Are digital wallets safe?

Digital wallets can provide a quick and convenient way to make payments right from a mobile device, like a phone or smartwatch. Whether people are shopping in store or online, they can use digital wallet apps to complete touch-free transactions with ease.

This article includes tips, suggestions and general information. We recommend that you always do your own research and consider getting independent tax, financial and legal advice before making any important decision.

According to FIS Global’s Payments Report 2023, over one-third of UK e-commerce purchases in 2022 were completed using digital wallets.¹

The question is: Are digital wallets safe?

Digital wallets are generally a safe and reliable payment solution. That's because they often use advanced security measures like encryption, tokenisation, and two-factor authentication to protect people's financial information and verify payments.

Learn more about how digital wallets work and potential digital wallet security measures.

Understanding digital wallets

A digital wallet is an app that people can use to store payment methods and bank account information, as well as send and receive money right from their device. Instead of carrying around physical credit cards or cash, they can make payments using their digital wallet app.

Here's a closer look at what people can do with digital wallet apps:

• Make touch-free payments: Complete in-store purchases with just a tap and shop online safely.
• Send money:  Transfer funds to friends, family, and businesses across the globe.
• Connect multiple accounts: Add credit cards, debit cards, gift cards, and bank account information for easy access and use.
• Manage funds: View transaction history, track expenses, and save money for future purchases.
• Earn rewards: Some brands and credit cards offer rewards for spending via a digital wallet app. The app may also provide its own bonuses and incentives.

Digital wallets and potential security measures

Many digital wallet apps may have built-in security features to help protect people's financial information and verify transactions.

Common digital wallet security measures include:

• Encryption: Payment information is encrypted with a unique code for each transaction. This process — called tokenisation — makes it tough for hackers to access someone's personal data.
• Two-factor authentication: Sign in using two different verification methods, such as passwords, PINs, or biometrics like face or fingerprint scans.
• Fraud protection: Many digital wallets offer fraud monitoring and protection to identify suspicious transactions.

Debunking digital wallet myths

Since digital wallets are still a relatively new type of payment solution, let's debunk some possible myths about them and their safety:

• Myth #1: It's easy for unauthorised users to access digital wallets. Digital wallets typically use advanced security features like encryption and two-factor authentication to authorise users and prevent fraud.
• Myth #2: Many businesses don't accept digital wallet payments. More businesses are learning about the convenience and security benefits of digital wallets. In fact, 55% of small merchants and 61% of large merchants in the UK currently accept digital wallet payments.²
• Myth #3: Digital wallets are difficult to set up. People can usually set up digital wallets in just a few steps right from their phone, tablet, or laptop.

How to potentially keep your digital wallet secure

In addition to using built-in security features, people can take measures to protect their digital wallets and financial information. Here are some potential tips:

• Keep mobile devices locked and password-protected.
• Set a strong digital wallet password or opt for biometric authentication.
• Regularly review transactions for suspicious activity.
• Use secured Wi-Fi networks.
• Choose a reputable and reliable digital wallet app.

See more about how to pay safely with PayPal.