Are You Ready to Switch to a Digital Wallet?

Mobile phones have forever changed how we communicate, and they’ve also started to have a powerful influence on the way we pay for things. A steadily growing number of merchants across Canada embrace mobile payments, and digital wallets are slowly replacing physical wallets, especially among younger Canadians.

What is a digital wallet?

A digital wallet, also known as an e-wallet, is a virtual wallet that securely holds all of your credit, debit, loyalty and gift card information. Digital wallets can also contain other information, such as event and concert tickets and boarding passes.

For people with smartphones, a digital wallet can be a much more convenient form of payment because it means you don’t need to carry around a bulky wallet filled with all your credit, debit and loyalty program cards — to say nothing of cash. As long as you have your smartphone with you, you can quickly and securely make payments with the card of your choice.

» Prefer mobile payments?: Consider online-only banking

How a digital wallet works

Digital wallets use specialized smartphone apps to perform a variety of transactions, including making payments. Rather than using a credit card or cash to pay for goods and services, you can make mobile payments through an app on your smartphone. You can also send or receive money using an app, such as your bank’s app.

Mobile payments rely on Near Field Communication (NFC), allowing smartphones and other electronic devices to communicate when held nearby. Your e-wallet uses this technology to “communicate” your payment information to a merchant’s payment processing terminal.

How to get a digital wallet

Getting a digital wallet is as simple as downloading an app onto your smartphone. The most popular wallet apps tend to be Apple Pay, Google Pay and Samsung Pay, though there are various others.

After downloading a compatible digital wallet app, you will first be required to secure it with a passcode, fingerprint, iris scan or a facial scan (each wallet may have a different security process). You will then need to add each of your debit and credit cards to the wallet. You’ll be prompted to input each card’s number, and then the app will connect to the provider’s site so you can authorize the card by entering your password. Depending on the app you use, you may also add gift cards, loyalty program cards, flight boarding passes and more.

While this setup process takes time, you should only have to do it once. After you’ve added all the cards to your e-wallet app, you can choose one card as your default payment card. You can change your default card at any time and easily switch between all the payment cards within your wallet.

How to use a digital wallet

Generally, any merchant that accepts contactless credit and debit payments will accept payments via a digital wallet.

To pay, follow these steps.

Open the app, and the card you selected as your preferred form of payment will show up on your screen. If you want to use a different card, swipe through your options.
Hold your smartphone close to the merchant’s payment processor just like you would when tapping a credit card. Depending on the merchant and transaction amount, you may need to enter the card’s personal identification number (PIN).
The payment will go through just as it would with a debit or credit card.

Sometimes, as an added layer of security, you may be prompted to provide a fingerprint ID or a code, depending on the wallet app you’re using.

Are digital wallets safe?

Some people are surprised to learn that mobile payments are as safe and secure as using a physical credit or debit card.

Your mobile payment data is protected through a process called tokenization, which replaces your financial data (such as bank account and credit card numbers) with a unique random number (a token). The token hides your data, and your financial information is only revealed once a legitimate financial service provider processes it. Merchants never see your banking information. Using an e-wallet that relies on tokenization is potentially even safer than using a physical credit card and entering a PIN because your banking information is never visible.

In addition, as with credit card payments, mobile payments are protected by the zero-liability policies of all the major credit card providers in Canada, like MasterCard, American Express and Visa. Even if you lose your phone and someone bypasses your PIN, fingerprint ID or password to unlock it and hack into your digital wallet, you are still as protected as you would be if your credit card was lost or stolen).

Finally, many smartphones have apps that allow you to track your phone and even erase sensitive information remotely — something that is impossible to do if you lose a physical wallet. If you’re concerned about using a digital wallet, reach out to your credit and debit card providers to learn more about how you’re protected by zero liability.

Pros and cons of a digital wallet

Pros

A digital wallet lets you keep all your credit, debit, loyalty and gift cards in one place.
It’s a convenient way to shop without having to carry a full wallet or purse.

Cons

You can only use it when shopping at retailers that allow contactless payments.
Must have a smartphone; basic cell phones won’t work.

Alternative forms of mobile payments

If you don’t want to use a digital wallet, you can still use your smartphone to send and receive money by using your financial institution’s banking app or logging into a bank’s website (much as you would use a computer or tablet). However, you can’t pay for items in person as you can with a digital wallet with a banking app.

DIVE EVEN DEEPER

How Does an Online Bank Work?

Online banks typically charge lower fees and deliver better interest rates on savings than traditional brick-and-mortar financial institutions, but may lack certain products and services.