Understanding digital wallets

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

For example, with a PayPal account and the PayPal app, shoppers can scan a seller’s PayPal QR code and complete an instantly confirmed payment in two clicks, with no need for special equipment.

The Australia Banking Association reported, almost 40% of people are now leaving their physical wallets at home and making digital payments instead — up from 19% in 2019.¹ The number of cards registered to mobile wallets also jumped from 2 million in 2018 to over 15 million in 2022.²

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 easily 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 and online purchases with just a tap.
• 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.

Digital wallets and 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.
• Strong authentication: Offering secure methods of authentication such as passkeys (password-less solution) and being able to enable two-factor authentication methods.
• Fraud protection: Many digital wallets offer fraud monitoring and protection to identify suspicious transactions.
• Buyer protection: Some digital wallets, including PayPal’s, offer buyer protection, meaning you may be eligible for a refund if something goes wrong with your purchase.

Benefits of Digital Wallets

While convenience is key for digital wallets, they offer more than just the freedom to leave the physical wallet at home:

• Strong Security: Digital wallets typically use advanced security features like encryption and two-factor authentication to authorise users and prevent fraud.
• Ascending Acceptance: More businesses are learning about the convenience and security benefits of digital wallets. In fact, nearly half of Australian businesses plan to invest in digital payment methods, including digital wallets, over the next 12 months.³
• Simple Set Up: People can usually set up digital wallets in just a few steps right from their phone, tablet, or laptop.

How to help keep your digital wallet secure

In addition to using built-in security features, users 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 in combination with a second authentication factor (2FA) or take advantage of more secure authentication methods such as passkeys.
• Regularly review transactions for suspicious activity.
• Use secured Wi-Fi networks.
• Choose a reputable and reliable digital wallet app.