From Venmo to Apple Pay: How Digital Wallets Are Changing the Way We Pay

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4 min read

From Venmo to Apple Pay: How Digital Wallets Are Changing the Way We Pay

Forget carrying around a physical wallet, overflowing with tatty receipts for a flat white you bought back in 2019. It's officially the era of the digital wallet. And we're here for it.

As digital payments become increasingly common, digital wallets have emerged as a convenient and secure way to store and use payment information. But what exactly is a digital wallet, we hear you say?

In this article, we delve into what a digital wallet is, how it works, and the benefits of using one. But of course, where there are pros, there are cons. So we'll also take a quick look at any disadvantages of using a digital wallet too.

What is a digital wallet?

Digital wallets are virtual/electronic wallets that contain digital versions of credit and debit cards, stored in a mobile app on your mobile device or tablet. They offer a convenient way to make contactless payments using mobile devices.

Types of digital wallets include Apple Pay, Samsung Pay, and Google Pay, all of which let you make purchases in person, online, and in-app without needing to use your physical credit card or debit card.

Compared to a physical wallet, mobile wallet apps take less space, are integrated into something you're already carrying with you (your mobile phone), and are super quick and easy to use. No more fumbling around trying to find your bank card.

Types of digital wallets

There are several types of digital wallets available, including:

Closed wallets: These types of digital wallets are issued by a specific retailer or service provider, and are used to make purchases with that retailer or provider. Amazon Pay is a great example of a closed wallet
Semi-closed wallets: These digital wallets are less common and can be used to make purchases at multiple merchants or service providers within a defined network
Open wallets: Open digital wallets can be used to make purchases at any merchant that accepts digital payments. PayPal is the perfect example of an open wallet

How does a digital wallet work?

Digital wallet payments work by using near-field communication (NFC), Bluetooth, wifi, magnetic secure transmission or other methods to send the information from your phone to the card reader.

Here's how to start using a digital wallet:

Install digital wallet app: Search for Apple Pay, Google Pay, Samsung Pay etc in your mobile device app store and hit install
Add debit and credit cards: this is pretty straightforward and done via the digital wallet app itself — just follow the instructions
Tap and pay: Then, when you're ready to pay for something, simply pull up the digital wallet app on your mobile device, choose the payment method, tap the card reader, and you're done

Contactless payments couldn't be easier.

What can I store in a digital wallet?

Digital wallets don't just store credit and debit cards. Most digital wallets can also be used to store loyalty cards, gift cards, coupons and sometimes even important documents like your driver's license and other types of ID or documents.

What are the benefits of using a digital wallet?

Convenience: No need to carry a clunky physical wallet filled with chewed-up bank notes and long-forgotten store cards. Digital wallets allow for quick and easy payments, with just one tap
Security: Of course, there's always a risk with digital platforms, but all of the popular digital wallet apps use advanced security measures to protect payment information. This can actually reduce the risk of theft and fraud
Flexibility: You can store as many payment methods as you like in your digital wallet, and you can switch between them with a quick swipe

What are the disadvantages of digital wallets?

Incompatibility: Alas, not all businesses and online merchants accept every type of digital wallet payment, which can be pretty annoying if you've not got another payment method with you. Our advice? Although many merchants accept digital wallets, remember that not all do. Carry a backup credit or debit card just in case
Dependency: Uh oh, phone battery dying? Lacking signal? (hint: you won't be if you sign up to a Circles Life plan). Digital wallets work best when connected to the internet and you'll also need to make sure your phone is always powered up and ready to go
Security: A digital wallet can be vulnerable to security threats such as hacking, identity theft, and unauthorised access if you have not taken steps to protect your phone (such as passwords, locked screen etc)

Popular digital wallets

Let the Apple 'v' Android 'v' Google debate commence! The digital wallet app you choose will likely be dependent on the device or operating system you have.

Apple Pay: Apple Pay is a digital wallet available on Apple devices
Google Pay: Google Pay is a digital wallet available on Android and other devices
Samsung Pay: This digital wallet is available on Samsung devices
PayPal: The PayPal digital wallet is available on multiple devices

Whatever mobile wallet app you choose, contactless payments will be a breeze.

Concerns and limitations of using digital wallets

More retailers accept mobile payments than ever before, and Apple Pay and other digital wallets go to incredible lengths to make them as safe as possible.

Mobile payments like Samsung Pay, Google Pay, and Apple Pay are widely recognised as highly secure methods of payment. In the UK, Apple Pay even ran an ad campaign about how secure digital wallets are against theft and fraud compared to traditional bank cards, which can be used by anybody if lost or stolen.

Digital wallets use various types of encryption technology to scramble users' password and financial information. Mobile wallets also use 'tokenisation', which replaces your complete credit card number with a randomly generated number, or 'token'. This is why a digital wallet is able to offer such a high level of security.

The biggest risk with your mobile wallet is if you lose your phone, or it's stolen. If your phone isn't locked and protected, a thief could use your digital wallet to drain your bank account faster than you can say 'hey, where's my phone'.

But, unlike a physical wallet, there are things you can do to protect your digital wallet.

Set up secure passwords: Set up a secure password, swipe code or biometric login (which is the most secure option)
Always lock your phone: Ensure your phone is set to lock automatically
Install security apps: Install an app to help you locate your phone if you lose it. There are also apps that let you wipe your data remote

Is public wifi safe?

Public wifi should be avoided while using digital wallets, as these types of networks can be easy to hack.

If you do need to use it, but you're wondering how to use public wifi safely, you could consider a Virtual Private Network (VPN) which encrypts your data. Also, always keep your anti-virus software up to date.

But, for maximum security, it's always best to avoid sensitive transactions like banking when connected to public wifi. If you need to complete contactless payments using your digital wallet, use your mobile data instead.

Digital wallets: our final say

It's pretty clear that physical wallets are going, going, gone and the digital wallet is here to stay. With the ease and convenience they offer, it's easy to see why.

Just remember to take those extra steps such as using strong passwords (no, password2023 doesn't count), enabling two-factor authentication, and saying 'no thanks' to public Wi-Fi networks. Sign up to Circles Life today.

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Published Date 2023-05-02

Written by Circles.Life

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From Venmo to Apple Pay: How Digital Wallets Are Changing the Way We Pay