5 benefits of digital payments

Digital payments have become a lot more popular over the last couple of decades, creating an increasingly cashless economy. If you’re just starting to explore these payment methods, you might be wondering why they’re gaining traction.

Continue reading to learn more about digital payments and the benefits of using them.

What you’ll learn:

• A digital payment is any transaction that doesn’t involve cash.

• Examples of digital payment methods include credit cards, virtual cards, digital wallets, mobile payment apps, cryptocurrencies, wire transfers and more.

• Digital payments can be not only fast and convenient but also more secure than traditional payment options.

• Keep in mind that some merchants may not accept certain forms of digital payment. Plus, a digital payment’s required technology must be functioning in order to use it.

Digital payments are transactions that don’t involve exchanging physical cash. While multiple companies and financial institutions may work behind the scenes to securely process them, digital payments can often be completed in seconds.

There are many types of digital payments. Some examples include:

• Using a physical credit card or debit card in stores

• Manually entering a card number for online purchases

• Tapping a phone to pay at a point of sale (POS)

• Selecting a digital wallet when paying online

• Using a virtual credit card number online

• Paying a friend using a peer-to-peer (P2P) app

• Sending a wire transfer

• Transferring money with an Automated Clearing House (ACH) payment

• Paying with cryptocurrencies

Digital payments are becoming widely used and accepted. And with all the benefits that digital payments offer, it’s easy to understand their growing popularity.

Here are a few key advantages of digital payment methods:

Digital payments typically can be processed in mere seconds. In addition, using digital payments means you won’t have to visit an ATM or your bank to replenish your funds like you would with cash. And that also means you won’t need to think about carrying enough cash or dealing with counting money and change in the checkout line. 

Stolen cash can be easily spent. Once a thief has stolen cash in hand, there’s nothing to prevent them from using it. But digital payments have various security measures in place, including:

• Fraud liability protections: Most credit card issuers offer $0 liability on fraudulent charges. And this protection would apply whether you’re using your physical card or a digital version.

• Security technologies: Some digital payment methods such as digital wallets and virtual cards use encryption and tokenization to help protect the actual card numbers. These payment methods also typically use various types of authentication, such as passwords or biometric authentication like a fingerprint or facial recognition, to provide an extra layer of security.

• Card lock: Credit and debit cards can typically be locked if they’re lost or stolen or if you fear your account information has been compromised. 

• Fraud alerts and notifications: Through their app or online accounts, most credit card issuers provide the option to receive fraud alerts and purchase notifications.

Making digital payments usually means you have access to digital transaction records. Most financial institutions provide access to online banking through their website or mobile app, where you can see digital records of your account activity, gain insights on your spending and use that information to create a budget.

Many credit cards offer rewards, such as cash back or miles, for using them. Whether you’re paying with your physical card in a store, using a virtual card to make an online purchase or tapping your phone to pay with a digital wallet, the rewards you get through your credit card account will apply. 

Many credit cards are accepted in various parts of the world, enabling local-currency payments without the hassle of exchanging cash. Digital wallets and other digital payment methods are also becoming more widely accepted across the United States. And some digital payment methods can be used internationally, as well—as long as the merchant accepts contactless payments. 

While there are many benefits to using digital payments, here are some considerations to keep in mind:

• Some merchants and people may not accept digital payments: You may find that some stores aren’t equipped to accept contactless payments. Likewise, if you’re trying to pay a friend or family member with a digital payment service, they may not have or be familiar with the technology necessary to receive funds that way.

• Technical issues could arise: Digital payments can be affected by the technology you’re using. So if you run into internet connectivity issues or your phone’s battery dies, for instance, you might have trouble completing your payment. 

It’s a good idea to have a physical backup form of payment on hand in case digital payments aren’t accepted or you encounter technical problems.

Digital payment methods like virtual cards, digital wallets and payment apps are fast, convenient and widely accepted. Plus, they offer other benefits like increased security and digital payment tracking. 

Learn about the digital payments available to Capital One cardholders.