What are digital wallets?

Digital wallets are becoming increasingly popular in Ireland, making up over half of all contactless payments and exceeding €12 billion in transactions in the year to March 2024*. But how exactly do these apps work, and what makes them so popular? On this page, we answer some of the most commonly asked questions, exploring the different types of digital wallets, their advantages, and security considerations.

A digital wallet, also known as a mobile wallet, online wallet, electronic wallet, or e-wallet, is an app that securely stores your payment information on devices like smartphones, tablets, or smartwatches. Instead of carrying physical debit cards or credit cards around with you, you save your card details in the app. This way, you can make payments directly from your device, whether you’re shopping in person or online.

Once you’ve entered and saved your card information, you can use your smart device to make contactless payments. This can be especially useful for everyday purchases in Ireland and elsewhere, using public transport, accessing tickets, or earning loyalty points. Digital wallets can also store other types of cards, such as gift cards, making it simpler to manage all your payment methods in one central location.

Digital wallets work by securely storing your credit card or debit card details and billing addresses in protected software. This financial information is encrypted, which means it’s coded to prevent hackers from accessing it. When you use a digital wallet, you can sign in and quickly make purchases with just a click or tap.

Digital wallets come in three main types in Ireland: closed, semi-closed, and open. Each type offers different levels of flexibility and usage.

1. Closed digital wallets: Closed wallets are issued by specific companies and can only be used for purchases with that company or at specific locations affiliated with that business. Amazon Pay is a closed digital wallet example that you can only use within Amazon stores. 

2. Semi-closed digital wallets: Semi-closed wallets let you make payments at multiple retailers within a defined network. They are not tied to a single company but are accepted by a group of businesses that have partnered with the wallet provider. This type of digital wallet can offer slightly more flexibility than closed wallets. For instance, a telecommunications company might issue a wallet that lets you pay bills, recharge your phone, and shop at partner stores. 

3. Open digital wallets: Open wallets tend to be the most versatile type, as they can be used for transactions with any retailer that accepts digital payments. Because they often support multiple payment methods, open wallets can be suitable for activities like online shopping and bill payments. They may require linking to a bank account or credit card for funding.

The answer to this depends on the type of digital wallet you use. In Ireland, you don’t need a traditional bank account with a physical branch to use a digital wallet. You can use an online-only bank to store your money, which can be helpful if you don’t have easy access to regular banks.

Whether you can use a digital wallet without a bank account ultimately depends on the specific type of wallet. Closed digital wallets allow you to load money directly from debit or credit cards without requiring a bank account. Semi-closed digital wallets may need a linked bank account to load or withdraw funds, but this depends on the provider’s policies. Some offer alternative methods like cash deposits.

Open wallets are the only wallet type that typically require linking to a bank account or credit/debit card to add funds and perform transactions. This includes PayPal, where you need a linked bank account or card to use it.

So, while it is possible to use some types of digital wallets without a bank account for specific transactions, it depends on the wallet’s features and how you plan to use it.

Advantages:

• Perhaps the clearest advantage of digital wallets is their convenience. You no longer need to carry a physical wallet or sift through a wodge of cards to get your loyalty points.

• Security features like two-factor authentication, fingerprint or facial recognition, and encryption make digital wallets highly secure, often more so than traditional wallets.

• If you’re keen to get better at managing your money or budgeting, digital wallets provide detailed transaction histories, helping you track and understand your spending habits.

Disadvantages:

• Technical issues can quickly turn the convenience of digital wallets into an inconvenience. Problems like battery drain, a poor internet connection, or device failures can make these wallets less reliable as a payment type, unlike physical bank cards.

• As with many technologies these days, and apps in general, your personal data stored in digital wallets may be used or shared in ways you’re unaware of, raising privacy issues.

• Acceptance of digital wallets varies across regions. In some areas, especially rural parts of Ireland, they may not be widely accepted, so it is often necessary to have a backup payment method.

Many people in Ireland worry about the security of digital wallets compared to debit or credit cards. However, when comparing them, some might argue that it’s easier for a physical card to be lost or stolen than your smartphone, and this could be especially true if you use a digital wallet on a smartwatch.

What’s more, digital wallets rely heavily on encryption, ensuring that your sensitive information remains hidden from cashiers and anyone around you. However, like any digital technology, there is a risk of unauthorised access by hackers, compromising your personal and financial data.

To keep safe when using a digital wallet, it’s important to use strong passwords and regularly monitor your accounts for any unusual activity. These measures can help to protect your sensitive financial information.

When choosing the best digital wallet for your needs, it’s worth noting that your options are sometimes limited due to the operating system you use. Other things to think about include the services they offer, and compatibility with your bank card.

Below is a table of the main digital wallet providers available in Ireland, and their services:

When considering these digital wallet examples, keep in mind that your smartphone’s operating system often determines your options. For example, Apple Pay is tailored for Apple users and can be integrated with iOS devices. Similarly, the Google wallet is designed for Android users, but it’s important to note that older Android phone models may not have the NFC technology needed for making contactless payments with Google Pay.

Lastly, it can help to verify the compatibility of your bank card with your preferred digital wallet. Not all personal debit, credit, or commercial cards may integrate seamlessly with every wallet. It’s often worth checking your bank’s website or customer service to check whether they would work.

While we don’t offer digital wallets at Raisin Bank, you can benefit from our free mobile app. Easily manage your savings account, stay informed about the latest top rates, and monitor your interest earnings. Getting started is simple: register for a Raisin Account, select and open an account, and securely deposit your funds. Explore our market-leading rates on fixed term deposits and get the most from your savings!

*https://www.rte.ie/news/business/2024/0516/1449381-over-12bn-spent-using-mobile-wallets-in-past-year/