Digital Wallets: What Are They and How Do They Work?
Digital wallets have been emerging as an alternative to traditional payment methods like cash or credit cards. Digital wallets store payment information and allow you to easily and conveniently pay for purchases online and in stores.
So what is a digital wallet and what differentiates it from other means of payment? Here’s everything you need to know about digital wallets, from how they work, to benefits, and how to use them.
What is a digital wallet?
A digital wallet (also called an electronic wallet or e-wallet) is an electronic payment method that stores your payment information - cards, cash, or bank accounts - and which you can use to make payments in-store and online.
You can think of digital wallets as a digital equivalent of your physical wallet. Digital wallets store funds and payment information the same way a wallet holds cash, cards, or cheques.
If the names ApplePay, Google Wallet, Samsung Pay, Venmo, Cash App (to name a few) sound familiar, then you’re likely to have used a digital wallet by now.
In recent years, digital wallets have become increasingly popular, and analysts estimate they even surpassed cash at point-of-sale payments in 2020.
So how does a digital wallet work?
A digital wallet is essentially a financial application that you can use on your device such as a computer, a mobile phone, or a wearable device like a smartwatch. It allows you to store many different payment methods, from a cash balance to credit or debit cards, bank accounts, and even gift cards or loyalty cards.
To pay with an e-wallet, you need to either have available funds in your wallet or link your card or bank account information. You can add funds to your digital wallet via an online money transfer from your bank account, card, or other digital wallets.
You can make payments using your available balance or one of your stored payment methods.
To use your digital wallet with physical merchants, just hold your device over a point of sale (as you would a card) and your payment data is automatically read via your phone’s Bluetooth, NFC, or WIFI connection.
Many online stores also provide the option to check out using a digital wallet. In this case, you’ll pay seamlessly and quickly without having to enter your card information.
Are digital wallets safe?
The short answer is yes. Digital wallet apps are a secure way to make payments both offline and online.
The long answer? Still yes. Here is what makes digital wallets a secure way to pay:
Your phone and your wallet application are protected with a passcode, swipe code, or biometric authentication, offering an initial layer of protection;
- Your actual payment data (credit card number, CVV code, bank account number, etc) is never visible or displayed when you make a payment using your digital wallet;
- Your payment data is encrypted, which makes it unreadable and therefore secured;
- Your card company and your bank also keep an eye out for fraudulent and unauthorized transactions and are likely to block suspicious activity.
Why pay using a digital wallet?
Digital wallets, like peer-to-peer money transfer applications, boast a number of advantages that enhance the way we pay, transfer, and manage our money.
Here are just some of the benefits of paying using e-wallets:
1. They’re convenient
Digital wallets enable you to pay quickly and easily, without the hassle of carrying cash or cards around. Because they allow you to store many means of payment, you have the flexibility to switch between payment methods as you see fit. In online payments, digital wallets speed up the checkout process and make payment data entry a thing of the past.
2. They’re secure
Digital wallet transactions are secured with multiple layers of protection that keep your sensitive payment information away from prying eyes. And with everything stored electronically, the risk of having your cards or cash lost or stolen is considerably reduced.
3. They’re versatile
Digital wallets can serve for more than purchases; they can be used to pay bills or transfer money, and can help you save because they give you a detailed picture of your financial health.
Is Fin.do a digital wallet?
Fin.do is not a digital wallet. Fin.do is a card-to-card money transfer app which enables you to transfer money abroad in seconds using Mastercard and Visa cards.
To use Fin.do, simply add your card(s) to the app (credit, debit, virtual, gift, or prepaid cards) and start transferring money to more than 50 countries.
Here is what differentiates Fin.do from digital wallets:
- You don’t need to add or store funds in order to send money via Fin.do;
- Money arrives in seconds, directly to the recipient’s card;
- You can send and receive all tradable currencies using any card.
How to use Fin.do with a digital wallet
Fin.do helps you move money between cards instantly, which makes it easy to transfer funds to cards in your digital wallet(s).
So how can you use Fin.do to manage your digital wallet?
- Add money to a card in your digital wallet
Use Fin.do to top up a card as an alternative to depositing cash at an ATM or making a bank transfer which takes several days to complete.
- Avoid currency exchange fees
Use Fin.do to transfer any currency to card(s) in your wallet. No matter which currency you transfer with Fin.do, you always see the final exchange rate upfront and there is no currency conversion markup fee on top of the exchange rate.
- Move money between wallets faster
If you want to transfer money between cards in different wallets, use Fin.do and the transfer will complete in a few seconds or minutes, no matter when or which currencies you transfer.
Digital wallets are a simple, secure, and popular alternative to cash, card, and bank account payments. Thanks to their convenience, ease of use, and versatility, digital wallets are becoming a preferred way by many consumers to pay for purchases both at point of sale and online.
A digital wallet works with your existing payment methods (cards or bank accounts) or with a cash balance.
To manage your wallet more easily, use Fin.do whenever you need to top up a card, move money instantly between accounts, or transfer a different currency from your wallet’s currency.
You can get started with Fin.do here.