What’s a Digital Wallet?

What’s a Digital Wallet?

by | Feb 23, 2022

Digital wallets make it possible to shop without using plastic cards. So, if you left your physical wallet at home, it wouldn’t be a problem because you can still make purchases on your phone. Here’s more information about a digital wallet and if it’s right for you.

What is a Digital Wallet?

A digital wallet, also known as an e-wallet, is a system that stores the payment methods and passwords you use with various websites in one place on your phone for quick and easy payments. It also allows you to use your phone’s near-field communications (NFC) technology to make purchases with your phone as you would with a plastic card.

How Digital Wallets Work

A digital wallet is an app you can use to store credit card information, gift card information, loyalty cards and coupons for each website you use. You receive the same perks as you would if you used your physical cards. To use your digital wallet in-store, open the app, tap the virtual card you want to use and tap your phone to the point of sale (POS) device like you would with a plastic card.

Digital wallets are more secure than physical cards. There are four layers of security that protect your transactions: the app, the store, the credit card company and the bank. It’s also highly encrypted if a store you’ve purchased from experiences a data breach.

Benefits and Risks of a Digital Wallet

There are benefits and risks of using a digital wallet:

Benefits of using a digital wallet

Security: Digital wallets are more secure than physical cards. When you make a purchase, the app uses a unique number the merchant can see instead of your actual card number. It also requires verification, such as your password or fingerprint.

Convenience: A digital wallet allows you to keep all your credit cards, gift cards, loyalty cards and coupons in one place, so you don’t have to worry about misplacing them.

Speed: A digital wallet transaction is usually processed faster than a physical card. Since most people have their smartphone readily available, the payment process is quick and easy.

Versatility: A digital wallet gives you another way to pay for the things you need. If you forget your wallet at home, you can easily use your phone to pay for purchases.

Risks of using a digital wallet

Phone theft: Make sure you have a strong password for your smartphone. If you don’t, someone could access your payment methods.

Wi-Fi breach: If you make purchases over an unsecured Wi-Fi network, you leave yourself vulnerable to theft.

Personal liability: If a thief makes fraudulent charges to your credit card or debt, the issuing bank or credit card company won’t hold the cardholder responsible. The same insurance doesn’t yet apply to digital wallets, so you may have to pay for all charges.

Keeping Your Digital Wallet Safe

Here are some tips to help keep your digital wallet safe:

  • Use a different strong passcode for your phone and your digital wallet app.
  • Be discreet when unlocking your phone or digital wallet.
  • Only make transactions over a secure Wi-Fi network.
  • Install extra security on your phone.
  • Finally, use credit monitoring to check for fraudulent activity

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*Source: Fair Isaac Corporation.

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