we’re able to pay for goods and services – and it’s never been easier for people to buy online. With a digital wallet, it doesn’t matter if you forget your credit card debit card, or cash at home – you’ll have an easy solution at your fingertips (or on your mobile device)!