How Digital Wallets Bring Security to Payments
As of 2023, digital wallets accounted for 50% of online transactions and 30% of in-store transactions globally, with these numbers expected to reach 61% and 46% by 2027[1]. This growth signals a consumer-driven demand for faster, more flexible ways of transacting and managing spending. For these trends to continue and for consumers to feel confident using digital wallets, the security of our money and data should be given equal priority.
The good news is that this widespread and growing adoption of digital wallets has a lot to do with the security measures already built into the technology. Digital wallets feature multiple layers of precautions, helping consumers feel confident about the safety of their accounts and personal information, even as payment processes become faster and more convenient.
Digital wallets achieve this layered security approach by combining protections like biometric authentication, tokenization, and encryption to provide a level of security that exceeds most other payment types. Advanced security features to manage and control sensitive data align with our mission at Privacy to support secure, controlled payments at every point of purchase.
As we explore the specific ways in which digital wallets can protect your information, you’ll see how these technologies work together to make secure payments easier and more reliable, making them a great choice for balancing efficiency with caution as you make payments online and IRL throughout your day.
What Digital Wallets Are and Why They’re Becoming the Go-To for Safer Everyday Payments
For many, paying with a quick tap of our phone has become second nature. Digital wallets like Apple Pay, Google Pay, and Samsung Pay are used by over 100 million people in the U.S. alone[2]. Apple Pay on its own is projected to process over $686 billion in transactions by the end of 2024[3], highlighting its expansive reach and significant adoption across major markets. This popularity reflects the appeal of digital wallets to anyone who values the combination of convenience and added security they provide over physical cards.
Digital wallets securely store the payment details attached to your virtual or physical cards in your phone or other mobile device. Google Pay and Samsung Pay can also link to PayPal accounts, providing additional flexibility when choosing which payment source in your digital wallet you’d like to use.
With digital wallets, you can make purchases with just a few taps or clicks. Other security features of your device itself, such as facial or fingerprint recognition or a PIN number, additionally make it much harder for unauthorized users to access your payment information when using digital wallets (even if your device gets lost or stolen).
Device-level protections are only the first gate in a series of security measures that safeguard your accounts and personal data at every step of a digital wallet transaction. Beyond convenience, the main reason more and more users are turning to digital wallets for payments is because of the multiple layers of security built into the technology itself.
What Makes Digital Wallets Safe for Storing and Using Debit Cards and Credit Cards
Digital wallets like Apple Pay, Google Pay, and Samsung Pay offer multiple layers of security, helping to keep your personal details hidden and secure throughout each stage of a transaction. This protection relies on key processes – most notably, tokenization – which play a crucial role in keeping your details secure.
1. Tokenization Replaces Your Card Number with a Secure “Token”
At the core of digital wallet security is tokenization. Through this technology, your card's primary account number (PAN) – its unique 16-digit number – is replaced with a secure digital token that can be used for payments. This means merchants never see or store your card number when you make contactless, online, or in-store payments using a digital wallet, protecting your sensitive financial information from unnecessary risk and exposure.
2. Provisioning the Card Allows for Various Fraud Checks
The step in which a card is added to a digital wallet is called provisioning. During this phase, both the digital wallet provider and the card issuing institution perform checks to verify that the cardholder is indeed the account owner.
Sometimes, additional verification is required to complete this step. One common method for verification is a one-time passcode (OTP) sent to the cardholder’s phone number or email. Other methods include authentication within the issuer’s app, or through their customer service. By preventing unauthorized access to the card at the onset, a secure foundation is laid for future transactions.
2. Encryption and One-Time Codes Bring Even More Security
Digital wallets also use encryption to shield payment data from unauthorized access during transactions. With encryption, your data cannot be read without an authorized decryption key, even if it’s intercepted by malicious actors.
Digital wallets also generate one-time codes (often called a “cryptogram”) that are specific to each transaction. Unlike tokens, which sub in for your PAN on your device, one-time codes are specific to each payment. They serve to verify and authenticate your transaction.
Taken together, tokenization, encryption, and one-time codes provide a layered level of digital protection that makes it exceedingly difficult for anyone to capture and use your data for fraudulent transactions.
