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.

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.
A Guide to Contactless Payments.

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
Blog Header - Product Evolution - App screenshot.

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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  • Does N26 Bank have digital wallets available?
  • Are digital wallets safe to use?
  • Do I need my card to pay for things?
  • How to use Apple Wallet
  • How to use Google Wallet
  • What does ‘mobile wallet’ mean
  • Is a digital wallet the same as an e-wallet?
  • What kinds of digital wallets are there?
  • Which wallet app is right for me?
  • How do you create a digital wallet?
  • How to add tickets to a digital wallet