What is a digital wallet & how does it work?

A digital wallet lets you make payments in stores, online, or via an app with just one wave—or tap—of your smartphone. But how do you set your digital wallet up, and which one should you choose? Keep reading to find out.

Contactless payment with a smartphone.

Digital wallets, defined

Digital wallets are online payment tools, usually in the form of an app. The wallet securely stores virtual versions of debit and credit cards, so you don’t need to enter your card details or carry a physical card at all to make payments. You can also save digital tickets and e-vouchers there, so you always have the documents you need on hand.

A Guide to Contactless Payments.

How does a digital wallet work?

  • A digital wallet uses software to link your payment details from your connected bank account to the vendor that the transaction is being made with.
  • Different apps allow different types of access—open wallets (accepted at most retailers) enable online purchases, contactless in-store payments, and cashback—and may even allow withdrawals at select ATMs.
  • Semi-closed and closed wallets allow certain transactions with a set group of retailers, or only with the retailer that issued the wallet.

The best digital wallets

There are plenty of digital wallet apps to choose from. The decision really comes down to your needs, location, and what kind of smartphone you’re using. Apple Pay, for example, is the go-to for iPhone users, while Google Pay is for anyone with an Android. Others prefer PayPal, which is accepted internationally. There’s also Cash App and Venmo, the latter of which requires a valid US phone number. Here’s a breakdown of the best digital wallets out there.

Apple Pay

Payments with Apple Pay are verified using Touch or Face ID, so you can have maximum security with minimal effort.

Google Pay

Google Pay uses NFC technology so you can pay with a fingerprint or a password, and your card information is always encrypted.

Samsung Pay

Samsung users can also set up Samsung Pay, another widely accepted electronic payment system equipped with MST and NFC technology.


Add your virtual N26 Mastercard to PayPal so you can check out with a single tap anywhere PayPal is accepted.

Digital wallets—the benefits

The advantages of digital wallets are numerous. No more filling in your card details every time you check out, or fumbling for your wallet at the store. Your payment information is saved in one protected, central location. The card number is never stored in the app itself, but is instead assigned a unique virtual number. This protects your money even if your smartphone is lost or stolen. Still, always research the digital wallet issuer before testing it out, just to make sure it’s legitimate.

Open online bank account
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Are digital wallets safe?

Digital wallets use advanced encryption to ensure that your payment information never leaves your smartphone. And becauses digital wallets sit within your passcode-protected device, with payments often only possible via fingerprint, they’re quite secure. Many wallets also have additional security protocols, like two-factor authentication one-time PINs, that can be used if needed. Still, it’s a good idea to stay vigilant—always keep your passwords to yourself, monitor your accounts for suspicious activity, and make sure that you’re able to disable your device if it gets lost or stolen.

How to use a digital wallet

Once you’ve got your digital wallet set up, you can use it to make online or contactless payments, store tickets and coupons, and much much more. Apple Wallet and Google Wallet are two of the most popular ones, but there are lots of digital wallets out there to choose from.

Crypto wallets

Crypto wallets are a unique kind of wallet used to store your cryptocurrency passwords in one central place. Unlike digital wallets, they don’t actually hold the currencies, but rather give you the tools to access and use them. While many crypto wallets are digital, some come as physical hardware similar to a USB stick. Digital crypto wallets are particularly practical as they allow you to manage all your currencies in one place, send and receive money, and even shop at stores that accept crypto.

Crypto wallet.

Downloading your digital wallet

Getting a digital wallet is straightforward and usually just takes a few minutes. Just download your chosen digital wallet app, enter the details from your eligible debit or credit card, and start spending straight away.

When you open an N26 account, you’ll instantly receive your own virtual N26 Mastercard right on your smartphone. Link it with Apple Pay or Google Pay and within seconds you can make payments from your very own mobile wallet.

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  • A virtual debit card
  • Free payments worldwide
  • Up to 3 free withdraws
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N26 Smart

The bank account that gives you more control

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  • Free Virtual Card
  • Up to 10 Spaces sub-accounts
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N26 You

The debit card for everyday and travel

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  • Up to 5 free withdrawals in the Eurozone
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N26 Metal

The premium account with a metal card

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  • An 18-gram metal card
  • Up to 8 free withdrawals in the Eurozone
  • Purchase protection
  • Phone insurance

All N26 accounts have digital wallet technology access available with their banking app and are also partnered with payment platforms Apple Pay and Google Pay. You can open your N26 bank account in minutes and start using your digital card straight away by adding your card to your mobile wallet.

Most digital wallets encrypt banking details and personal information and should never store the card number of the checking account. Always check on the viability of wallet issuer first, ahead of activating a digital wallet.

As long as you have an NFC-equipped smartphone, you’ll no longer need to bring your physical card with you. You’ll be able to pay for things at a variety of bars, restaurants, and shops safely with your virtual card.

Apple Wallet lets you store the digital form of pretty much anything you’d put in your normal wallet—from theater tickets to boarding passes to credit cards. To start using it, simply open the Wallet app on your iPhone and begin adding whatever you like to it. If you want to use Wallet to make purchases, you’ll need to connect a payment method to Apple Pay. To do this, simply open your Wallet app, tap ‘Add Card’ and follow the prompts to verify your card.

To use Google Wallet on your Android phone, you’ll need to first make sure you’ve downloaded it from the Google Play Store. Then, set up a Google Wallet PIN to log in for the first time. If you have payment methods already associated with your Google account, you can choose one from the list displayed. Once you select your payment method(s), you’re all set to start paying with Google Pay and adding tickets, coupons, and more to your account!

Mobile wallet is another term for digital wallet. It’s basically a virtual wallet on your smartphone that holds and stores your virtual cards and payment details. This way, you can make quick, convenient payments electronically and store other important documents like plane tickets.

Digital wallets and e-wallets are very similar, but they’re not quite the same thing. While a digital wallet stores virtual versions of debit and credit cards on your mobile device, e-wallets are online prepaid accounts where you can upload and withdraw money, and make transactions.

There are three types of digital wallets: closed, semi-closed, and open. Closed wallets are produced by companies, and can only be used to transfer funds between the user and wallet-issuer—such as Amazon Pay. Semi-closed wallets are for users making transactions at a given list of merchants. Open wallets are issued by banks or their partners, and can be used for any kind of transaction, including ATM withdrawals.

Choosing the right digital wallet depends on your taste. If you have an iPhone, Apple Pay might be the right fit for you. For Android users, Google Pay may be your best bet. It’s also important to take location into account, as some wallet apps don’t work in certain regions.

Setting up your digital wallet is easy. Simply download or open the wallet you want to use (Google Pay, Apple Pay, PayPal, etc.) and add a payment method, or more than one. You can also add boarding passes, train tickets, or e-coupons—just like in a real wallet!

When you buy bus, train, plane, or even concert tickets, there are several ways to add them to your wallet. If you’ve purchased something online, you may be able to click or tap the ‘Add to Apple Wallet’ icon in your email or browser. You may also be able to scan a bar or QR code if you’ve purchased something in-person. For more possibilities, check out this link.