What You Need to Know About Digital Wallets

Posted September 14 2016
by PenFed Team
man paying with digital wallet

Your credit card is now officially mobile. Gone are the days where you had to carry a wallet stuffed with credit cards. Today you can pay for many things just by using your smartphone—or even your smartwatch.

Commonly known as digital wallet technology, it’s the latest trend in payment technology. Instead of worrying about which cards you should carry in your wallet—or even worse, dealing with the frustration of having one lost or stolen—you can now easily, and safely, store all your credit cards digitally on your mobile device.

It doesn’t mean you can ditch your physical wallet just yet—not all financial institutions or merchants support the technology. But if you want to check out the digital payment future right now, there’s good news, because PenFed supports three major digital wallet services: Apple Pay™, Android Pay™, and Samsung Pay™. Most newer smartphones will support one of these systems, making it easy to get started.

Let’s take a look at just what you can expect from this new technology and more mobile way to pay.

How Do Digital Wallets Work?

Just like your ordinary wallet, you fill your digital wallet with credit cards—either by manually entering card information or snapping a photo of your card. Then when you’re at a store that supports your digital wallet, take out your phone, tap it to a payment terminal, and use a fingerprint or Personal Identification Number (PIN) code to authorize the transaction. Your phone communicates wirelessly with the payment terminal using near field communication (NFC), which requires it to nearly touch the terminal to activate. This, combined with the need to authorize the transaction, means you won’t accidentally make any payments.

With a digital wallet, instead of fumbling through your wallet for a credit card, you’re already walking out the door.

What will slow you down is running into a retailer that doesn’t support your digital wallet—and because this technology is still new, you’ll find a lot of retailers who don’t. However, if you use Samsung Pay, there’s a workaround. While the system can use NFC like the others, it can also use magnetic secure transmission (MST). This handy feature allows your phone to mimic the magnetic stripe on your credit card, and it lets you use Samsung Pay at almost any retailer with a magnetic stripe reader.

Are Digital Wallets Secure?

Apple Pay, Android Pay, and Samsung Pay all use a system called tokenization to thwart would-be thieves. This means that instead of storing your credit card, your phone stores a token that represents your card. When you make a payment at a store or in an app, all that is sent is the token. While your card issuer can tell which tokens link to which cards, the token cannot be used by itself to make a transaction. Even if a thief gets your phone, or hacks into a merchant to get your token number, the token is useless by itself.

Your payment token and information is still stored securely and requires user authentication to be able to use it: typically through a fingerprint scan, by unlocking the phone, or entering a code. However, tokenization adds extra protection—and peace of mind for anyone who’s uncertain about loading their wallets into their smartphones.

Which Digital Wallet Should I Use?

The type of phone you have is going to limit the digital wallets you have access to:

  • Apple Pay works with the iPhone 6 and newer.
  • Android Pay works with most phones running Android 4.4 KitKat or newer, and support NFC.
  • Samsung Pay works on Galaxy S6 phones and newer, as well as Galaxy Note5 phones and newer.

Change the Way You Pay With PenFed

If you’re using a supported phone, PenFed makes it easy for their cardholders because the credit union supports three major digital wallet platforms.

If you do not have a PenFed credit card, it’s never too late to get one. Whether you’re looking for rewards or just want a simple, fee-free card, PenFed has a wide selection of credit cards to choose from. Change the way you pay—apply for a PenFed credit card today.