A digital wallet, also known as an electronic wallet, is a secure financial transaction application that operates on connected devices. It efficiently stores your payment information and passwords in the cloud, offering accessibility from various devices, including computers and mobile devices, with mobile wallets being a subset primarily used on phones and tablets.
With digital wallets, you can conveniently make payments while shopping without the need to carry physical cards. By entering and securely storing credit card, debit card, or bank account information, you can use your device to make purchases easily.
The operation of a digital wallet relies on mobile devices’ capabilities, leveraging technologies like QR codes, near field communication (NFC), and magnetic secure transmission (MST). QR codes enable initiating payments by scanning matrix bar codes using the device’s camera and the wallet’s scanning system. NFC facilitates secure data transfer between smart devices in close proximity. MST generates encrypted fields on mobile phones, allowing point-of-sale systems to read payment data, although some providers have phased out this feature in favor of other technologies.
In addition to its convenience and accessibility, a digital wallet offers an added layer of security for users. By utilizing features like encryption and tokenization, digital wallets protect users’ sensitive financial information from potential threats such as identity theft or fraud. Furthermore, digital wallets often provide additional security measures like fingerprint or facial recognition authentication to ensure that only the authorized user can access and use the stored payment information. This level of security can be particularly beneficial in preventing unauthorized transactions and minimizing the risk of chargebacks, providing users with greater peace of mind while conducting financial transactions through their connected devices.
Written by Andrii Vovk