What Is a Digital Wallet?

By Anders Bylund – Updated Aug 7, 2025 at 8:43 PM

Key Points

Digital wallets enhance payment security by using encryption and never sharing actual card numbers.
They support contactless transactions, fostering a safer, cashless purchasing environment.
Digital wallets provide banking alternatives, giving access to financial services without traditional banks.

You might have heard your parents or friends talking about them, or maybe you've even used one yourself without realizing it. But what exactly are digital wallets?

Maybe you like to pay for things with cash or a debit or credit card. These are common and fairly convenient ways to manage financial transactions in stores or online. But they also have serious drawbacks. Cash can be lost or stolen, while cards can be skimmed or hacked, putting your money and personal information at risk.

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Person using a mobile phone to make a payment in a store. — Image Source: Getty Images

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About the Author

Anders Bylund is a contributing Motley Fool media and technology analyst covering semiconductors, cloud computing, internet infrastructure, quantum computing, and streaming media. Previously, Anders was a systems administrator for Nielsen Technology and CSX, gaining hands-on experience with enterprise-class systems. He was also a freelance writer for Ars Technica, TIME, USA Today, CNN, WIRED, and AOL's Daily Finance. He holds a bachelor’s degree in English and a master’s degree in library and information sciences from Florida State University. He believes in coyotes and time as an abstract.

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Anders Bylund has positions in Alphabet. The Motley Fool has positions in and recommends Alphabet and PayPal. The Motley Fool recommends the following options: long January 2027 $42.50 calls on PayPal and short September 2025 $77.50 calls on PayPal. The Motley Fool has a disclosure policy.