What Are eWallets and How to Secure Them?
In 2020, there were approximately 294.15 million smartphone users in the United States, and this number continues to grow. If you're among the millions of Americans who own a smartphone, it's likely that you have access to an eWallet. eWallets, also known as electronic wallets or digital wallets, are digital systems that allow individuals to store and manage their financial information, such as credit card details, bank account information, and digital currencies, in a secure and convenient manner. It securely stores your payment information and passwords in the cloud. Digital wallets may be accessible from a computer; mobile wallets, which are a subset, are primarily used on mobile devices.
These digital wallets enable users to make electronic transactions, including online purchases, money transfers, and mobile payments, using their stored payment information. In simpler terms, an eWallet is more than just a convenient way to make online payments, although it excels in that area as well. Popular examples of eWallets include Apple Pay, Google Pay, and Venmo. These platforms have gained significant popularity globally and are continuously evolving to offer enhanced features and integration with various merchants and financial services.
Digital wallets utilize the wireless capabilities of mobile devices, such as Bluetooth, WiFi, and magnetic signals. It transmits payment data securely from your device to a point of sale designed to read the data and connect via these signals.
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Presently, the technologies employed by mobile devices and digital wallets encompass:
- QR codes: These are matrix barcodes that store data and can be scanned using your device's camera and the wallet's scanning functionality to initiate a payment transaction.
- Near Field Communication (NFC): NFC is a technology enabling two smart devices to establish a connection and transfer information via electromagnetic signals. It requires the devices to be in close proximity to establish a connection.
- Magnetic Secure Transmission (MST): This technology emulates the same mechanism used by magnetic card readers when swiping a card through a slot on a point of sale device. Your phone generates an encrypted magnetic field that can be read by the point of sale system. However, it's worth noting that Samsung, a digital wallet and mobile phone provider, has phased out the MST feature for Samsung Pay on its Android mobile phones.
When you select a card from your stored wallet to initiate a transaction, the information associated with that card is securely transmitted from your device to the point-of-sale terminal. This terminal is connected to payment processors that serve as intermediaries in the transaction process. Through these processors, as well as gateways, acquirers, or other relevant third parties involved in credit and debit card transactions, the payment is directed along the credit card networks and banks. This routing enables the completion of the payment process.
The benefits of the eWallet include these following
- Convenience: Users can store multiple payment methods in one place and access them easily, eliminating the need to carry physical cards or cash. Digital wallets allow you to organize and carry less by saving loyalty cards, gift cards, coupons, travel passes (plane tickets, hotel reservations, train passes, etc.), and even your student ID to your phone.
- Security: eWallets typically use encryption and other security measures to protect sensitive financial data, reducing the risk of fraud or theft. Unlike physical wallets, digital wallets provide an added layer of security through features like two-factor authentication or Face ID. So, even if you misplace your smartphone, unauthorized access to your digital wallet becomes significantly more difficult.
- Speed: Transactions made through eWallets are often faster compared to traditional payment methods, allowing for quick and efficient payments.
- Accessibility: eWallets can be accessed through smartphones, tablets, or computers, providing users with the flexibility to make payments anytime and anywhere with an internet connection.
- Rewards and Discounts: Some eWallets offer rewards programs or discounts for using their services, providing additional incentives for users to adopt digital payment methods. Since your card is fully linked to your account, all your reward points are still earned with every purchase.
While eWallets offer convenience and ease of use, there are some risks associated with their use:
- Security breaches: As with any digital platform, there is a risk of security breaches and unauthorized access to your eWallet. This could result in the theft of your personal and financial information.
- Phishing and fraud: Cybercriminals may attempt to deceive users by creating fake eWallet applications or websites to trick them into revealing their login credentials or other sensitive information. It's important to be vigilant and only use official and trusted eWallet services.
- Device theft or loss: If your mobile device or other device containing your eWallet is lost or stolen, there is a risk that someone could gain access to your eWallet and make unauthorized transactions.
- Technical glitches and system failures: eWallets rely on technology, and there is a possibility of technical glitches, system failures, or disruptions in service that could impact your ability to access or use your eWallet effectively.
- Limited acceptance: While eWallets are becoming more popular, not all merchants or service providers accept them. This can restrict your ability to use your eWallet for certain transactions.
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eWallet Security Tips
To mitigate the risks associated with eWallets, consider the following practices:
- Use strong and unique passwords: Create strong, complex passwords for your eWallet accounts and avoid using the same password across multiple platforms. Consider using a password manager to securely store and manage your passwords.
- Enable multi-factor authentication (MFA): Whenever possible, enable MFA for your eWallet accounts. This adds an extra layer of security by requiring a secondary form of verification, such as a fingerprint scan or a one-time password sent to your mobile device.
- Keep your device and eWallet app up to date: Regularly update your mobile device's operating system and ensure that you have the latest version of the eWallet app installed. Updates often include security patches and bug fixes that help protect against vulnerabilities.
- Be cautious of phishing attempts: Be vigilant against phishing attempts that aim to trick you into revealing your eWallet login credentials or personal information. Verify the authenticity of any communication or links received through emails, messages, or other channels before providing any sensitive information.
- Protect your device: Use a passcode, fingerprint lock, or facial recognition to secure your mobile device. Enable remote tracking and wiping capabilities to safeguard your data in case of loss or theft.
- Regularly review your transactions: Monitor your eWallet transactions regularly for any unauthorized activity or discrepancies. Report any suspicious transactions to your eWallet provider immediately.
- Install security apps by utilizing security apps like mobile security apps, password managers, 2FA apps, VPNs, and anti-phishing apps, users can enhance the protection of their eWallet accounts and personal information.
In conclusion, eWallets offer great convenience , but at the same time, it's important to be aware of the potential risks associated with eWallet usage, such as unauthorized access, phishing attacks, or device theft.
By following the options listed above, users can enjoy the convenience of eWallets while minimizing the potential risks. Remember to stay informed, choose reputable security apps, and regularly update them to stay one step ahead of potential threats. With the right precautions, eWallets can provide a convenient and secure way to manage your finances in the digital age.