What is a digital wallet?
Have you ever been at a store getting ready to be rung up ... only to realize you left your wallet at home? Or you’re a digital shopper who dreads having to enter your payment and shipping information over and over again for multiple stores and apps. You aren’t alone — these are common frustrations. If you have a digital wallet these inconveniences may become a thing of the past.
Digital wallet technologies
A digital wallet is a contactless electronic payment method. They are sometimes also referred to as virtual wallets or electronic wallets. Digital wallets enable customers to save their credit or debit card on their mobile device to make payments online, in stores, or in apps. When you need to make a payment, you can use your digital wallet in much the same way as you might use your physical credit or debit card. Current digital wallets tend to use one or a combination of the following methods to enable payments:
Near field communication
Near field communication (NFC) allows your mobile device to interact with the NFC terminal to securely exchange data. NFC is a common method used by many digital wallets, including some of the biggest names in the industry.
QR codes
QR codes are specialized bar codes that can be scanned using either your phone’s camera or a designated app. This feature usually directs interested parties to a payment portal. Many third-party payment apps use QR codes.
Other ways to use digital wallets
Digital wallets have uses beyond just linking your accounts and cards to them. They can also store things like:
- Gift card balances
- Membership cards
- Coupons
- Tickets for travel or events
- Personal information
Are digital wallets safe?
The advent of new technology is almost always accompanied by some concerns. Security is always important, but even more so when it comes to sensitive financial information.
Digital wallets use tokenization to help keep your information safe during transactions. Tokenization means that your 16-digit card number is converted into a token of randomly generated numbers which is unique to that transaction.
Many digital wallets carry extra safety features such as data encryption and a PIN, password or biometric verification. Some digital wallets also create virtual card numbers for any linked credit or debit card. This helps to make your actual card information invisible to others.
In addition to the security measures that digital wallets have, it’s important to remain an astute and alert customer. While biometric verification is required to make purchases using your digital wallet, sharing sign-in information or leaving devices unlocked in public presents a general security risk to you. Exercising caution with your personal information is generally considered the best practice online.
How to set up a digital wallet
Setting up a digital wallet is designed to be a pretty user-friendly process. You’ll need to start by locating the wallet app on your smart device where you wish to enable payments. Most smart devices have a digital wallet already installed.
From there, locate the prompts to enter information for any accounts you wish to add to your digital wallet. You’ll most likely be directed to then authenticate this information in some way. After verifying your details, your digital wallet should be ready to go.
Alternatively, an increasing number of banks are providing customers the ability to add their card to a digital wallet directly from the bank’s mobile app. This can also allow some customers to start using a new card right away, before it arrives in the mail. Availability of this feature can vary based on bank eligibility rules. The steps to follow when accessing your bank’s mobile app may be:
- Sign in to your bank’s mobile app.
- Tap on your checking account to add a debit card, or tap your credit card to add that instead.
- Find a section within the app labeled "Digital Wallets."
- Tap on the wallet you’d like to add your card(s) to, and then tap the desired card(s) to add them.
- Depending on the wallet you may be asked to agree to some terms and conditions.
In summary
Digital wallets are an excellent example of how technology has expanded payment options. As an alternative to a physical wallet, a digital wallet can help make your payments convenient and secure — all in your smart device.
