There’s been talk of wallets going the way of the dodo for years, as our identification documents and money become increasingly digitised. And while we’re not there yet, mobile payment products, known as digital wallets or e-wallets, have definitely been slimming down the pocket variety for a few years now.
Instead of carrying around a wallet containing debit and credit cards and cash, the alternative option is to download a mobile phone application such as Google Pay, Samsung Pay or Apple Pay to your smartphone and simply tap the device against an eftpos machine when you’re in store to make a purchase. You can download the app most relevant to your device or preferences on whatever platform you’d usually use for apps, such as Apple’s App Store or the Google Play Store.
The apps are not associated with the major banks and don’t process or authorise transactions – you’re still using your existing bank accounts or credit cards, the details of which are securely stored in the app, and your payments are protected by an additional layer of security provided by the app and the phone itself. The only requirement is that the device has NFC (near field communication) functionality, which is common on smart phones nowadays.
If you’re wondering how the best-known digital wallets work, here’s an simple rundown.
The service is currently only offered on Android phones, tablets or watches and works by simply tapping the device against an eftpos machine. Users don’t even have to open the app, just make sure the device is turned on, hold it over the top of the machine and wait until the purchase has been confirmed. Users will know the sale has been successful when the phone makes a noise and vibrates before showing visual confirmation. However, not all stores have Google Pay available so it’s important to look out for the Google Pay symbol before heading to the checkout.
In order to prove that it’s definitely you using your mobile phone to make a purchase, the fingerprint ID technology that already exists on the device can be used, or alternatively, a passcode is generated. It’s important to note that Google Pay does not send the users’ credit or debit card number to the merchant with the payment. Instead, it creates a virtual account number that’s linked to the account information.
To set up Google Pay, users must connect a Google account to the app and then add a bank card. This can be done by scanning the card details onto the app by using the phone’s camera to focus on the card. The other option is to enter the card number manually.
Apple Pay works in similar way to Google Pay but can only be used on Apple devices, including the iPhone, Apple Watch, iPad and Mac.
All the user has to do is hold the device up to an eftpos machine and authenticate the purchase by placing their finger on the phone’s touch ID sensor. Alternatively, they can use facial recognition if it’s available on their device. With no other person able to replicate the user’s fingerprint, users are guaranteed there is no way for anyone to navigate from the Apple Pay app to their bank accounts.
For those with an Apple Watch, things work a little differently, with the purchase confirmed by double clicking a button on the device rather than using touch ID or facial recognition.
Just like the other digital wallet options, Apple Pay creates a device number that’s linked to the card, along with a unique security code, to make purchases instead of using the credit or debit card number itself.
Samsung Pay follows the same lines as its competitors by way of a mobile phone application. However, it does provide an extra benefit in that it can be used at the majority of stores that accept credit or debit cards, not just those with tap-to-pay NFC terminals.
Just like Google Pay and Apple Pay, the third digital wallet option doesn’t store account or credit card numbers, instead using a separate code generated through the app to make the purchase. It works by sending through two codes, the first is a 16-digit number that represents the credit or debit card number, and the second is a one-time-only code to identify the particular purchase.
To make the purchase, users simply have to select on the app which card they want to pay with and verify their identity either through the fingerprint scanner, iris scan or a PIN. The mobile phone must next be placed against the payment terminal and in some cases a card PIN may need to be entered on the terminal itself as well. Once the purchase is complete the user will receive a notification of confirmation, detailing the amount of the purchase and the merchant’s name.
Important information: The information provided on this website is of a general nature and for information purposes only. It does not take into account your objectives, financial situation or needs. It is not financial product advice and must not be relied upon as such. Before making any financial decision you should determine whether the information is appropriate in terms of your particular circumstances and seek advice from an independent licensed financial services professional.