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Digital wallets: All you need to know


The next big thing in payment is the digital wallet, and the likes of Apple Pay and Google Wallet are already changing the way many of us buy things. We explain how these systems work.

Mobile phone payment

The future is not just cashless – it will be cardless as well if the likes of technology giants Apple and Google have their way.

Both corporations have made significant investments into digital wallets, which they consider to be the future of payment both on the high street and online.

Pay by phone or watch

A digital wallet is a system that allows you to save bank card or account details on a device such as a smartphone or smart watch.

The device can then be used to make payments in shops, restaurants and on public transport, for example.

Digital wallets can also be used to make online or in-app purchases.

Perhaps the best known system is Apple Pay, which launched in the UK in July this year.

Rival systems

But there are a number of rivals, including Google Wallet, PayPal Mobile Payments, MasterCard’s MasterPass and from Visa.

To use a digital wallet, you typically have to download and install the relevant app on your smartphone or similar device.

Then you store details of whatever cards or bank account you want to be available through the wallet.

From that point on, you can use your device to pay wherever your digital wallet is accepted – just touch your phone or Apple Watch on the scanner next to the till.

Apple Pay iPhone

Pay for items using your iPhone or Apple Watch.

Pay more quickly

The main attraction of using a digital wallet so far appears to be convenience. 

Instead of having to pay with cash or wait for a card to be authorised, all that’s needed is a quick swipe of your phone.

But what else do you need to know about this new way of making purchases?


Not every retailer will accept every kind of digital wallet – far from it, in fact.

When Apple Pay launched in the summer, it had already put in place deals with big names such as Waitrose, Marks & Spencer and McDonalds.

Since then, many more have signed up – but there are plenty of places where you won’t be able to pay this way.

Your bank also needs to allow your account and any related cards to be used in the wallet: for example, Natwest, HSBC and Nationwide customers were able to use Apple Pay from the outset, while Lloyds and Halifax have since joined up.

But Barclays accounts won’t be compatible with this particular system until 2016.

Finally, the technology can also be an issue: Apple Pay is currently only available on the iPhone 6, the Apple Watch, and the latest iPads.


Digital wallets can be more secure than other forms of payments.

With cash, there’s no little chance of getting back any money that is lost and stolen.

And criminals have long been able to clone or otherwise steal information from cards when they are used to make payments.

With a digital wallet, payment information is transmitted to retailers via a system known as tokenisation.

This means that no account or card details are shared with the retailer: instead, a one-off code (or token) is generated for each transaction.

Other than that, the security of your wallet depends on how easy it is for someone to use your phone.

Apple’s latest iPhones, for example, require the user’s fingerprint to be scanned before access is granted.

How far is the UK from giving up on notes and coins? Read our in-depth report Cashless Nation.


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