Digital wallets vs. credit cards: How do they compare for your business?

Digital wallets have become an increasingly popular tool for small businesses, startups, and everyday consumers. In addition to being a convenient alternative payment method to physical credit and debit cards, you can use digital wallets to store and access everything from cryptocurrency to concert tickets.

But what exactly is a digital wallet, how does it differ from a traditional credit card, and how can small businesses and startups benefit from using one? In this article, we’ll provide a simple guide to the differences between digital wallets and credit cards, as well as how you can use the two together to boost efficiency and optimize the expense management process.

What is a digital wallet?

While popular use cases date back to the earliest iterations of online payment platforms like PayPal, typically to facilitate ecommerce transactions, digital wallets have since evolved to include a variety of unique and increasingly innovative applications.

Today, in addition to sending and receiving online payments, you can use digital wallet apps like ApplePay and Google Pay to make in-store purchases at a growing number of retailers, eliminating the need to carry around physical cards.

Moreover, most mobile wallets allow you to opt for contactless payments, in which you make purchases by simply waving your mobile phone or smartwatch in front of a payment terminal. Beyond sending and receiving payments, digital wallets have become a popular tool to store a variety of virtual assets, including boarding passes, hotel reservations, and movie or concert tickets.

Digital wallets vs. mobile wallets

The difference between a mobile wallet and a digital wallet is fairly subtle. Whereas the term “digital wallet” is used more broadly to refer to software that allows a user to store credit and debit card information to make payments, the term “mobile wallet” refers exclusively to applications that allow users to make contactless, in-person purchases using a mobile device rather than a physical card.

6 digital wallet options

‍When it comes to choosing a specific digital wallet app or provider, individuals and businesses have a variety of available options. Generally speaking, most users are likely to decide based on two primary factors:

1. Device or operating system
2. Features and functionality

For example, iPhone users may choose to use Apple Pay because it doesn’t require installing an additional application, and it can be set up and used within a matter of minutes. However, those looking to take advantage of a specific feature, such as the ability to buy, sell, and store cryptocurrencies, might prefer a more crypto-friendly platform like PayPal, MetaMask, or Trust Wallet.

Here are six popular digital wallets on the market today worth considering:

1. PayPal

PayPal has spent decades establishing itself as a respected and reliable online payment service, and users can now make purchases using the platform’s mobile wallet at a large number of retailers across the US and beyond. PayPal’s wallet application has the advantage of being available on virtually all smartphones and devices, but you’ll need a PayPal account to get started.

2. Amazon Pay

The Amazon digital wallet is called Amazon Pay, and it streamlines the online shopping experience by allowing you to make transactions using the funds spent from your Amazon account. The wallet can be used at an increasing number of largely US-based ecommerce retailers, and it’s as simple as clicking the Amazon Pay icon at checkout.

Unfortunately, as an online-only wallet, Amazon Pay is one of just a few popular options that doesn’t currently support in-person transactions.

3. Apple Pay

iPhone users will be hard-pressed to find a better option than Apple Pay, an incredibly intuitive digital wallet that takes only minutes to set up. After adding your credit card or bank account information, you can use Apple Pay to make purchases both online and in-person at a growing number of participating retailers.

True to the brand, Apple Pay was developed with a unique eye toward security and user experience. In addition to serving as a convenient alternative to physical cards, Apple’s seamlessly integrated Wallet application allows you to store and access everything from boarding passes to gift cards. However, it’s important to note that Apple Pay is exclusive to Apple devices, so those who prefer the Android operating system will need to look elsewhere.‍

4. Google Pay

Formerly Google Wallet, Google Pay predates Apple Pay by a few years while sharing many of the same basic features and advantages. But whereas you can only use Apple Pay on Apple devices, the Google Pay wallet is available to download and use on virtually all popular smartphones.

As for drawbacks, those with a particular concern for privacy and security might object to the fact that Google stores its users’ passwords and card information on its servers and uses more traditional PIN-based security features as opposed to Apple’s use of fingerprint matching and facial recognition technology.

5. Click to Pay

Introduced jointly by Visa, Mastercard, American Express, and Discover, the Click to Pay system streamlines the checkout process by allowing you to upload, save, and easily access multiple cards when making an online purchase.

Before Click to Pay emerged in 2020, major credit card issuers offered their own digital wallets, notably Visa’s “Visa Checkout” and Mastercard’s “Masterpass,” both of which have been phased out in favor of this unified offering.

Overall, Click to Pay lives up to its title by consolidating the often lengthy online checkout process into a few simple clicks. But unlike Apple Pay, Google Pay, and PayPal, it does not currently support contactless in-person transactions.

6. Samsung Pay

Samsung Pay is a versatile digital wallet designed for Samsung device users, offering both online and in-person payment options. Users can add credit, debit, and loyalty cards to their Samsung Wallet and make secure transactions using biometric authentication.

The Samsung digital wallet integrates with Samsung Rewards, offering cashback and other incentives for frequent use.

What is the difference between a digital card and a credit card?

While you can ultimately use both to make payments, it’s important to understand the basic differences between digital wallets and credit cards. For one thing, digital wallets are entirely virtual, meaning payment information is stored digitally and relies on a computer or mobile device with an internet connection. Credit cards, on the other hand, can be either virtual or physical.

