Digital Wallets

Overview

Digital wallets allow people to hold, send, and receive money through electronic transactions. A digital wallet is just a tech update to the traditional, physical wallet you might keep in your pocket or purse. Most digital wallets have all the functionality of regular old wallets, the big difference being that you can access them through connected devices like a computer or a mobile phone.

The first digital wallets were created for online shopping. Websites like eBay needed a solution for return shoppers to make faster transactions, rather than adding their payment information with every different purchase.

Mobile payment options progressed, and in 2014 Apple Pay expanded the use of digital wallets to all iPhone users. Today, we can do everything, from buying groceries at the store to instantly sending and receiving money, from the convenience of our smartphones.

How does it work?

Digital wallets basically store bank account and card information securely on a device or profile account so that you can easily and quickly make purchases. Within the swipe of a finger print and a wave over a payment terminal, your digital wallet can pay for goods.

There are two main types of digital wallets:

  1. Device-based and
  2. Internet based

Device based digital wallets

This type uses near field communication (NFC) technology to allow users to pay for purchases without handing over a credit or debit card. Instead, customers can wave their phone or other NFC capable device near a contactless reader. Visit our web page 'Contactless Payments' for further information.

Certain smartphone manufacturers make mobile devices work with magnetic strip payment terminals, this means they can be used even if contactless payments are not accepted.

Examples of device based digital wallets are Google Wallet and Samsung Phone, although Google Wallet can also be used as an internet wallet.

Internet based digital wallets

This type lets customers add credit or debit card information to a personal account or profile. Information is kept on file and when customers make an online purchase, they sign into their account and use it to pay for their purchase. This internet based digital wallet allows users to pay for online purchases without providing their card details to the website from they are shopping from. PayPal and Google Wallet can both be used with an online profile.

Internet based digital wallets are most commonly used for paying for products from a website, but may also be accepted as a payment method for fast food, delivery services, tickets, and other prepaid purchases.

What are the benefits of a digital wallet?

  • Digital wallets offer enhanced security, convenience, and financial flexibility
  • Users to transfer money instantly between linked accounts when needed
  • Some businesses, like coffee shops, reward return customers who spend on a branded smartphone app
  • Many retailers accept digital wallet payments
  • International travellers can use digital wallets with whatever currency they need
  • Anyone holding crypto currency will use a digital wallet
  • They are free to the consumer
  • Some work with without wifi

Can I use a device based wallet offline?

You would need to check with your particular provider but yes, it is possible to use digital wallets offline:

  • Some digital wallet apps use sound wave technology, with this type you do not need any wifi connection, your device basically connects by audio emitted from an app on your device
  • You may be able to use offline with a restriction limit, for example, Samsung Pay limits to 10 offline transactions

Major digital wallets

You have probably heard of some of the main digital wallets even if you are not really sure what they do, there are a growing number out there to shop around for but the list below features some popular ones:

  • Google Pay - internet and device based
  • Paypal - internet and app based (probably the most famous of all due to eBay)
  • Samsung Pay - device based and can be used with magnetic payment terminals
  • Apple Pay - device based

Disadvantages of a digital wallet

  • Technology problems
  • Glitches, outages, and innocent mistakes can cause problems, leaving you without the ability to buy things when you need them
  • If your device is stolen and hacked, you could be left without money until it is resolved with your bank, be security aware at all times
  • You literally cannot afford to run your mobile out of battery power if you only use your digital wallet
  • Although digital wallets are in the main free, what is the catch? It is likely that your spending is being tracked to advertise products that you might like. This already happens through internet browsing but your spending patterns used to rest with your personal bank, this will be old news using a digital wallet.
  • There are usually transaction limits so you will likely be restricted and not be able to use for large purchases

Digital wallet security

  • Do not share your digital wallet password or PIN with anyone and select a password that cannot be easily guessed, visit our web page 'Create Secure Password' for more information
  • Make sure you change your digital wallet password or PIN regularly, or immediately if you suspect that someone might know it
  • When accessing your digital wallet via your smart device or at your PC (for example, to check your account balance or to add the details of an additional card), if not using an app, always type the URL into the browser, do not enter the wallet via email links
  • When shopping online with your digital wallet, make sure you check that they are a legitimate trader, before payment. Check there is a physical address, not a PO Box, for example.
  • Think carefully before removing any security controls from your smart device: this is known as jail breaking or rooting your device. This will weaken the security of your device, and expose you to additional risks.

What to do if you suspect misuse or fraud?

  • If you spot any unauthorised entries on your bank account, contact your bank immediately
  • If you are a victim of fraud you have legal protection which means that you will not be liable for any losses unless you have acted fraudulently or without reasonable care
  • If you think that you may have given information to a fake website, or if you believe that any of your passwords have been grabbed by malware, contact your bank immediately