Digital wallets, e-wallets, and mobile wallets have transformed the way consumers make payments and transactions. In 2023, over half (53%) of Americans used digital wallets more often than traditional payment methods.1 However, consumers have also shown concern around the safety of mobile payments and digital wallets.2
This article looks at digital wallet security — highlighting the advanced technology used to keep transactions safe — with some practices to ensure personal information stays as secure as possible when using digital wallets.
A digital wallet is an app or software platform that can facilitate secure and convenient purchases without the need for physical credit or debit cards.
Digital wallets can store multiple forms of personal payment information and communicate selected information to vendors and merchants to complete transactions.
Digital wallets may also be able to store a range of other personal information, including tickets, licenses, subscriptions, memberships, reservations, and loyalty program details.
There are also mobile wallets, a form of digital wallet stored on a phone or mobile device that can be used for purchases online or in-store at point-of-sale (POS) terminals.
Digital wallets come with built-in security protection to help keep personal and payment information safe. These measures commonly include:
Digital wallets create coded "tokens" for every unique transaction rather than transmitting actual credit card or account details.
Tokenized payments are an anonymous and secure way to transfer sensitive data, helping reduce the risk of personal information falling into the wrong hands should a merchant’s system be compromised.
Security encryption is an advanced technology that "scrambles" personal payment data, making it unreadable to hackers and any unauthorized individuals who might try to intercept it during a transaction.
Two-factor or multi-factor authentication (MFA) security adds an additional layer of protection to a digital wallet. Multi-factor authentication requires numerous forms of identity verification in addition to a basic password. This ensures the user is properly authorized for access to make transactions. This might include, for example, a biometric fingerprint scan, a PIN or code sent to a phone or email, or facial recognition.
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There are additional measures to keep in mind when using a digital wallet to make transactions. These can include:
Compare digital wallet transactions with current bank statements to observe any suspicious activity. If detected, report potential digital wallet scams or credit card fraud to the bank or provider immediately. When used responsibly, digital wallets can be a safe, secure, and highly efficient way to make purchases and transactions.
Always choose a reputable provider, ensure the wallet is downloaded directly from the source, and follow strong digital wallet security practices for best results.
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