With the global transaction value of digital payments projected to grow from $17.72 trillion in 2024 to $36.5 trillion by 2029^[1], payment methods such as virtual wallets are becoming essential tools for facilitating secure and convenient transactions. They're already the most popular e-commerce payment option, accounting for half of the global e-commerce transaction value in 2023^[2].

In this article, we'll explore virtual wallets, their purpose, functionality, and their benefits. If you want to make your online payments more secure, you'll also learn about another method to shield your personal information during online transactions.

What Is a Virtual Wallet?

A virtual or digital wallet is an app that lets you securely store and access payment information, such as credit and debit card details, directly on your smartphone or other digital devices.

Virtual wallets allow you to complete transactions quickly and securely without having to handle cash or physical debit or credit cards at checkout. Besides payment information, some virtual wallets can digitally store gift cards, identification cards, and transportation passes and tickets.

How Do Virtual Wallets Work?

To set up a virtual wallet, enter your payment card details directly into the wallet app. Virtual wallets typically encrypt this data, ensuring your payment information remains secure. Once your device is unlocked and you authorize the wallet, it's ready for use.

When making payments with your digital wallet, your payment card details are replaced with a unique number—the merchant receives this token instead of your actual payment information.

Different Ways of Making Payments Using Virtual Wallets

For in-store payments, virtual wallets use three key technologies:

1. Quick response (QR) codes—Virtual wallets often allow you to scan a QR code with your smartphone camera to initiate payments. This code contains transaction details, including the amount and merchant information.
2. Near-field communication (NFC)—This technology allows wireless data transfer between devices over a short distance, typically within 1.5 inches. NFC enables you to complete transactions by tapping your phone on a compatible terminal, providing a quick and secure method for in-person payments.
3. Magnetic secure transmission (MST)—MST enables your smartphone to emit a signal that mimics a traditional card swipe. This technology allows for secure payments even with older terminals, ensuring compatibility across various point-of-sale systems.
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For online purchases, virtual wallets integrate with merchant systems. Once you confirm a transaction, the wallet completes the payment. Some wallets also autofill shipping details for added convenience.

Some wallets support or primarily operate with peer-to-peer payments. You can send money directly to another person's digital wallet or linked bank account by providing credentials like their username or email address. After the app verifies the details, the funds are transferred to the recipient instantly or after a specific duration, depending on the service provider. 

Benefits of Using a Virtual Wallet

Virtual wallets have several advantages, including:

• Availability and convenience—Virtual wallets can consolidate payment methods and identification into a single, readily available digital platform, streamlining the payment process and allowing you to declutter your actual wallet at the same time.
• Reduced exposure to card loss or theft—By securely storing credit card and identification details on mobile devices, these wallets reduce the risk of losing cards. Many wallets also offer transaction notifications, one-time passwords (OTPs), and device-specific authentication, boosting security.
• Cost savings—Virtual wallets often integrate with perks such as cashback offers, discounts, or reward programs, allowing you to save money when using them.

Popular Virtual Wallet Providers

Among the most popular virtual wallet options are:

1. Apple Pay
2. Google Wallet
3. Samsung Pay

Apple Pay

Apple Pay is a mobile payment and digital wallet service developed by Apple Inc. It is designed for payments in person, within iOS apps, and on the web via Safari. Key features include:

• Device integration—Available on iPhone, Apple Watch, Mac, and iPad, Apple Pay enables seamless online transactions for Apple users^[3].
• Enhanced security—Transactions are secured using Face ID, Touch ID, or a device passcode. It also uses a Device Account Number—a unique identifier tied to a specific device—to shield actual payment card details^[4].
• Flexible payment options—Users in certain jurisdictions can pay in installments using an Apple Card, splitting purchases into manageable payments for added flexibility^[5].

Google Wallet

Google Wallet is a versatile digital wallet solution from Google, designed to simplify transactions and credentials management. Its features include:

• All-in-one solution—Offers storage for debit and credit cards, tickets, passes, keys, and IDs in a unified platform^[6]
• Fitbit payments support—Allows you to make tap and pay transactions with the fitness tracker^[7]
• Security features—Leverages Android's built-in security measures, such as 2-step verification and the ability to erase wallet data remotely for enhanced protection^[8]

Samsung Pay

Offered as part of Samsung Wallet, this payment platform allows users to make payments using Samsung devices. Its notable features are:

• Advanced compatibility—Works with NFC and MST (support varies with country) technologies, offering broad compatibility with various payment terminals^[9]
• Exclusive offers—Offers discounts, gift cards, and promotions from retailers to users^[10]
• Biometric security—Secures transactions using fingerprints, PINs, or iris scans for a robust authentication process^[10]

Do Banks Offer Virtual Wallets?

Some banks offer products marketed as "virtual wallets," but these can sometimes differ from traditional digital wallets like Apple Pay and Google Wallet. For instance, bank-based virtual wallets can offer more financial services and features.

The PNC virtual wallet is an example of a bank-based solution. This virtual wallet integrates multiple accounts and digital tools to assist users in managing their finances effectively. It offers several features, including:

1. Account options
2. Digital tools for money management

Account Options

The PNC virtual wallet is structured into three distinct accounts, each designed to support specific financial needs^[11]:

Digital Tools for Money Management

The Virtual Wallet includes various digital tools that help users manage their finances efficiently, including:

• Spending categories—Provides insights into expenses, allowing users to track and manage budgets effectively^[11]
• Calendar—Facilitates scheduling and monitoring of upcoming bills and paydays for improved financial planning^[11]
• Savings goals and rules—Enables tracking progress toward long-term financial objectives through customizable savings plans^[11]
• Low Cash Mode^®—Offers added control during periods of low balances, including additional time to resolve overdrafts^[12]
• Zelle^® integration—Allows secure money transfers with trusted contacts directly through the wallet^[13]

While the PNC virtual wallet can't be used as a regular digital wallet for certain types of transactions, the mobile app comes with PNC Pay^[14], a feature that allows users to make contactless payments at terminals. 

