Both a digital wallet and a bank account offer secure places to store your money. A digital wallet is an electronic version of a wallet, storing money and financial information digitally so you can shop and make payments. A bank account holds your deposits for safekeeping until you decide to withdraw, spend, or transfer the funds.
You could use Western Union to send money directly to someone’s bank account, or you could arrange for the money to show up in their digital wallet. Our guide below will help you understand the difference between a digital wallet vs. a bank account and how they’re used.
Key takeaways
- Digital wallets are the electronic version of your physical wallet, holding money, debit or credit cards, and even your driver’s license.
- Bank accounts hold your money securely with a financial institution. They are better suited to support your long-term financial goals.
- Digital wallets are best for quick payments such as point-of-sale purchases.
- You can combine digital wallets with bank accounts to get the best of both worlds: modern convenience and traditional stability for your money.
What is a digital wallet?
A digital wallet stores money, credit, and debit cards electronically, so you can pay for purchases or send and receive funds with your mobile device. A few examples include Apple Wallet, Google Wallet, and PayPal.
Almost 53% of the world’s population, or 4.3 billion people, use digital wallets, according to a report from Capital One. That number is expected to rise by 35% in the next four years, owing to the convenience of this payment method. A few of the benefits of using a digital wallet include increased security, enhanced fraud protection, and the ability to make international money transfers.
What is a bank account?
A bank account is a secure way to store your money with a financial institution. You can access your funds by visiting a branch, using your debit card or checkbook, or via bank transfers (such as wires, e-checks or ACH transfers). There are different types of bank accounts to support your financial needs, such as a savings account to grow your funds with interest.
Funds at financial institutions are often insured by the Federal Deposit Insurance Corporation (FDIC), offering additional protection.
Key differences: Mobile banking vs. mobile wallets
They might sound quite similar, but mobile banking is not the same as a mobile wallet. Mobile banking provides a way to access your bank account via your mobile device, but it’s still a bank offering. That means the focus remains on traditional financial services.
Mobile wallets, on the other hand, are instant and ideal for daily spending: just pull out your phone and pay. Let’s break down the differences.
Services
Mobile banking offers the ability to:
- Check your balance
- Pay bills
- Transfer funds to another account
- Locate a branch or ATM
Mobile wallet services include:
- Storing payment, loyalty, ID, and membership cards
- Storing tickets and passes
- Point-of-sale purchases
- Sending and receiving money
- Tracking transactions
Fees
Mobile banking might incur fees such as monthly maintenance fees, overdraft fees, or wire transfer fees.
Mobile wallets are free to use, though some platforms may charge a fee for instant transfers or certain credit card transactions.
Convenience
Mobile wallets are built for convenience. You can send and receive money, pay for purchases, and transfer funds right from your mobile wallet app. Bank accounts require you to log in to the mobile banking app each time you want to make a transaction, and it could take days for certain money transfers.
Safety
Mobile banking and mobile wallets both typically use strong digital security features. For a mobile bank account, you’ll usually use two-factor authentication to protect your account.
Mobile wallet safety features often include tokenization, which is when the app creates a digital token to be used in place of your actual credit card number or other financial information. You may also be able to authorize transactions using biometrics like your fingerprint.
Combining digital wallets and bank accounts
You don’t have to choose one or the other. You can pair your bank account with a digital wallet to enjoy the benefits of both: convenience and accessibility for everyday spending, plus security and stability for your deposits.
When to use traditional banking
Bank accounts are the stronger choice when you want to:
- Build savings
- Earn interest
- Invest in securities
- Insure your deposits
- Receive money such as paychecks via direct deposit
When to use a digital wallet
Instances when you might choose a digital wallet vs. a bank account include:
- Making everyday purchases (like groceries or coffee)
- Leaving cash and plastic cards at home
- Making person-to-person payments
It’s also convenient to use a digital wallet for international money transfers. You can use Western Union to send money directly to someone’s digital wallet in a participating country, and they’ll receive the funds quickly and securely.
Finding the right mix to manage your money
You don’t have to pick between a digital wallet vs. a bank account. The right choice for you depends on your needs. Pair them together to manage your money strategically. You’ll get the convenience of mobile technology along with the reliability of a traditional financial institution.
With Western Union, you can send money to a mobile wallet or a traditional bank account, and you can choose the best way to pay. Download the money transfer app or stop by a local agent near you to send money now.
FAQs
A digital wallet works like an electronic version of a physical wallet. It can hold some money, your credit or debit cards, even your driver’s license. A bank account doesn’t store your cards. It is designed to hold your deposits for safekeeping, and you access your funds with a debit card or check.
Unlike a traditional bank account, digital wallets are best for quick, convenient, contactless payments and storing your cards digitally. They’re not ideal for long-term savings or financial stability.
No, you don’t need to have a bank account to use a digital wallet. You can link your wallet to a credit card or a prepaid debit card for a way to pay if you don’t have a bank account.
Yes, digital wallets are safer than debit cards in many ways. Digital wallets use security features like biometric authorization and tokenization, which means your account number isn’t transmitted during transactions. Debit cards don’t have those features, leaving you vulnerable to someone stealing your card number or even the card itself.
