Picture this: You stopped at the store for a morning coffee. While standing in line, you reach for your wallet, and that sinking feeling hits – it's sitting at home on the kitchen counter.
Luckily, there’s no need to panic. If you’ve set up a digital wallet, paying for purchases is as easy as pulling out your phone.
Today, carrying around a bulky wallet full of cash and cards is becoming a thing of the past. Digital wallets allow you to store payment details and other financial information in a digital app, creating seamless transactions and providing a higher level of security.
While digital wallets can be convenient, they may also raise quite a few questions – from how to set them up to whether they’re really safe to use. The following guide explains what a digital wallet is and how it works so you can confidently decide whether this financial technology might be right for you.
What Is a Digital Wallet?
A digital wallet is a software-based digital payment system that securely stores payment information, like credit card and debit card numbers. This allows you to make purchases without having to keep physical cards or cash on hand. Digital wallets also hold other items, like coupons, loyalty cards, tickets, and even your identification, keeping a wide range of important information in a single location.
The information stored inside a digital wallet is encrypted[1]. This helps keep it secure inside the app and allows you to avoid exposing account numbers to potential skimmers and individuals who have ill intentions.
Digital Wallets vs. Mobile Wallets
The terms "digital wallet" and "mobile wallet" are often used interchangeably, but there is one significant difference.
A mobile wallet is a type of digital wallet that is specifically designed for use on mobile devices, like smartphones and smartwatches. They use near-field communication (NFC), magnetic secure transmission (MST) or QR code technology and are ideal for convenient, contactless in-person purchases. Digital wallets can be used for in-person transactions but also work with other devices, such as laptops and desktop computers.
How Do Digital Wallets Work?
With a few simple steps, a digital wallet can turn your smartphone or other connected devices into a versatile payment tool. The process starts with adding your payment cards to the wallet app. Depending on the app, you can typically either manually input card details or snap a picture with the app, which then reads and stores the information. Once a card is added, the digital wallet encrypts the data, helping to safeguard it against unauthorized access.
The process for using a digital wallet depends on where the transaction occurs. For in-person transactions, you typically open the digital wallet app and select the card you wish to use. Then, depending on the technology the store's system supports, you'll either tap the device to a contactless reader or show a QR code to the cashier to scan. Either way, the payment information is transferred without any contact.
When shopping online or within apps, you can often choose a digital wallet as a payment method at checkout. This typically bypasses the need to enter your card details manually, as the wallet auto-fills the necessary information.
Using this feature can save time, reduce the likelihood of an error, and help keep your data secure. Some digital wallets also store transit passes and event tickets, allowing you to gain entry by showing or tapping the device at the gate.
Types of Digital Wallets
A wide range of digital wallets is available, with different providers and formats to suit just about every lifestyle. Often, providers aim to offer a unique feature or service that differentiates their digital wallet from competitors.
Here’s a look at some of the most common digital wallets available today:
- Google Pay™
- Apple Pay®
- Samsung Pay™
- Garmin Pay™
- PNC Pay
- PayPal
In addition to digital wallet apps on smartphones, many smartwatches and fitness devices now also offer built-in digital wallets, allowing users to easily access payment options on the go.
Pros and Cons of Digital Wallets
Digital wallets are reshaping the way many people think about how they handle money. Like most tools, they have both benefits and limitations. Understanding the potential pros and cons can help you decide whether a digital wallet might meet your needs.
Advantages of Digital Wallets
- Convenience: With a digital wallet, your phone, smartwatch, or fitness device becomes an all-in-one payment tool.
- Speed: Transactions are quick and easy – just tap or scan, and you’re done.
- Security: Enhanced encryption means your actual card details aren’t directly used, reducing the risk of fraud.
- Organization: Many digital wallets allow you to keep loyalty cards, coupons, and tickets in one place.
- Contactless Payments: Contactless payments mean less handling of cash or touching public card terminals.
- Biometrics: Digital wallets are often locked with biometrics, making them accessible only to you.
Potential Drawbacks
- Limited Acceptance: Not all merchants are equipped to accept digital wallet payments, though this is rapidly changing.
- System Availability: If the phone battery dies, you might be left without access to funds. If Bluetooth or WiFi are not available or the electronic point-of-sale (POS) system isn’t functioning, you may not be able to complete transactions with a digital wallet.
- Tech Challenges: Less tech-savvy Individuals may find the setup and use of digital wallets challenging. Moving away from traditional payment methods sometimes requires a learning curve and adjustment period.
- Security Concerns: While digital wallets are secure, they are not immune to cyber threats. Losing an unprotected device could also expose your financial information. To protect yourself, make sure your mobile device has the most current system software and that appropriate security features are activated. This can include activating a two-factor authentication or biometric login on the actual digital wallet application.
Explore Digital Transactions With PNC
Digital wallets combine the security of traditional banking with the speed and convenience of modern technology. Whether you’re paying for groceries, managing loyalty cards, or securely storing tickets for the next big event, digital wallets can simplify your financial routine.
The added security, biometrics, and contactless interactions can also help keep you safe.
If you’re ready to experience the benefits of digital payments, PNC Bank is here to help. With PNC Pay, you use the PNC App on eligible devices to pay for transactions using your linked PNC Visa consumer and small business credit or debit cards. PNC Bank cards are also compatible with many mainstream digital wallets, including Apple Pay and Google Wallet. Learn more about PNC Pay now.
