Card Payments

What Are Digital Wallets and How Do They Work?

How digital wallets like Apple Pay, Google Pay and Samsung Pay work, the role of device tokenisation, and what merchants need to accept them.

A digital wallet lets a customer pay with a card stored on their phone, watch or browser instead of carrying the physical card or typing in card details. The best-known wallets in South Africa are Apple Pay, Google Pay and Samsung Pay, and most of the major issuing banks, including Absa, FNB, Nedbank, Standard Bank, Capitec, TymeBank and Discovery Bank, support adding their cards to at least some of these wallets.

Under the hood, a wallet payment is still a Visa or Mastercard transaction. What changes is how the card details are stored and presented: the wallet never uses the real card number, and every payment is approved with the device's own security, such as a fingerprint or face scan.

How Does a Digital Wallet Work?

When a customer adds a card to a wallet:

The wallet sends the card details to the card network and the issuing bank for verification (the customer may need to approve the addition via their banking app or an OTP).
The network issues a device token, a substitute card number bound to that specific device, and the real card number is never stored on the phone.
From then on, every payment uses the device token plus a one-time cryptogram, authorised by the customer with biometrics or the device passcode.

This is network tokenisation applied to a device; see Card Tokenisation and Network Tokens for how tokens work in general.

Where Can Wallets Be Used?

In store – the customer taps their phone or watch on any contactless-enabled terminal, including SoftPOS devices. To the terminal this looks like an ordinary contactless payment, so no special merchant setup is needed. See Chip, Contactless and SoftPOS Payments.
Online and in-app – the checkout shows an Apple Pay or Google Pay button. The customer confirms with a fingerprint or face scan instead of typing card details, which removes most of the checkout friction.

Why Are Wallet Payments Secure?

The real card number is never shared with the merchant or stored on the device; only the device token is used.
Each payment carries a unique cryptogram, so intercepted data cannot be replayed.
Every payment requires the cardholder's biometric or passcode, providing strong customer verification.
If the phone is lost or stolen, the customer can disable the wallet remotely without cancelling the underlying card, and the physical card keeps working.

Because of this strong built-in authentication, wallet transactions carry a low fraud profile. In-store wallet taps are treated as card-present transactions, and online wallet payments carry stronger authentication data than a typed card number.

What Do Merchants Need to Accept Wallets?

In person – any contactless-capable card machine or SoftPOS app already accepts wallets. Nothing extra is required.
Online – the payment provider must support the wallet, and the merchant enables the wallet button in their checkout. Hosted checkouts typically switch this on with minimal effort; see Hosted, Embedded and API Checkouts.
Wallet transactions settle through the same acquiring relationship as ordinary card payments; there is no separate settlement stream to reconcile.

Are Wallet Payments Different from Card Payments for Refunds and Disputes?

No. Because a wallet payment is a card payment underneath, refunds, reversals, chargebacks and settlement all work the same way. A refund on a wallet payment goes back to the underlying card account, even if the customer has since removed the card from the wallet. See Card Refunds, Reversals and Voids.

How Card Payments Work

A step-by-step explanation of how a card payment works, from the cardholder and merchant through the acquirer, card network and issuing bank.

Recurring Payments (CIT and MIT)