3. Biometric and PIN Authentication Add Device-Level Protection
If you’ve ever used a digital wallet before, you’re probably aware of device-based authentication. Through methods like facial recognition, fingerprint scanning, or a PIN code, your phone or other device requires you to unlock your digital wallet before paying for something. This is the first true gateway, protecting access to your device and, ultimately, your cards. The physical layer of control and security it provides surpasses anything a physical card can do.
The Benefits of Layered Protection in Digital Wallets
With this full set of both digital and real-world security layers, consumers can effectively guard against fraud and data theft – while continuing to enjoy the ease and speed of digital wallet transactions. With additional device-level protections like remote locking[4] added into the mix, these technologies help make digital wallets one of the most seamless and secure payment options available today.
Step-by-Step Security Protections of a Digital Wallet Transaction
| Step | Protection | Benefit |
|
Initiate Payment
|
Biometric or PIN authentication
|
Ensures only the authorized user can access the wallet
|
| Generate Token |
Tokenization of card details
|
Hides your PAN from sellers and anyone else
|
|
Encrypt Data
|
Encryption during transaction
|
Protects data from unauthorized access over networks
|
| Validate Payment |
One-time codes
|
Prevents reuse of any intercepted transaction data
|
Practical Uses of Digital Wallets for Everyday Payment Security
Digital wallets have become the ideal choice for consumers seeking convenience and security in their everyday transactions, because of a few common practical uses.
Convenience without Compromise
While the speed and ease of transacting with digital wallets is attractive on its own, what really sets them apart is that this convenience doesn’t come at the cost of security. Through the built-in layers of protection we’ve discussed, digital wallets empower you to pay quickly and securely without introducing any new risks to private data, such as account numbers and Personally Identifiable Information (PII). In fact, as we’ve seen, digital wallets typically provide more protection for your sensitive information, even as they also deliver more speed and convenience.
Flexibility, and Wide Retailer and Merchant Acceptance
Digital wallets offer compatibility for a wide variety of in-store, in-app, and online transactions, empowering you to pay through them wherever and however it’s most convenient for you. From retail to e-commerce to food service, this wide acceptance means you can rely on digital wallets to safely pay for your coffee, your new bespoke hoodie, or to cover your rideshare fare – right from your phone or watch. As businesses throughout the U.S. and the world continue to embrace this technology – which brings security benefits to them as well – a new standard in payment security begins to emerge when it comes to everyday transactions.
Proactive, Consumer-Led Security
In addition to everything that digital wallet technology is doing to keep our payments secure, it’s worth mentioning that it also affords individual consumers a level of control over payment security that traditional cards (and some banks and many retailers) typically can’t provide. For anyone looking to be proactive about financial security, this control can be appealing. Digital wallets can provide a practical method for keeping your financial data safe, perhaps as a complement to other payment security efforts, such as using Privacy virtual cards.
Setting Up Your Debit and Credit Cards with Your Digital Wallet
Linking your cards to a digital wallet is straightforward and supported by most major banks and financial institutions. Many debit and credit cards can seamlessly connect with popular wallets like Apple Pay, Google Pay, and Samsung Pay. If you're unsure which wallets your bank supports, reach out to them directly for details.
Here are step-by-step guides for adding your cards to each of the above-mentioned digital wallets:
Why Digital Wallets Are a Smart Choice for Secure Transactions
Given their wide acceptance across industries and locales, and advanced security features, digital wallets are quickly becoming a trusted standard for paying securely at physical stores and online. With cyberattacks and data theft increasing in both volume and frequency year after year, taking the security of your accounts into your own hands – when utilizing digital wallets and beyond – is an increasingly important choice for the everyday consumer.
The speed and convenience of digital wallets help us keep up with the busyness of our modern lives. But the assurances brought by features like provisioning, tokenization, biometrics, and encryption are the real heroes. By enabling everyone to make payments throughout their day without compromising account safety or personal information, digital wallets provide peace of mind at the same time that they make everyday transactions easier for everyone.
[1]Worldpay’s Global Payments Report
[2]business.com
[3]appleinsider
[4]The Keyword
