The last decade has seen a tremendous shift in how we buy and sell goods, both online and in the “real world.”  As our wallets get thicker and credit card scammers get smarter, people are turning to a sleeker, potentially safer alternative to cash and cards: digital wallets.

But do they actually pose less of a risk than the pieces of plastic in your pocket?  And what are digital wallets anyway?

1. Digital wallets are an elegantly simple alternative to cards.

Using encryption software, a digital wallet links your bank account, credit card, and debit card information to an app. The app allows you to tap your phone or smartwatch against a checkout register (or to enter your phone number and PIN) to complete your transaction. Instead of having to carry bulky credit and debit cards, you can rely on the electronics that you keep in your pocket or on your wrist every day.

2. The technology is on the rise.

Despite the technology’s relative recency, a surprising number of people have already downloaded digital wallet apps. According to a Gallup poll, over one in ten people have digital wallet on their phone – and one in ten Millennials uses their digital wallet every time they make a purchase. In fact, mobile payments accounted for $52 billion worth of transactions in the U.S. in 2014.

3. But some people still aren’t buying it.

These numbers are encouraging, but they don’t tell the whole story: among people who do have a digital wallet on their phone, 38% don’t see the technology as beneficial, and 90% don’t plan on using their digital wallet over the next year.

4. And many stores aren’t digital wallet-ready.

Consumers who aren’t using their digital wallets aren’t necessarily holding back because a lack of enthusiasm. Actually, many of them can’t pay with a phone or smartwatch. Though several large companies like Walgreens and Target have implemented digital wallet-compatible technology at their stores, other merchants have been slow to install technology compatible with phones or smartwatches.

5. The digital wallet marketplace is dominated by a few companies.

Google, Amazon, and PayPal were quick to establish their hold on the digital wallet space.  They began by creating quick, easy payment options online, which they are now translating into compatible services in the physical world. Google Wallet, for example, lets people load their phone with cash that they can spend in stores or online.

6. Digital wallets aren’t just used for making payments.

They aren’t just a convenient payment option: digital wallets are also becoming efficient platforms for customer loyalty programs. Digital wallets such as Apple Pay, Android Pay, and Samsung Pay allow users to store rewards cards on their app to easily carry out transactions or check their rewards balance.

7. Security is a major concern.

Despite their growing popularity, consumers worry that digital wallets may be unsafe. Some 55% of consumers who are sticking to physical cards say they are unwilling to use a digital wallet because of safety concerns. Specifically, users worry that storing pass codes and card numbers digitally makes them more susceptible to fraud. And while most banks and credit card companies don’t hold users liable for fraudulent purchases made on stolen cards, such fraud insurance does not necessarily exist for consumers who rely on digital wallets.

8. Mobile payment attacks have surged.

Some of these concerns might be well-founded.  Fraudsters have started using phishing schemes to steal passwords to digital wallets. And the Federal Trade Commission has investigated incidents in which more sophisticated scammers have hacked companies’ credit card data to sell stolen cards on the black market.

9. But many consumer worries are overblown.

As a matter of fact, digital wallets may be safer than the cards in your back pocket. Unlike physical cards, digital wallets are heavily encrypted, making it almost impossible to access a user’s financial information without a PIN, password, or fingerprint. And unlike physical cards, digital wallets can’t be snatched from your purse or wallet.

10. You can ensure your safety by being careful with your accounts.

The good news is that mobile payment fraud can often be avoided by cautious users. Never give out the passwords to your digital wallet apps, and pay attention to your surroundings when you enter your PIN. If you notice suspicious transactions on your account, change your passwords and contact your bank immediately.

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Roxanna "Evan" Ramzipoor

Roxanna "Evan" Ramzipoor is a writer on the marketing team at Sift Science. Her fiction is represented by Kristin Nelson of Nelson Literary. To see more of her work, check out her blog: