What is a digital wallet and how does it work?
A digital wallet is a mobile app that stores your payment card details, credit, debit, and even loyalty cards. So you can pay with just a tap from your phone or smartwatch. It’s designed to make payments quicker, simpler, and more secure.
Digital wallet security: Are digital wallets safe?
Yes, in many ways. They’re safer than traditional card payments. The reason? Digital wallets use multiple layers of protection, including tokenization, which replaces sensitive card details with encrypted codes during transactions. This means that even if someone gets into a shop’s system, the customer’s actual card number won’t be exposed.
Biometric checks, like fingerprint or facial recognition, also make it more secure. This means that only the person who owns the device can approve transactions. Also, most wallet apps work in their own little worlds, which means it’s harder for malware to attack across apps.
But of course, safety isn’t just about tech, it’s about how it’s built and what assumptions are made about the user. Knowing where the weak points are can make or break your product’s credibility. This is where product innovation plays a key role, the product team needs to design not only for functionality, but for real-world behavior, risk, and resilience.
Safety threats of digital wallets (Top threats that can weaken wallet security)
When we talk about digital wallet security, we also need to pay attention to how things can go wrong. These are some of the biggest risks to watch out for.
- Lost or Stolen Devices Can Expose Wallet Access
- Malware or Remote Attacks Through Apps and APIs
- Poor Private Key Storage Can Lead to Direct Loss
- Social Engineering Tricks Users into Giving Access
- Unencrypted Data Can Be Intercepted in Transit
- Rooted or Jailbroken Devices Are Easy Targets
- Browser and Desktop Wallets Can Be Exploited
- Third-Party Services May Introduce Hidden Risks
Pros and cons of using a digital wallet
Digital wallets offer plenty of benefits, but there are also some downsides to be aware of. Let’s have a look at the pros and cons of using a digital wallet.
| Pros | Cons |
| Fast, contactless payments | Relies on hardware compatibility (NFC, POS terminals) |
| Stores multiple card types in one place | One compromised device = full access risk |
| Biometric/PIN protection built-in | Dependent on OS security; vulnerable if jailbroken |
| Can be accessed remotely if set up right | Requires constant updates to prevent exploits |
| Popular with users, especially younger demographics | Not all merchants accept mobile payments yet |
The best digital wallet apps right now
1. Apple Pay
Still the go-to for iPhone users. It supports contactless payments, online checkouts, transit cards, and even digital IDs in selected regions, all integrated into the Apple ecosystem.
2. Google Wallet
Great for Android (and iOS) users who want flexibility. Google Wallet stores everything from payment cards to tickets and IDs. It’s also expanding support for digital identity and transit options globally.
3. PayPal
Works pretty much everywhere. PayPal is widely accepted for online shopping and peer-to-peer payments. It also offers credit, crypto, and business tools, making it more than just a wallet.
4. Cash App
With 57 million users and $283 billion in annual inflows as of 2024, Cash App has established itself as a comprehensive financial tool for many Americans. Beyond payments, it supports features like direct deposits, investing, and crypto trading, all from one app.
5. Samsung Wallet
Tailored for Samsung device owners. It combines payments, digital keys, IDs, and more, and supports both NFC and MST, making it compatible with a wide range of terminals.
How to make safety payments
Even the smoothest payment experience needs to be secure behind the scenes.
- Keep authentication front and center
Make sure every payment action triggers a clear authentication step: fingerprint, face scan, passcode, not just app access.
- Minimize what’s shown on the lock screen
Avoid displaying any sensitive data or transaction previews unless the device is unlocked. Accidental taps shouldn’t reveal too much.
- Encourage real-time payment alerts
Push notifications for every transaction (or threshold-based ones) not only give users peace of mind, they can also be early fraud detectors.
Flag unusual behavior
Location mismatches, large transfers, or activity from new devices? These should automatically trigger temporary holds or additional verifications.
Make cancellation and support accessible
If something feels off, users need a fast way to freeze activity or get help, no digging through menus or waiting for business hours.
Ways to improve digital wallet security
Require strong passwords by design
Don’t just allow secure passwords, enforce them. Set minimum complexity standards and encourage password managers through user prompts or autofill support.
Ensure device-level security
Consider that users might one day lose their phones. Build around the device’s biometric and lock-screen protections. Also, prompt users to set them up if they haven’t already.
Make MFA the default, not the optional extra
Two-step verification shouldn’t be hidden in settings. Guide new users through MFA during onboarding and explain why it matters.
Detect risky environments
Design your digital wallet app to recognize when it’s being used on unlocked devices or over unsecured networks, and restrict sensitive actions in those scenarios.
Integrate monitoring, not just transactions
Give users simple tools to view recent activity, get alerts for unusual behavior, and flag suspicious transactions right inside the app. The earlier they notice something’s wrong, the better.
What to do if your device is lost or stolen
Here’s what to do right away:
Use device tracking tools
If “Find My Device” (on Android) or “Find My iPhone” (on iOS) is turned on, try to locate your phone immediately. If it’s nearby, you might just recover it. If not, both platforms allow you to lock or erase your device remotely, a critical step to keep your wallet (and everything else) safe.
Log out or freeze your wallet remotely
Some wallets offer remote deactivation or access control. If not, change your passwords and remove linked devices from your account settings as fast as possible.
File a police report
It’s not just a formality. Your carrier or insurance provider may require it, and it can help if your device ends up being recovered.
For product teams
Make sure your mobile app supports quick access to emergency settings, ideally without needing to log in. Help users act fast when it matters most.
How can Vacuumlabs help?
When it comes to digital wallet security, the priority is to build safety and trust. That means balancing smart design, security best practices, and a deep understanding of how customers actually use these tools.
We’ve helped clients do exactly that. In the case of SKPAY, a wallet and card solution used across Slovakia, we worked side-by-side with the client to support mobile app experience, wallet integration, compliance, and ongoing improvements.
The result? A product that’s functional, safe, and simple to use in everyday life. If you’re working on your own wallet solution or thinking about launching one, we can help you get there.
