Digital Wallets 101
You are standing in line at the store, ready to check out and fumbling around looking for cash or a card. Meanwhile, the person next to you simply holds their phone near the payment terminal. In a flash, they have paid for their merchandise and are out the door. How did they do that? A credit or debit card has been attached to their "digital wallet" which is then recognized by the merchant's payment terminal, authorizing the transaction. It is the same as if the card had been swiped or inserted, except touchless and faster!
Since the pandemic, digital wallets have soared in popularity as a form of "contactless payment" that does not require you to handle a payment terminal or others to touch your card. Digital wallets are also reported by users to be more convenient and secure than carrying around individual cards. And the contactless functionality can extend to other types of transactions, such as tickets, coupons, and more!
What is a Digital Wallet?
A digital wallet is an electronic method of securely storing and using your credit cards and other types of cards, tickets, and coupons so you do not have to physically carry these items with you. The merchant can complete the transaction securely without ever actually seeing these items.
How are Digital Wallets evolving?
The concept of contactless payment has been around for the last decade and has evolved based on specialized needs, including online payment vendors such as PayPal, Venmo and Zelle. And even retailers such as Starbucks and Chick Fil A have created apps that allow you to order and pay within their app. Then there are those apps that want to replace your entire physical wallet by securely storing multiple credit and debit cards, allowing you to select at each transaction which payment method to use. The most popular of these are Apple Pay, Google Pay and Samsung Pay. When you are checking out in a store, restaurant, or other retail establishment, look at the card reader for either a digital wallet provider's logo or QR code, or the sideways Wi-Fi symbol that indicates the presence of NFC (Near Field Communication).
Is a Digital Wallet Safe?
When compared to a traditional wallet the use of a digital wallet is safer:
- Your digital wallet is locked. Assuming if you have your phone locked when not in use, you must unlock your phone with either a fingerprint scanner, facial recognition, or a passcode to allow a digital wallet transaction.
- Your actual card number is never shared. When your payment information is sent over NFC waves, or over the internet via QR code, it is encrypted in the form of a "token". The merchant never receives your actual card number. If the merchant has a data breach and your token is stolen, a new token can be issued without changing your card number or replacing your physical card.
- Your card number is not stored on your phone. If your phone is lost or stolen your card number is not exposed like a physical wallet loss. And, even though your card information is not on your phone, most mobile phone manufacturers (Apple, Google, Samsung, etc.) and many third-party apps allow you to wipe the data from your phone remotely as an extra measure of security.
How Can I Help Keep My Digital Wallet Secure?
- When signing up for a digital wallet for the first time, make sure that you are on an official site for a reputable company before adding any personal information.
- Do not click on a link from an email or text message to begin the process.
- Keep your phone locked when not in use, and make sure it can only be unlocked with a strong password that is changed often, or better yet, use fingerprint or facial recognition instead.
- Keep your phone updated with the latest operating system and security patches.
- Sign up for banking transaction alerts on your accounts connected to your digital wallet so you can easily spot any unauthorized payments.
- Do not use public Wi-Fi when accessing your digital wallet app and other online accounts. Your usernames and passwords could be compromised.
Remember, if you ever see any suspicious transactions or you think you might be a victim of identity theft, let us know! We have professional Identity Theft Recovery Advocates standing by to work with you to investigate and resolve incidents of identity fraud, even if it occurs outside of our institution.