What is a digital wallet and do you really need one?
You know how it goes. One day you hear about something that had not previously been on your radar. Then it just keeps cropping up all over the place. You can’t imagine why you had never come across it before.
Digital wallets are a bit like that. You may not really be aware of them, but once you hear the term, you start noticing it everywhere.
But what exactly is a digital wallet? Where can you get one? What could you use it for? And are digital wallets safe?
Let’s take a look.
What is a digital wallet?
A digital wallet is one method of contactless payment. Contactless payments grew globally by 53% in 2020, due partly to the Covid-19 pandemic.
There are three main methods of contactless payment:
- contactless cards
- digital wallets
- QR code payments.
A digital wallet is an encrypted payment system that you can access on your smartphone or computer. It can store information about your debit and credit cards, and also other items of value or significance, such as your driving licence, membership cards, e-tickets, and gift cards.
If your digital wallet is stored on your phone it means that you can use your phone to pay instead of a physical debit or credit card. If shopping online, you can use the digital wallet app and select the card you want to pay with. If you are in a shop that accepts digital payments, simply tap your phone onto a digital payment terminal i.e. one that accepts contactless payments. The terminal uses a technology called NFC (Near-Field Communication) that enables devices to transmit and receive data within a very short range.
Where can you get a digital wallet?
In the UK four of the currently most popular digital wallets are:
Click on the above wallet you are interested in to find more about how to register for one.
They all function slightly differently:
- Google Pay is both internet and device-based; Samsung and Apple Pay just device-based.
- Most enable you to save card details and/or a default payment method; Apple Pay also uses Face ID or Touch ID to make a payment.
- All of the above digital wallets can be used online, and most also in participating stores, although it is less common to see PayPal in this context.
Let’s take a more detailed look at the various ways you might use your digital wallet.
What are digital wallets used for?
Users of digital wallets appreciate the convenience of being able to do any financial transaction quickly and easily from their mobile phones. They also do not need to carry a physical wallet for cards or cash so it can be more convenient when out and about.
Some examples of where digital wallets can be used instead of cards or cash are:
- Online shopping
- In-store shopping (if contactless is accepted)
- Travelling abroad: digital wallets can operate in any currency
- When using any type of cryptocurrency
- Transferring money between different accounts.
You may also find that some retailers and other businesses have reward or incentive schemes for customers who use smartphone digital wallets.
Are digital wallets safe?
Whilst digital wallets are very convenient, some people have concerns about how secure they are.
In many ways it could be argued that they are safer than cards. If you lose a contactless card, it can easily be used by someone else, perhaps before you even realise it has gone. But most digital wallets require you to login and/or perform some kind of authentication before you can pay for a purchase. Information you store in a digital wallet is also encrypted for additional security.
Some digital wallets also have limits on either the size or number of transactions, which could help to protect you if it does fall into the wrong hands.
Obviously you do need to be very careful not to lose your phone if you are out and about, especially if it is your only form of payment. Ensure that you guard it carefully, and also consider installing a tracking app such as Find My Phone to give you a better chance of finding it if it does go astray.
Also, as with any kind of digital device, you need to take some basic security steps to protect yourself from hacking or fraud. For example:
Select a password that is not obvious or easy to guess, and change it regularly.
- Do not share your password or PIN with anyone else.
- Don’t use any email links to enter your wallet. Always go via the website or the app.
- Be careful to check out the trader when buying with a digital wallet, to ensure it is not some kind of scam.
- Don’t leave your digital wallet open on an unattended device, even for a short time.
We hope that the above information has helped you to understand more about digital wallets, and decide whether or not it would be helpful for you to have one.
If you are currently in the process of reorganising your finances, remember that Advantage Loans offer quick and easy short term loans that may help to bridge any gaps until you get things sorted.
Check back here soon for more financial and lifestyle tips from Advantage Loans.