A digital wallet refers to an electronic device that allows an individual to make electronic transactions. It can be used in conjunction with mobile payment systems that allow customers to pay for purchases with their smart phones using Near Field Communications technology, QR codes, etc. An individual’s bank account, cryptocurrency, health card, and other ID documents can also be linked to some digital wallets.

Digital wallets have been around since the late 1990s, about the time of the dot-com boom, with their first generations developed by a variety of entrepreneurial companies with small and relatively unknown software publishers. In 1997, Coca Cola introduced the first example of the mobile wallet which introduced the idea of using mobile devices for transactions. By 2003, about 95 million cell phone users had made a purchase such as having bought tickets or arranged travels using their mobile device.

The second generation of digital wallets was proprietary and couldn’t allow storing all your credit card information without a separate program. These wallets included MasterCard, Visa, and other leading banks and lenders. The third generation of digital wallets are largely software programs that reside on your smart device, store information from multiple credit cards, and work with virtually any website. Some are specifically designed for new cryptocurrencies.

In July 2008, Apple started an app store and opened it to third-party developers hence giving an opportunity to develop an app that held payment data. In 2011, the payments industry was leaning toward storing transaction data in smartphones while the rest of the world was enthusiastically embracing storage in the cloud. As of May 2011, Google had aligned partners who thought the smartphone should contain the data. It was under the control of the wireless carrier, and the wallet was an app on the phone that Google developed. In 2012, Apple introduced the Apple’s Passbook, an app that targeted boarding passes, tickets, and coupons instead of actual mobile payments. It was followed by Apple Pay in 2013.

Since 2015, Near Field Communication has been available on almost all high-end smartphones. The technology has been supported by the Android for several years, and Apple got in the game after the launch of iPhone 6. Over time, many stores have started to accept mobile payments via NFC terminals, leading to more companies updating or releasing their mobile wallet versions, a strong competitor to cash transactions.

Security Issues
Transactions using a digital wallet are subjected to the risks inherent in any mobile transaction. Cyber security experts are of the opinion that with the use of online payment platforms, the fraudulent use of payment networks and data theft has also gone up. There are several forms of cyber attacks where cyber criminals look for vulnerabilities within a technology and turn it to their advantage and con people out of their money. The 2012 Google Wallet hack exposed user’s PINs. The Starbucks app was hacked in May 2015 which automatically withdrew funds from user’s bank, credit, or PayPal accounts. In early 2015, Slate discovered that the accounts of users on the popular mobile-payment solution Venmo had been hacked, which resulted in their accounts getting drained.

Mobile payment technology is based on over-the-air communication. Therefore, there is a risk of the device being compromised by hacking. In fact, a hacker can theoretically hack into a device without physically having the phone or a physical connection going to it. These days, criminals can use RFID and NFC wireless communication to steal numbers. ABC7 I-Team in early 2015 revealed just how easily thieves can steal personal details from cards that use ‘wave and pay’ radio technology. The readers can be bought online or downloaded to your phone via an app. All the hacker has to do is stand six inches away while a transaction is being made. Within a matter of seconds, the technology can pick up and store your data. A $300 machine can then replicate the card so it can be used elsewhere. It’s estimated that 70% of cards will soon be vulnerable to digital pick pocketing. Cards can be protected from RFID skimmers by being wrapped in tin foil, or other materials which can block the frequencies. Some companies have even started making special-purpose signal-impenetrable pouches for your phone.

Malware is specifically designed applications and programs that compromise the security of mobile phones and computers. It can give cyber criminals access to devices, and hence also to sensitive consumer data. Therefore, one should only download and install applications from authentic sources and trusted developers. The first quarter of 2011 put Trojan infections at the top of the malware list, being more than 70% of all malicious files detected on computer systems, followed by the traditional viruses and worms.

Phishing Attacks
In phishing, the user is lured into fradulent emails or fake websites and is made to enter account-related sensitive information. Those who are new to the world of electronic transactions are more prone to such traps. Even if you were using software that blocked phishing emails, an illegitimate email could still pass through. Do not click on attractive or suspicious links that you get through SMS or email. In most cases using common sense can prevent phishing attacks in the first place. Even if you do not intend on entering any personal information, it’s best to not click on suspecious looking emails or links (even image links), as doing so could also trigger hidden viruses or malware.

Human Error
There are a number of security concerns that can be traced back to people.

Public Networks And Wi-Fi
Using a public network such as a Wi-Fi network can expose your mobile device and information to cyber criminals. Avoid doing digital transactions on public computers and networks like a cyber cafe or a public Wi-Fi hotspot, better to opt-out of connecting to other devices on the network. To keep yourself protected, consider using a VPN or an SSL connection. Remember to turn off sharing and Wi-Fi when these services are not in use.

Battery Life And Risk Of Losing Your Device
If you lose your phone, you could lose your wallet if it’s not hosted on an internet service. If your device’s battery runs out, you will lose access to your wallet temporarily. If your smartphone or tablet runs out of power, you won’t be able to access the digital accounts on it. This can be a concern if you’re a heavy user of your device, as power can quickly be sapped by battery-intensive applications, leaving you stranded without power or money in your pocket (if your digital wallet is your sole on-person money storage.

Ransomware involves the hacker gaining remote access to the device as well as the data of the victims, and can block access to the device until a sum of money is received. Ransom prices vary depending on the ransomware variant and the price or exchange rates of digital currencies.

While financial institutions like banks and mobile e-Wallet companies take steps on their part to safeguard information, you too should consider taking financial precautions. See our​ ​​blockchains.my wallet app, developed using Blockchain technology, mobile devices, and the advanced security of biometric identification systems. ​Visit the  ​website ​​and ​​download ​the ​app, available ​on​ ​Google ​Play.