What is a Digital Wallet?
Digital wallets are an online payment method, usually in the form of an app. They store your payment options, such as credit or debit cards, providing you with a convenient form to make your payments using your smartphone or smartwatch.
Plus, you can also store:
- Gift cards
- Membership and loyalty cards
- Digital keys (example: car, house, and so on).
How Does a Digital Wallet Work?
A digital wallet uses software in the form of an app to link your payment data from your registered bank account to the vendor with which the transaction is being made.
Different apps allow different access. For example, open wallets (the ones accepted at most retailers) enable online purchases, contactless payments, cashback and may even enable withdrawals at selected ATMs.
Semi-closed and even closed wallets permit certain transactions with a specific group of retailers, or, in some cases, only with the retailer that issued the wallet.
There are some particular technologies that a digital wallet can be structured over:
- Near Field Communication (NFC): allows the exchange of information between two devices when they’re placed side by side;
- Magnetic Secure Transmission (MST): generates a magnetic signal which maybe be transmitted to the payment terminal card reader;
- QR codes: essentially, are kinds of barcodes that you can scan, making use of your smartphone cam.
Are Digital Wallets Safe?
There are multiple layers of security for digital wallet transactions. First, they use one of the more secure payment methods available: tokenization, which essentially keeps your information secret when you perform a purchase.
Therefore, when you pay for something, it is created a one-time-use token made up of random numbers. That token is used to process the payment while your personal information remains secure.
Plus, there are digital wallets that require other layers of security to access them, like requiring a PIN or biometric information, such as facial recognition or fingerprint.
What is a Cryptocurrency Wallet?
Essentially a cryptocurrency wallet holds proof of your digital cash and stores your public and private keys, keeping your information safe and secure.
They also allow you to send, receive and spend cryptocurrencies like Bitcoin or Ethereum in transactions, providing digital signatures authorizing each purchase.
In order to make such transactions, a cryptocurrency is mandatory so that you can control the digital currency.
Crypto wallets technically don’t store your crypto. Instead, your holdings live on the blockchain, and you can access them using a private key. Your keys prove your ownership of your digital money and allow you to make transactions.
If you lose your private keys, you lose access to your money. That is why it is important to keep your hardware wallet safe.
How to Keep Your Digital Wallet Safe
- Lock your phone and wallet app with separate codes or methods;
- Protect your phone or watch with a password, fingerprint, or another biometric authentication;
- Be cautious of prying eyes. Be discreet when unlocking your device;
- Avoid using digital payment services over an unsecured or public Wi-Fi network. Using them can create an opportunity for thieves to access your information;
- Locate your smartphone from any computer;
- Keep an eye on your accounts. Just as you do when using checks and debit cards, watch your bank and credit card statements and immediately report any suspicious activity;
- Write down the make, model, serial number, and unique device identification number of your device — either the International Mobile Equipment Identifier (IMEI) or the Mobile Equipment Identifier (MEID). For example, some phones display the IMEI/MEID number when dialing *#06#. You can also find IMEI/MEID on a label located beneath the phone's battery or on the box that came with the phone.