Using Your Phone to Pay for Things Safely

Last Updated on July 24, 2023

Paying for things with some form of paper is becoming a thing of the past. In fact, due to the COVID pandemic, some places stopped accepting cash altogether.

Insider Intelligence estimates that 50 percent of smartphone users will use mobile payments by 2025.

Maybe you’re ready to move on from paying directly with plastic and cash. Instead, paying with an app on your phone makes far more sense. That’s one less thing you have to keep track of and carry. 

But how safe is it to pay for things with a digital payment platform? 

You can use them safely as long as you take a few precautions. We’ll show you the options for paying through your smartphone and how to do so safely.

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What Are Digital Wallets?

A digital wallet tracks your financial accounts and allows you to use them to make payments. You can manage the digital wallet through an app on your smartphone or another connected device. (If you’re using the digital wallet on the phone, some people consider this a mobile wallet.)

Digital wallets can hold money in an account from the company that provides the wallet app. They also let you spend money from linked bank accounts or credit cards. Beyond day-to-day finances, they also can possibly store gift cards, your identification card or driver’s license, tickets to events, plane tickets, or even digital car keys.

A digital wallet may be available through the bank where you have accounts. More commonly, people use digital wallets from third parties where they can store multiple types of payment options.

How Does a Digital Wallet Work?

You can connect your payment options to your digital wallet, whether a credit card, a bank account, or something else. The digital wallet’s software tracks your account and communicates with the company that holds your payment options, ensuring you have the funds available to make the purchase.

When running a wallet app through your phone, you can pay in person or through a digital-only transaction.

To add your payment sources, tap on the app on your phone. Then enter the account information for your bank account or credit card. You can store multiple payment options.

In-person transaction

Rather than handing a retailer cash or a credit card, you’d make payments through the digital wallet. The digital wallet takes advantage of wireless data transmission technologies in the phone to make the payment, such as:

QR code
Magnetic secure transmission (MST)
Near field communication (NFC)

The retailer’s point-of-sale (POS) terminal contains these same technologies, allowing it to make a direct, contactless connection with your phone. Once the contact occurs, the transaction proceeds just like any other transaction. The payment processors let the retailer know through the POS that you can make the transaction.

Digital-only transaction

When you are shopping online, you also can use your digital wallet. This takes the place of you needing to enter your bank account information or credit card into the website. 

The digital wallet keeps your information secure by telling the online retailer you have the money to make the transaction. You don’t have to give the retailer the details of your account.

If the website accepts payments through a digital wallet, you’ll see the wallet logo on the checkout page. 

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What Digital Wallets Are Available?

Quite a few different apps are available that will help you make a contactless transaction with your smartphone. Some of these are general-use apps, meaning you can use them anywhere that accepts digital wallet payments. Some are made only for use at a certain store or with accounts at a certain bank or credit card provider.

Some of the digital wallets worth considering include:

Apple Pay
Cash App
Google Wallet
Samsung Pay

How to pick a digital wallet to use

Selecting the best digital wallet for your needs has some challenges. After all, the basic structure is almost identical from app to app – they all allow you to make payments from your smartphone.

However, there are a few differences that are worth considering.

Compatible with your phone: Some popular digital wallets will only work with specific smartphone operating systems. Apple Pay only works with iOS phones, for example. Others work with any kind of phone.
Acceptance from your merchant: If you have a few brick-and-mortar or digital merchants that you use regularly, check to see what digital wallet apps they accept. Understand that merchants add acceptance for new digital wallets regularly, so if you pick a wallet that isn’t accepted now, it might work soon.
Fees: Fees for purchases are not common with the best e-wallets. (Some digital wallet providers do charge you fees for things like transferring balances to your bank.) If your bank or credit card company charges you fees, the e-wallet does not erase these charges, though. You’ll still have to pay them. 
Rewards: Some digital wallet apps will give you the opportunity to earn rewards as part of using the app. Often, these will be rewards that are only usable in a certain store. You can earn cash back when you use the store’s digital wallet, for example. It almost works like a loyalty program.
Stick with names you know: Although new digital wallet companies appear with regularity, it’s a bit of a risk to trust a newcomer with your financial information. As you are just beginning to use digital wallets, stick with a brand name until you learn more about how to use them. You then may be able to spot a trustworthy newcomer that has great rewards.
Security: Of course, security is the most important factor with any e-wallet. Part of the reason you may want to use a digital wallet is because you feel like it’s safer than carrying cash or handing a retailer your credit card. You can trust that the top digital wallet companies have excellent security, or users would find another app to use.
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Are Digital Wallets Secure?

