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What Is a Digital Wallet?

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Last editedNov 20213 min read

Are you tired of carrying around a bulky purse or wallet? Good news: you can now use your smartphone or other mobile device as an all-in-one communication, entertainment, and payment station. It lets you pay for items securely with a single tap or swipe, but what is a digital wallet, exactly? Here’s a closer look at how digital wallets work, as well as how to choose the best one.

Digital wallets explained

Sometimes referred to as an e-wallet, a digital wallet is usually a mobile phone app designed to store all your payment information in one place. You can link it to credit cards, bank accounts, and gift cards. When you swipe or tap your digital wallet, you’ll be able to make a secure, electronic payment without any need to present the physical card.

You can also use digital wallet apps to store additional items that would be present in a traditional wallet. For example, many e-wallets have space to hold your transportation passes, concert and movie tickets, customer loyalty cards, and official ID.

What is a digital wallet purchase?

Now that we’ve covered what a digital wallet looks like, what is a digital wallet purchase? You can use a digital wallet to purchase any of the same goods or services that you would access with cards, cash, or any other type of payment. Purchases can be made online or in-person, depending on the app and payment methods you’ve selected. With a digital wallet app, you can also use your mobile device as a stand-in for paper tickets.

How does a digital wallet work?

Whether housed on your personal computer, smartphone, or both, a digital wallet serves as a central platform to connect all your financial and personal details. For maximum convenience, you’ll want to download a digital wallet app on your phone so that you can make in-store payments with a single tap. This works by using contactless technology or magnetic secure transmission. To use your digital wallet, you’ll need to check the POS compatibility first. Most are now set up to accept contactless payments.

How to use a digital wallet

When figuring out how to use a digital wallet in a store, you’ll first need to ensure that the retailer accepts contactless payments. If you already have the app downloaded, you can hold your phone up to the terminal and the payment will be taken from your linked account. In some cases, you’ll need to verify the transaction with biometric security such as facial recognition or fingerprints.

However, you can also use a digital wallet online. When you reach the checkout page of any online store, you can select the appropriate app, whether it’s Apple Pay or PayPal. Your e-wallet will then take care of the rest by automatically filling in the payment information for you, making online checkout a faster and easier process.

The best digital wallets

There’s a multitude of payment apps out there, so how can you choose the best digital wallet? Here are a few of the most popular options.

1. Apple Pay

One of the most well-known digital wallets is Apple Pay, available for all Apple Watch and iPhone users. You can use it in-store by verifying your identity with your usual PIN or Face ID. The app holds entertainment tickets and transportation passes, as well as multiple forms of payment.

2. PayPal One Touch

If you already have a PayPal account, it couldn’t be easier to download the One Touch app. This lets you bypass the usual login and password stage for instant payments, both in-person and online. However, you will need to pay PayPal’s usual fees if using credit cards or converting international currencies.

3. Venmo

Also owned by PayPal, Venmo is a peer-to-peer platform that lets you transfer money to friends and family. This mobile wallet enables free transfers between app users. If you want to use it to make payments for retail goods or services, you’ll pay transaction fees to use a credit card.

Additional options include Samsung Pay, eWallet, Fitbit Pay, and Zelle, with the number of digital wallets growing every day. These services offer a range of benefits. Not only are they more convenient than lugging around an overstuffed physical wallet, but they ensure a faster payment process. They’re also more secure, preventing the hassle of dealing with lost or stolen cards.

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Interested in automating the way you get paid? GoCardless can help

Interested in automating the way you get paid? GoCardless can help

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