Leverage Virtual Cards for Secure & Convenient Transactions

Digital wallets might boost security and convenience during online purchases, but they have downsides. Even though they're popular, they might not be available as a supported payment method in every online store. 

Some stores might accept digital wallets in general, but not yours specifically. Also, your virtual wallet depends on your phone's battery—if it goes out, so does your ability to make purchases.

For added flexibility, consider using virtual cards for online payments. Because they work like regular payment cards online, virtual cards are accepted by any merchant that accepts cards from the same payment card network. 

Virtual cards can also be designed to deactivate after the first transaction, rendering them useless to potential hackers who may obtain them. 

If you're looking for bank-grade security, spending controls, and a seamless shopping experience, consider a dedicated virtual card provider like Privacy.

Protect Your Online Payments With Privacy Virtual Cards

Privacy is a BBB-accredited virtual card provider with over 250,000 users. If you're a U.S. resident over 18 with a bank account or debit card with a U.S. bank or credit union, you can connect it to Privacy and request virtual cards for online purchases. Each Privacy Virtual Card comes with the typical card credentials, including:

• A unique 16-digit card number
• Expiration date
• CVV security code

A Privacy Card acts as a barrier between your actual payment card details and potential hackers. In case of a merchant security breach, a hacker can only access the virtual card details, protecting your actual financial data from unauthorized access.

Beyond basic virtual card functions, Privacy Virtual Cards come with the following convenience features:

• Privacy Browser Extension—Available for Chrome, Edge, Firefox, and Safari (including Safari for iOS), the extension autofills card information at checkout, eliminating the need to search for your wallet or manually type card numbers. 
• Privacy App—Available for Android and iOS, the mobile app allows you to create, manage, and monitor virtual cards on the go.
• 1Password integration—This integration enables you to create, use, and store Privacy Cards within the 1Password browser extension.
• Transaction alerts—Privacy sends instant notifications for every transaction, keeping you informed of any card use and allowing you to quickly detect unusual activity.

Privacy Card Types & Spending Controls

Privacy offers three types of virtual cards:

• Single-Use Card—Designed for a one-time transaction, this card closes shortly after use. Anyone attempting to reuse the card number will find it inactive, making it ideal for purchases on unfamiliar sites.
• Merchant-Locked Card—This card "locks" to the first vendor you transact with, making it a reliable choice for subscription services and other recurring payments. Attempts to use the card elsewhere will be declined.
• Category-Locked Card—Configured for a specific spending category (like dining, travel, or retail), this card blocks transaction attempts above your limit for the category, which makes it useful for budgeting.

You can set a spending limit on each Privacy Card, and if a charge attempt is above the limit, Privacy will decline it. This feature protects you from double billing, fee increases, or accidental overcharges.

You can also pause or close any virtual card, and Privacy will block further transaction attempts. This feature protects you against unexpected charges when going through the lengthy process of canceling subscription services.

How To Get Started With Privacy

Getting started with Privacy is straightforward—follow four steps to begin creating secure virtual cards for your online purchases:

1. Sign up
2. Complete the onboarding process and verify your identity
3. Connect a funding source—your bank account or debit card
4. Request your first Privacy Card
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Privacy has four monthly plans—you can learn more about them in the following table:

Privacy Virtual Cards can be used at most vendors that accept U.S. debit or credit card payments, including those processing transactions via Visa or Mastercard networks.

References

^[1]Statista. https://www.statista.com/outlook/fmo/digital-payments/worldwide, sourced November 25, 2024.

^[2]Statista. https://www.statista.com/statistics/1111233/payment-method-usage-transaction-volume-share-worldwide/, sourced November 25, 2024.

^[3]Apple. https://www.apple.com/apple-pay/, sourced November 13, 2024.

^[4]Apple. https://support.apple.com/en-us/101554, sourced November 13, 2024. 

^[5]Apple. https://support.apple.com/en-us/120477, sourced November 13, 2024.

^[6]Google. https://support.google.com/wallet/answer/14187590?hl=en, sourced November 13, 2024. 

^[7]Google. https://support.google.com/wallet/answer/12060037?hl=en#zippy=%2Cuse-google-wallet-for-transit%2Cpay-with-your-fitbit-device, sourced November 13, 2024

^[8]Google. https://wallet.google/, sourced November 13, 2024. 

^[9]Samsung. https://www.samsung.com/my/samsung-pay/supported-devices/?srsltid=AfmBOortUExgD9Ia-dO8KIO-GhBfxosTGfHqJSZ5sbLLDCB3xNKeu5CK, sourced November 13, 2024. 

^[10]Samsung. https://www.samsung.com/levant/support/apps-services/what-are-the-main-features-of-samsung-pay/, sourced November 13, 2024. 

^[11]PNC. https://www.pnc.com/en/personal-banking/virtual-wallet-overview.html, sourced November 13, 2024. 

^[12]PNC. https://www.pnc.com/en/personal-banking/banking/services/low-cash-mode.html, sourced November 13, 2024. 

^[13]PNC. https://www.pnc.com/en/personal-banking/banking/online-and-mobile-banking/zelle.html#legal, sourced November 13, 2024.

^[14]PNC. https://www.pnc.com/en/personal-banking/banking/online-and-mobile-banking/pncpay.html, sourced November 13, 2024.

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