As mentioned, security is the most important aspect of any digital wallet. If the e-wallet app cannot keep your payment methods safe, there is zero reason to make use of it.

Not only does the digital wallet app need to keep the information safe on your phone, but you also have to trust how the company that created the app stores your information. 

You don’t want a hack of that company’s servers to expose your account information with your bank and credit cards. If you are also storing your driver’s license or some gift cards with your digital wallet, you could see a lot of information exposed during a hack.

Using encryption

Digital wallets make use of encryption to protect your data. This process runs code on the data to make it unrecognizable until the company receiving the data decrypts it. If someone intercepts the data en route, encryption ensures they cannot read it.

Digital wallets deploy some of the same encryption technologies and algorithms you’ll find in use elsewhere on the Internet. 

Secure Socket Layer (SSL): SSL ensures secure communication when using the Internet by creating an encrypted link between the sender and receiver. When using the Internet, SSL typically encrypts the data between the server and the end user’s web browser.
Transport Layer Security (TLS): TLS is an encryption protocol that encrypts the actual data traveling from one location to another on the Internet.

Using tokenization

Tokenization is a key technology used with e-wallets. Through tokenization, the digital wallet’s software exchanges key numbers and information in your data for other random numbers, called tokens. There is no way for a criminal who intercepts the token to decipher what exactly it is

The digital wallet’s database maintains the original data on its server, protecting it. The recipient is able to use detokenization to find the original piece of data. 

Digital wallets may use tokenization to protect credit card numbers, driver’s license numbers, or Social Security numbers.

Using biometrics

Some e-wallets require that you use facial recognition software or a fingerprint to open the digital wallet. This would prevent someone who managed to gain access to your digital wallet from using it without your permission, because the thief would not have your biometrics.

These biometrics provide an additional layer of security, as they are separate from any biometrics you use to gain access to your phone.

Using transaction alerts

Much like the best identity theft protection services, a digital wallet may alert you on your phone or by email whenever someone makes a transaction with it.

Most people use this feature to help them track spending, which can be challenging because making touchless payments is so easy. It’s common to forget you made a purchase or two when using a digital wallet.

However, you also can use the alerts to look for any odd transactions that could indicate someone is using your digital wallet without your knowledge. 

Using remote lock

Should you ever lose your phone or believe someone has managed to beat all the security features and break into your e-wallet, you can often turn off the e-wallet remotely. Some apps even allow you to completely wipe the app remotely, including all the information stored within it.

Tips for Staying Safe With Your e-Wallet

Here are some tips to help you protect your digital wallet.

Hide your passcode: When entering your passcode on your phone while out in public, shield the screen so no one else can see it.
Use longer passcodes: If your phone gives you the option of a six-digit passcode instead of a four-digit passcode, use the longer passcode.
Activate biometrics: Some phones allow you to use face identification or a thumbprint to unlock the phone. This can help to keep your phone secure.
Lock the phone more often: Although it can be a hassle to have to enter your passcode repeatedly, your phone is more secure when you must re-enter the passcode after 15 minutes of inactivity versus a few hours of inactivity.
Watch your statements: Don’t assume all your transactions are safe. Keep an eye on your account statements to ensure that nothing strange is happening with your e-wallet.
Set up phone tracking and wiping: Use a second device to set up tracking on your smartphone, just in case you ever lose it. You also may be able to set up the ability to wipe the phone or the digital wallet using this second device.

