DEFINITION
Digital Wallet
A digital wallet is a software-based system that securely stores users’ payment information and passwords across different payment methods and accounts. This is done so that users can make electronic payments via different devices, such as their phone or computer, as opposed to carrying cash or their credit card.
Payments via a digital wallet are typically performed by utilizing NFC or QR technology or by relying on online payment platforms. Some digital wallets can also store things such as loyalty cards, coupons, and even IDs for added convenience.
Synonyms
E-wallet, mobile wallet, virtual wallet
Acronyms
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Synonyms
E-wallet, mobile wallet, virtual wallet
Acronyms
–
Examples
Google Pay, Apple Pay and Venmo are all popular digital wallets that allow you to connect your bank account to their apps and perform transactions via your phone or their online portals. Recent years have also seen the rise of crypto wallets, which serve a similar purpose but connect to the blockchain instead of a traditional bank and provide private key management.
FAQ
How does a digital wallet work?
A digital wallet fundamentally just remembers the user’s banking information and then utilizes NFC or QR technology to send that information to the merchant. It also has a layer of security via advanced encryption and tokenisation features.
Are digital wallets safe?
Generally, yes. Through the use of encryption, tokenisation, 2FA, password/biometric locking systems and fraud detection mechanisms, digital wallets are very secure. In fact, they can be seen as more secure than physical cards as even if the phone is stolen, the responsible party will have a harder time withdrawing any funds due to the protective measures in place.
What are the benefits of using a digital wallet?
Digital wallets are the most convenient way to make everyday transactions for many people as they are fully contained on your phone. Therefore, there is no need to carry cash or even a credit card. Furthermore, digital wallets offer some added advantages, such as faster processing and the ability to easily link them to budgeting and similar financial tools.
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