A digital wallet stores your payment information electronically so you can pay without cash or physical cards. But what's actually happening behind the scenes?
The Basics
When you create a digital wallet account, you link a funding source — a bank account, credit card, or direct top-up. Your wallet balance represents real money held securely by the wallet provider.
When you pay, the wallet sends an encrypted token to the merchant's system. No card numbers are transmitted — just a one-time code that authorises the specific transaction.
Types of Digital Wallets
Stored-Value Wallets
You preload funds and spend from your balance. Examples include transit cards and loyalty wallets like Experience Zeno. Your money sits in the wallet until you use it.
Pass-Through Wallets
These store your card details and charge your bank or credit card at the point of sale. Apple Pay and Google Pay work this way — they're a convenience layer, not a stored balance.
Hybrid Wallets
Some wallets combine both — you can pay from a stored balance or fall back to a linked card. This gives flexibility while still offering the benefits of pre-loaded funds.
Security
Digital wallets are generally more secure than physical cards. Your actual account numbers are never shared with merchants. Transactions use tokenisation and encryption, and most wallets require biometric or PIN authentication for each payment.