Pros and Cons of Using Digital Wallets

Here are some pros and cons if you are still on the fence about using a digital wallet.


Convenience: Once you start making contactless payments through your phone, you might wonder why you didn’t make the switch sooner. The process of paying for items goes fast and is easy when using a digital wallet.
Multiple options: With several trustworthy e-wallets available for use, it should be easier to find one that perfectly meets your needs.
It’s always with you: Most people always have their phones with them. Chances are probably higher that you will forget your wallet at home than your phone, so you always have your payment options with you.
Protection against thieves: If someone steals your phone, there’s little chance of having your accounts hacked through the digital wallet. The thief would need your passcode or biometric information. If you lose your physical wallet or if someone steals it, your cash and credit cards are in immediate peril.


Lack of acceptance: Some retailers don’t accept any digital wallet payments, while some only accept specific digital wallets. It can be quite frustrating when you take the time to set up your digital wallet only to be unable to use it everywhere you want. However, more retailers are accepting e-wallet payments daily, so this may not be a disadvantage for much longer.
Exceeding your budget: Some people need to use cash or need to physically hold a credit card or debit card, so they can remember each transaction and stick to a budget. With the digital wallet, making a quick purchase and forgetting about it is easy. Before you know it, you’ve blown your budget. However, you can set spending alerts and limits on the digital wallet to keep your spending under control.
Fees: Occasionally, you will run into extra fees you have to pay when using your digital wallet in a certain way. Be sure you understand these fees before you start using the e-wallet app.

Digital Payments Vs. Other Methods of Payment

In general, it’s easier to keep your account information and money safe from thieves when using the digital wallet than other payment methods.

Digital wallet vs. cash

Using a digital wallet is safer than cash when protecting your money from a thief.

Your cash is gone if someone steals your physical wallet or money clip. There’s little to no chance of retrieving it.

If someone steals your phone, the passcode and biometrics you have installed should prevent the thief from accessing your digital wallet app. You can often lock your phone remotely if someone steals the phone, too.

However, using cash is an anonymous spending option versus using the e-wallet if that’s important to you. A digital wallet app might track your purposes for advertising purposes.

Digital wallet vs. credit cards

Because the digital wallet encrypts your payment information, it would be difficult for a criminal who steals your phone to access your wallet and see your credit card numbers. The criminal would need access to your passcode or biometrics with the phone to access the account information.

Someone who gained access to your cards could try to use them if you are using physical credit cards. Additionally, if you hand your credit card to a retailer, someone could steal the number without your knowledge.

Remember, if something happens to your digital or physical wallets, you can take steps to protect your credit card accounts. So both the digital wallet and the credit card are safer than cash from thieves

However, it is possible that your digital wallet provider could track your spending habits, just like credit card companies can track them. They then may be able to generate targeted advertising for you. This wouldn’t happen if you are using cash since it doesn’t leave a digital trail.

Digital Wallet App on Smartphone

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Keeping Yourself Safe With Digital Payments

Although it may seem strange the first few times you pay with an app on your phone, the process feels natural in almost no time. 

Although you may have safety concerns when paying this way, other payment methods have their own dangers. You can take a few precautions to keep vulnerabilities at bay.

Since you likely carry your phone with you at all times, you never have to worry about forgetting your wallet again. And when it comes to the physical safety of your payment device, criminals who grab your phone can’t get into your digital wallet as quickly as they can take all your cash and credit cards after they grab your physical wallet.

Yes, a data breach could expose your digital wallet. But you can take a number of precautions to minimize the chances of stolen data happening, giving you a level of safety that you can trust when making digital payments.

Related: How to Identify a Scammer on the Phone.