Perhaps most importantly, whereas credit cards provide individuals and businesses with access to a line of credit, a digital wallet comes with no issuance of debt and exists merely as a tool to make the use of a credit card or bank account more convenient and efficient.

In this sense, digital wallets and credit cards are fundamentally different yet complementary financial instruments. Digital wallets won’t replace credit cards because their existence is dependent on credit cards in the first place.

Digital wallets are neither better nor worse than credit cards, merely different. However, just as one credit card may be better than another for the cardholder’s unique needs, some digital wallets may have more attractive features and functionality, depending on the user’s preferences and objectives.

Now that we’ve clarified some basic attributes and explored the differences between digital wallets and credit cards, let’s highlight some of their respective benefits, particularly as they relate to small businesses and startups.

Are digital wallets safer than credit cards?

Overall, digital wallets are generally safer than traditional credit cards, but only if you use them with proper security measures—such as enabling biometric authentication and keeping your device software up to date.

Digital wallets use a unique, single-use token for each transaction, rather than your actual card number, minimizing the risk of theft. Biometrics add an extra layer of protection, making your card details much harder to access even if your device is lost or stolen.

That said, digital wallets aren't immune to risks. If someone gains access to your phone and you haven't set up strong authentication, your wallet could be vulnerable.

Benefits of digital wallets

Organization

One of the most appealing benefits of digital wallets is their centralization. Instead of juggling multiple physical credit cards in a wallet or purse, digital wallet apps completely remove the hassle of searching for the right card during a transaction.

Additionally, digital wallets can often hold extra information or assets, such as loyalty cards, hotel bookings, and flight tickets. This feature proves especially useful for businesses that often arrange travel for their employees, ensuring all necessary items are conveniently accessible and reducing the risk of lost boarding passes or confusion at the check-in counter.

Convenience

Digital wallets not only improve organization but also streamline both online and in-person transactions. For online purchases, digital wallets eliminate the tedious task of manually inputting credit card details or personal and business-related information.

Meanwhile, for in-store purchases, many mobile wallets enable you to complete transactions in mere seconds, often through a simple gesture like waving your smartphone or smartwatch near a payment terminal.

Security

With instances of credit card theft and expense fraud on the rise, it’s more important than ever to ensure all business transactions are secure to the point of redundancy. Digital wallets deliver this level of protection through a process called tokenization.

Tokenization ensures that all payment information is constantly encrypted throughout the checkout process and further guarded by advanced identity verification technology, such as facial recognition or two-factor authentication (2FA).

Benefits of credit cards

Access to capital

Leveraging credit is an essential component of running any business, and it’s particularly important for small businesses and startups looking to accelerate growth during their earliest stages. Business credit cards and charge cards like Ramp provide startups and small businesses with the upfront capital needed to launch critical growth projects or cover operating expenses, often alongside flexible credit lines and spending limits based on a company’s individual needs and credit history.

Rewards

Whether for office supplies, fuel, or travel, small businesses and startups inevitably face a range of necessary business expenses. However, one strategic move you can make is to leverage a small business credit card that offers rewards for frequent expenditures, whether via cashback or points redeemable for dining, entertainment, or travel benefits.

Some of today's business cards offer the flexibility to tailor rewards to specific spending categories, though there might be an annual cap on the rewards you can accumulate. Conversely, corporate business credit cards like Ramp offer businesses the advantage of earning cashback across all spending categories, without any limitations or expiration dates.

Accounting and expense management

Issuing business cards to employees can also be a huge benefit from an accounting and expense management perspective.

For one thing, business expenses are far easier to track and account for when transactions all flow from the same account. Moreover, when employees can only make purchases on behalf of the company using a business card, it can minimize or eliminate the costly and time-consuming task of issuing expense reimbursements.

Finally, to take this benefit one step further, corporate business credit cards like Ramp not only improve your company’s ability to track expenses across the organization, but they also allow you to automate a variety of time-consuming accounting tasks and implement customized spend controls down to the individual card user, category, or vendor.

Digital wallets and credit cards work together with Ramp

Digital wallets and credit cards are distinct financial tools, each with its own set of unique advantages to offer small businesses and startups. But while the individual benefits of each are certainly attractive, the best way to maximize the value of both tools is to allow them to work together.

More specifically, you’ll want to look for a corporate business credit card that integrates seamlessly with the digital wallet apps your employees use and leverages modern technology to optimize expense management and accounting processes. For example, here’s a brief overview of what small businesses can accomplish when they use Ramp’s business credit card alongside a virtual wallet:

• Easily issue new virtual credit cards to employees: You can spin up and issue virtual cards to new and existing employees at any time, at no extra cost. Because your employees can instantly store their virtual card in their digital wallet, there’s no need to await the delivery of a physical card or manually enter card details into a mobile app.
• Minimize reimbursements: If employees always have access to an authorized card to make business purchases, you can avoid the constant processing and issuance of reimbursements for expenses like business travel. With the Ramp card always available to your employees via secure access to a digital wallet, you’ll no longer need to worry about physical cards being damaged, misplaced, or stolen.
• Make business transactions more convenient: Business transactions should be as efficient as possible for everyone involved. When you or your employees use a Ramp card for business purchases via mobile wallet, not only will you get a fast and streamlined checkout experience, but Ramp’s customizable spend control features will eliminate concerns related to overspending or unauthorized transactions. With Ramp, businesses can save an average of 5% each year.