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How to pay with your phone using a digital wallet

A digital wallet is an application on your mobile device that stores your credit and debit card information. You can pay for items using only your phone.

Below, we'll outline everything you need to know about using your phone to pay for goods or services. This includes:

  • How does a digital wallet work?
  • Are digital wallets secure?
  • The different types of digital wallets.
  • How to set up a digital wallet.
  • How to use a phone to pay for items in stores.
  • How to use a phone to pay for items online.
  • Are there any drawbacks?

How does a digital wallet work?

To make a payment, digital wallets use your mobile phone's wireless functions including Wi-Fi, Bluetooth and magnetic signals. The magnetic signals connect through something called Near field communication (NFC). These signals transmit your credit or debit card information from your phone to a device the merchant provides, which is designed to receive this kind of data.

Digital wallets can also store things like gift cards, event tickets, airline tickets, membership cards and more. In a similar way, the data stored on those items can be digitally transmitted when you're ready to use them.

Are digital wallets secure?

Yes, digital wallets are considered secure due to a process called tokenization. This is when a unique string of numbers, called a token, is created for that one-time transaction. This token masks your credit card information so the merchant doesn't collect it and the entire transaction remains secure. Because a new token is created for every new transaction, it makes it very hard for hackers to obtain your information.

In addition, you need a biometric scan or pass code to access your wallet in the first place. In the event your phone is lost or stolen, without those additional verifications, it's unlikely that anyone could access it.

Different types of digital wallets

Depending on the mobile device you use, there are several popular types of digital wallets to choose from.

Apple Pay

Apple Pay is a contactless way for iOS users to make payments. It uses biometric screening technology called Face ID or Touch ID, or you can use a passcode to access the wallet. You can add any debit or credit card as well as Apple Cash, boarding passes, event tickets, gift cards and much more to the wallet. Apple Pay is widely accepted at retailers and restaurants around the world.

Google Pay

Google Pay is very similar but was developed by Google and enables users of both Android or iOS phones, tablets or watches to make contactless purchases. To access this wallet, you use a traditional PIN-based authentication. Similarly to Apple Pay, you can add much more to this wallet than just credit or debit cards.

Samsung Pay

Samsung Pay has similar technology and features but was developed for users to make payments using Samsung phones and other Samsung devices.


PayPal is one of the oldest forms of digital wallet where users can manage and store their PayPal account balance, as well as cards and other financial accounts. You can use the wallet to make payments online or in-store using your Apple or Android devices, and you can also send or request money from other people.

How do I set up my digital wallet?

Setting up your digital wallet is easier than you might think. Follow these steps:

  1. Choose a digital wallet and download the app. As listed above, depending on the type of device you have, you can choose from Apple Pay, Google Pay, Samsung Pay, PayPal or various other options. For example, iPhone users may find Apple Pay the optimal choice. Some of these apps may already be pre-loaded onto your device. If not, you'll want to download it.
  2. Add your payment method. When you open your digital wallet app, it will prompt you to add one or more payment methods. This may include multiple credit cards and your debit cards from different banks. You'll be able to set a default payment option if you load more than one card onto the app. Part of the prompt may include photographing each card with your device's camera.
  3.  Add additional items to your wallet. Some apps allow you to load other items into your digital wallet. These include boarding passes, event tickets, loyalty cards, transit cards and even coupons.

How do I use my phone to pay at a store?

To purchase an item at a store, you'll need to access your digital wallet using your Face ID or lock code. Swipe through your wallet until you find the credit card you'd like to use. Once that's selected, hold your phone within several inches of the payment terminal for a couple seconds until you hear the confirmation tone.

How do I use my phone to purchase something online?

To purchase an item online, go to your shopping cart and look for the Apple Pay, Google Pay or other corresponding payment logo and select it as your payment method. Choose the card you want to use, confirm your billing and shipping information is correct, then confirm the payment. After the transaction is complete, you'll see a checkmark on the screen.

Are there any drawbacks to using digital wallets?

There are two main drawbacks to using digital wallets as opposed to cash or a physical card.

First, with the digital wallet being accessible only on your digital devices, if your battery dies while you're out shopping or you misplace your device, you lose the ability to pay with those devices.

Secondly, not all merchants offer the option of paying with your digital wallet. Merchants must have the proper hardware to accept mobile payments. For this reason, it's a good idea to carry some cash or cards in case you encounter this.

In conclusion

As contactless payments become more widely adopted, you may find that digital wallets allow you to ditch your physical wallet. By storing your payment methods and other important cards all on your phone, you eliminate the need to carry much of your paper and plastic. Not only is this convenient, but because of the tokenization technology, it's also more secure than a physical wallet.