Digital Wallets – What They Are, How They Work and Why They Matter

Today, whether you're shopping in a store, ordering through a favorite app or sending cash to a friend in seconds, digital wallets are a fast, easy and safe option. Don't want to enter your card number online? Forgot your favorite store card but want your rewards? Digital wallets make it possible.

What Is a Digital Wallet?

Digital wallets securely store a tokenized version of your credit or debit card details so you can pay without carrying the physical card. They can offer a fast, easy and convenient way to pay in-store, online and in-app by using your phone or other connected devices instead of cash or plastic credit or debit cards.

Digital wallets are commonly used for contactless payments in-store (which can be completed in seconds with a single tap or mobile device scan), and that means less to carry. They're also often used to make almost instant purchases in apps or online.

Digital wallets can also be used to:

• Send money to friends and family without sharing your card details with them on apps like Venmo© and PayPal©.
• Hold digital versions of loyalty cards and coupons so you never miss rewards.
• Store library cards or concert tickets, cutting down on what you have to carry.
• Keep travel essentials like airplane boarding passes and hotel keys in one place.

How Do They Work?

Simply load your eligible credit or debit card into the digital wallet app directly or by using your mobile banking app. Once you load your cards, you can use them to make tap-and-go purchases at a large number of retailers, restaurants, and gas stations in-store, in-app and online. Digital wallets are simple to use.

In-store

Look for the contactless symbol on the point-of-sale terminal. Then hold your device up to the symbol and follow the prompts on the screen. Digital wallets wirelessly transmit a unique, tokenized credential that represents your payment information to the merchant.

Online and in-app

Most online sites and apps—such as shopping, ride share and food delivery—let you select a digital wallet as your payment option at checkout instead of entering your card information each time you make a purchase or allowing the site to store it.

Which Digital Wallets Are the Most Popular?

Apple Pay, Google Pay, and Samsung Pay are widely accepted at merchants that offer contactless payments and across many online stores. You've probably also heard of or used Venmo, Amazon, and PayPal. To get started:

• Apple Pay: Go to Wallet on your eligible iPhone, iPad, or MacBook. Tap to add a debit or credit card and follow the steps and prompts on your screen. Lets you pay quickly in-store, in-app and online.
• Google Pay: Look for the pre-installed Google Pay app on your compatible Android device. Tap to add a debit or credit card and follow the steps and prompts on your screen. Can be used for contactless in-store payments and online purchases.
• Samsung Pay: Look for the pre-installed Samsung Pay app on your compatible Galaxy device. Tap to add a debit or credit card and follow the steps and prompts on your screen. Supports tap-to-pay contactless payments using NFC and, on select older devices, MST (magnetic secure transmission) for magnetic stripe terminals. It also works for in-app and online purchases with participating merchants.
• Venmo: Search your app store for this application for transferring funds to friends or family. Transactions are public by default but can be made private. Can be used for online purchases at participating merchants.
• Amazon: To shop on Amazon or use Amazon Pay, add your debit or credit card to your Amazon account. Once saved, your debit or credit card is automatically available for Amazon checkout with participating Amazon Pay merchants.
• PayPal: Click the PayPal button and sign into your online payment system and digital wallet. Lets you pay for purchases online without sharing card information.

PayPal vs Amazon

PayPal and Amazon provide secure and convenient ways to make digital payments, but they are designed for slightly different purposes.

PayPal:

• Lets you send, receive, and store money
• Can be used for both personal transfers and online shopping
• Works with a PayPal account and stored payment details
• Offers buyer and seller protection for eligible transactions

Amazon:

• Lets you shop directly on Amazon.com through the site or app
• Provides Amazon Pay, a service that lets you make purchases with merchants using your saved Amazon account credentials
• Is designed mainly for online shopping rather than personal transfers
• Works with already saved Amazon payment and shipping details

Why People Love Using Digital Wallets

Digital wallets bring a lot of benefits, like:

• Speed: No more swiping or typing card numbers. Just tap your screen.
• Control: Easily track your spending data and organize rewards and coupons.
• Convenience: Everything you need (cards, boarding passes, even hotel keys) are stored on your phone instead of in your purse or pocket.
• Security: Digital wallets can offer enhanced security compared to traditional cards, thanks to tokenization and authentication requirements. Instead of sharing your actual card number with merchants, they use a process called tokenization, which replaces your card number with a unique, encrypted code that works only for that transaction. On top of that, purchases are typically authenticated on your device through a passcode, fingerprint, or facial recognition, before the payment is completed. Using biometric authentication (fingerprint or face ID) offers convenience and adds extra protection beyond a simple passcode so it is worth taking time to set up these protections.

You can now add select Synchrony issued credit cards to your digital wallet if you have Apple Pay, Google Pay or Samsung Pay. This lets you shop and earn rewards more easily.

Are Digital Wallets Safe?

Yes, digital wallets are safe. In fact, they can even be safer than traditional cards.

That's because when you make a payment, your wallet doesn't send your actual card number. Instead, it uses a process called tokenization, where your card's details are replaced with a unique, one-time-use code for that transaction. Even if a hacker intercepted the data, they'd only see the token, not your real account information.

These wallets also have safeguards to prevent someone from stealing your device and making payments with it:

• Apple Pay: To confirm a payment, you have to double-click your phone's side button and verify with Face ID, Touch ID or your passcode.
• Google Pay: You can only use the app if you have a screen lock set up on your device. To confirm a payment, you have to use the verification you set up (a PIN, pattern, password or biometric unlock.)
• Samsung Pay: To confirm a payment, you have to enter the security option you chose when setting up the app, such as a PIN or the phone's fingerprint scanner.

Of course, you can take even more steps to safeguard your digital wallet. Depending on the wallet's options, this might include:

• Regularly reviewing your purchase history for suspicious activity.
• Setting up fraud alerts for unusual or large transactions.
• Not using the digital wallet on an unsecured Wi-Fi network.
• Adding security software that lets you remotely lock and wipe your device if it's stolen.

The combination of tokenization and authentication makes digital wallets one of the more secure ways to pay today.

Making Every Day Simpler

Digital wallets are changing the way people pay, and making daily life much simpler — whether you're tapping at checkout, ordering through an app or shopping online. They're fast, secure and convenient to use.

If you want to budget better, earn rewards or just simplify your daily routine, digital wallets can help you make the most of every dollar and every moment.

Ready to upgrade your wallet? You can add select Synchrony issued credit cards to most of the major digital wallets, including Apple Pay, Google Pay, Samsung Pay, Amazon Pay, and more depending on the type of Synchrony card you have available.

Tasha McCall, Cassondra Thurmond and Premnath Ananthan contributed to this article.