So what’s the latest on digital payments?

One of the many impacts of the Covid-19 pandemic has been the explosion in the growth of digital payments. More demand for online shopping and contactless payments has fast-tracked the development of different types of digital payment, particularly amongst millennials and Generation Z. The number of digital payment users is expected to exceed 4.4 billion by 2025.

Two of the fastest-growing digital payment systems are digital wallets and QR codes. But how do these work? And are they safe?

Let’s take a look.

Digital wallets

A digital wallet is an encrypted payment system that you can access on your smartphone or computer. It is particularly useful to store your digital wallet on your phone as this enables you to use your phone to pay instead of a debit or credit card. 

If a merchant accepts digital payments, all you need to do is wake your phone, display your default card and simply position your phone near the digital payment terminal. The terminal will then use NFC (Near-Field Communication) technology to transfer data between the phone and the terminal.

As well as in-store shopping, when accepted, other examples of where digital wallets can be used instead of cards or cash are:

  • Online shopping;

  • Travelling abroad – digital wallets can operate in any currency;

  • When using any type of cryptocurrency;

  • Transferring money between different accounts.

There are an increasing number of digital wallets available, and they all function slightly differently. Some of the most popular current digital wallets are:

QR codes

QR – Quick Response – code payment is another type of contactless payment where payment can be made by scanning a QR code from a mobile app. 

It can work in one of two ways: 

  • Your phone scans the QR code from a merchant

This is usually done from the camera app on your phone. In this case the QR code will contain details of the price of the item, for example in a pub or takeaway food outlet. You then complete payment either through your digital wallet, a banking or merchant-specific app, or by typing in your card details.

  • The merchant scans a QR code from your phone 

When checking out, for example in a restaurant or store, you need to open the payment or merchant app on your phone and display the QR code which identifies your card details. The merchant uses a barcode scanner to scan the QR code, and payment is made.

Are digital payments secure?

Digital payments are undoubtedly convenient. They save you having to carry cards or cash and can be used increasingly both online and in-store. But how secure are they?

In many ways it could actually be argued that they are safer than carrying cards. For example, if you were to lose a contactless card, it could be used extensively by someone else before you even realise it has gone. 

Digital payments are more secure because they require access to your phone, which you are more likely to notice if it disappears. They may also require you to login and/or perform some kind of authentication – for example face recognition – before you can pay for a purchase. Some digital wallets also have limits on the size or number of transactions, so this is another layer of protection if your phone does fall into the wrong hands.

However, as with anything else digital, you unfortunately need to be aware that some people will be out to scam you. In this respect, treat the security of your phone and your digital payment mechanisms just the same as you would with any other digital device. 

For example:

  • Use a password that is not easy to guess, and change it regularly.

  • Do not share your password or PIN with anyone else.

  • Only go to your digital wallet through its website or app, not email links.

  • Don’t leave any digital payment method open on an unattended device, even for a short time.

  • Use a tracking app such as Find My Phone to help you find your phone quickly if it does go astray.

We hope that the above information has helped you to understand more about digital payment methods, and decide which would be most useful for you. 

If you are currently overhauling your finances, remember that Munzee Loans offers a range of products, for example 24 month loans, that may be of interest.

For more financial and lifestyle tips visit us again soon at Munzee Loans.