Digital wallet is a kind of software that enables users to pay for goods online. It stores credit card numbers and other personal information, such as shipping address. Once the data is entered, it is automatically transmitted to the ordering field of the merchant website. When using digital wallet, consumers do not need to fill in orders at various sites when purchasing goods, because the information has been stored and automatically updated into the order field of the manufacturer's site. Consumers can also benefit from using digital wallets because their information is encrypted, that is, protected by private software codes. Merchants also avoid being cheated and get protection and benefits from it.

For consumers, digital wallets are free and can be easily obtained. For example, when a consumer buys something on a merchant website that handles server-side digital wallets, he inputs his name, payment amount and delivery information into the merchant's own form. At the end of the purchase, he was asked to sign the user name and password for the wallet he chose in the future. Users can also get wallets from the website of the wallet supplier.

Although wallets are free for consumers, suppliers have to charge merchants for using wallets.

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Basic classification

There are two kinds of digital wallets: client and server (digital wallet). In these categories, there are wallets that only work on some merchants' websites and wallets that are unknown to merchants.

Customer-based digital wallet is the older of the two kinds of wallets. According to analysts, such wallets have begun to be ignored because they require users to download and install software. Users download the wallet application and enter the payment amount and mailing information. In this sense, information is safe and encrypted on the user's hard disk. Users can control their credit cards and personal information locally.

When using a server-based wallet, users fill in their personal information and automatically download a snack file (a snack file is a text file containing user information). In this case, the consumer's information resides on the server of a financial institution or a digital wallet provider, not on the user's PC.

Server-side wallets provide security measures against merchant fraud because they use certificates to verify the identities of all parties. When one party makes a transaction, it submits a certificate to the other party involved. Electronic messages are accompanied by certificates, which are used to verify the identity of the other party and provide the receiver with a way to encode the reply.

In addition, the sensitive information of credit card holders is generally kept in financial institutions, which is an additional security measure, because the financial environment usually provides the highest level of security. However, even though wallets provide convenience for online shopping, they have not been widely adopted.