What Is a Digital Wallet?

As they become more popular, you may be wondering, "What is a digital wallet?"

A digital wallet is an app that stores your debit and credit cards on your phone or device, allowing you to tap your phone/device for payment instead of a physical card.

These digital products are considered by many to be safer than most other payment options, providing significant peace of mind.

This article explains the finer details of what digital wallets are and how they work, along with reviews of the most popular apps and options available.

What is a digital wallet?

A digital wallet is an app that securely stores your payment information on your mobile device. It lets you complete purchases using near-field communication (NFC) technology – also known as tap – from your phone, instead of your physical card.

You might hear people use terms like "mobile wallet" or "electronic wallet" instead of "digital wallet." They all mean the same thing.

How to get a digital wallet

To get one, simply find a digital wallet app that's compatible with your phone's operating system. Once you've narrowed down your options, pick an app that you prefer and download it, if needed.

Many phones already have built-in digital wallets, but you can also use third-party apps.

Depending on the app, you'll be prompted to set up security, which might mean using your fingerprint or creating a passcode. Then, you'll enter the following info:

• Credit card number
• Expiry date
• CVV number
• Billing address or postal code

Once the card is added, you're all set. You won't have to re-enter credit card details again.

Are digital wallets safe?

Digital wallets are arguably safer than regular wallets.

The information stored on your device is heavily encrypted and is locked with some form of authentication – usually a passcode, password, or biometric identification, such as your fingerprint. And, like tapping a card, using a digital wallet is a surefire way to avoid credit card skimming.

Even if you lose your phone, whoever finds it won't be able to use your payment info because they can't unlock your digital wallet. And with the high-grade encryption, it's less likely anyone can hack into it.

Compare this with your physical wallet. If you lose it, whoever finds it can use your cards to make tap payments or make online purchases with little difficulty.

That said, there are steps you can take to help keep your digital assets safe. McAfee – a leader in online security – recommends that you:

• Use a passcode lock for your phone
• Set a unique passcode for your wallet
• Update your OS and apps regularly
• Only download digital wallet apps from official app stores or the provider's website
• Learn how to remotely lock or erase your smartphone

Other tips include:

• Don't use your digital wallet on an unsecured WiFi network
• Set a spending cap on large purchases
• Only purchase from businesses or individuals you trust
• Avoid linking your digital wallet app to social media apps
• Monitor your transaction history
• Secure your mobile information in case you lose your device

The best digital wallets in Canada

Here are some of the most popular digital wallets currently available:

* Apple Pay can be used for purchases on non-Apple devices, like a PC, but you'll also need your iPhone or another Apple device that can scan a code to pay.

Apple Pay

Participating banks (not exhaustive): Amex, BMO, Brim, Canadian Tire, CIBC, Desjardins, KOHO, MBNA, National Bank, RBC, Scotiabank, Tangerine, TD

Apple Pay is already included on your Apple products. You simply need to open the "Wallet" app, add your cards, and enter your security passcode (or use whichever security and authentication feature you set up). Double-click the lock button, select the credit or debit card you want to use, and tap your device against the card machine to make a payment.

Pros:

• Cash back available with select cards
• No internet access required to use

Cons:

• Only works with newer Apple products
• Biometric security features can glitch

Google Pay

Participating banks (not exhaustive): BMO, Brim, Canadian Tire, CIBC, Desjardins, KOHO, National Bank, RBC, Scotiabank, Tangerine, TD

If you don't already have Google Pay on your device, download it from the Google Play Store and open the app. After you've followed the prompts and added your cards, you'll set up a secure screen lock.

You'll also need to open your device's Settings app and type "NFC" (for near field communication). From there, find Google Pay, and you're all set.

Pros:

• Extensive list of biometric security options
• Integrated with several Google products

Cons:

• Not available for use with Apple products
• If you're using an unsupported lock screen method, you may need to unlock your phone twice to use Google Pay

Samsung Wallet

Participating banks (not exhaustive): Amex, ATB, Brim, KOHO, Manulife, RBC, Rogers, Scotiabank, Simplii, Stack, Tangerine, TD, various credit unions

Start by downloading Samsung Pay from your phone's app store, then sign in to your Samsung account once you've opened the app (it should also ask you to set up an authentication method).

To use Samsung Pay, swipe to find the card you want to use, then authenticate your choice. Touch the back of your device to the card machine and enter your PIN if prompted.

Pros:

• Offers rewards program

Cons:

• No longer uses magnetic secure transmission (MST)
• App can glitch or run slowly

Garmin Wallet

Participating banks: ATB, Affinity Credit Union, Aura, Brim, CWB, Questrade, Stack

If you have a Garmin watch that supports Garmin Wallet, you can set up your digital wallet through the Garmin Connect mobile app. Ask it to "Create Your Wallet" and follow the prompts to finish setting it up.

To pay, select Wallet and enter your 4-digit passcode. Hold your watch up to the payment terminal within 60 seconds to complete the payment.

Unfortunately, Garmin Wallet doesn't currently support debit cards in Canada. Also, users note that Garmin support in Canada is limited.

Pros:

• Uses watch-specific card numbers and transaction codes for each purchase
• Available anywhere contactless payments are accepted

Cons:

• Works with a limited number of banks
• Does not work with American Express
• Does not currently support debit cards

FAQ

What is a digital wallet and how does it work?

A digital wallet is a secure app that stores credit or debit card information, so you don't have to manually enter your card details or swipe or tap your physical card. Digital wallets require authentication in order to make purchases, so they're secure to use.

What are the disadvantages of using a digital wallet?

From a financial standpoint, the biggest disadvantage of a digital wallet is how easy it is to set up and use. Digital wallets remove the friction of having to take out your wallet to pay for things. The ease of tapping to pay can make it all too easy to overspend.

How do I set up a digital wallet?

You'll usually need to download the app on a compatible device and follow the prompts to get started. Set up security with a PIN, facial recognition, or your fingerprint, then enter your card details and verify the card with your bank.

What is the safest digital wallet?

Using secure internet networks when making purchases goes a long way in securing your transactions. Otherwise, the safest digital wallets tend to be the big apps like Google Pay and Apple Pay, since they offer robust encryption and multiple layers of security.

What's available for e-wallets in Canada?

Digital wallets like Google Pay, Apple Pay, Samsung Wallet, and Garmin Wallet are all available in Canada, but you'll need to check whether your bank supports the wallet type that you want to use. You'll also need a compatible phone or device.

Is a digital wallet and an e-wallet the same thing?

Yes, the terms "digital wallet," "e-wallet," and "mobile wallet" all mean the same thing. They're a way of storing credit or debit card information on your phone, so you can easily pay without using a physical credit or debit card.