What Is a Digital Wallet?

A digital wallet is an electronic service that securely stores your bank and credit card information, along with other account details, on your smartphone, smartwatch, or computer.

A digital wallet can also be used to easily store and retrieve event tickets and other documents. The technology behind digital wallets allows you to conveniently make payments without having to pull out your credit or debit card. Digital wallets are relatively easy to set up and convenient to use for everyday purchases.

Definition and examples of digital wallet

A digital wallet is an electronic service that stores and protects your banking and credit card information, allowing you to make contactless payments in store, online, or within apps. When you use a digital wallet, you don't need to swipe your credit card or enter your credit card information.

A digital wallet stored on a mobile device, such as a smartphone or smart watch, is called a mobile wallet.

Apple Pay is a type of digital wallet that can be used on Apple devices. Once you store your card information in Apple Pay, you can use the digital wallet to make in-person payments using your iPhone or Apple Watch, provided the retailer has the proper equipment. Or you can buy online or in the app when you see the Apple Pay logo.

How does a digital wallet work?

Digital wallets allow you to complete transactions in less time because you do not need to withdraw your payment card for online or in-store purchases or ATM transactions.

In addition to your preferred payment methods, some digital wallets allow you to store airline boarding passes, movie tickets, coupons, reward cards, ID cards, and even car keys. Certain passes or tickets within your digital wallet may be readily available based on your location. Or you can open the digital wallet to find the appropriate pass and scan it.

Your actual account information is not stored on your device, so businesses will not receive your full account number when you make purchases.

To make a payment in person with your phone or smartwatch, hold your device near the contactless-enabled credit card reader. Your device and the payment terminal send encrypted information to each other using radio frequencies.

Digital wallets include:

Apple Pay
Fitbit Pay
Garmin Pay
Google payment
PayPal
Samsung Pay
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Source: Investor Trading Academy

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