What is a digital wallet and how it works: A comprehensive guide

Key takeaways

• 87% of Malaysians now use digital wallets, and most use multiple options. Offering these payment methods is critical to meet customer preferences and driving sales.

• Digital wallets simplify expense management by eliminating physical cards and showing every transaction instantly with automatic categorisation.

• With Airwallex, you can issue multi-currency Corporate Cards in 60+ markets to simplify expense management for your employees.

Digital wallet use has surged in Malaysia, with 87% of consumers now paying electronically according to Visa research¹. In fact, Ipsos data shows that Malaysians regularly use an average of 1.8 wallets per person.² Stores that don't offer digital payments risk losing customers to competitors who meet these evolving payment preferences.

Businesses need to offer digital wallet payments to meet customer expectations. Beyond customer transactions, digital wallets also streamline internal operations by automating expense management for your team. In this guide, we'll explore how digital wallets work and show you how to connect corporate cards like Airwallex to eliminate foreign transaction fees across multiple currencies.

What is a digital wallet?

Think of a digital wallet as your smartphone's answer to a physical wallet. Instead of carrying cash or cards, you can pay by tapping your phone or clicking a button online. The app holds your bank account or card details and uses them to complete transactions quickly and safely. Many digital wallets also store your loyalty cards, vouchers and receipts in one place for added convenience.

In Malaysia, digital wallets like Touch 'n Go eWallet, GrabPay, Apple Pay, and Google Pay have become popular choices for tap-and-go payments at stores and online. While most businesses focus on accepting digital wallet payments from customers, the same technology can play a powerful role in managing employee spending.

Instead of employees paying out of pocket and filing expense claims later, they can add company corporate cards to their digital wallets and pay with these cards. This removes out‑of‑pocket spend for staff and saves finance teams from chasing after receipts in order to process reimbursements. On top of that, every transaction flows straight into your expense management dashboard, with AI‑driven categorisation that eliminates manual data entry and speeds up reconciliation. 

How do digital wallets work?

Digital wallets process payments with multiple card types through four steps:

Step 1: Setting up a wallet

Users download the digital wallet app, create an account, and add their payment details. The app guides them through setting up security features like a PIN or biometric authentication to keep their wallet safe.

Step 2: Making payments

For in-store purchases, users hold their device near the payment terminal and authenticate. For online purchases, they select their digital wallet at checkout and confirm the payment.

Step 3: Payment processing

The wallet uses one of two technologies to complete transactions: Near Field Communication (NFC) for tap-to-pay at terminals – used by platforms like Apple Pay and Google Pay – or QR codes that are scanned or displayed for payment.

Step 4: Transaction completion

The payment terminal transmits encrypted payment data to the bank or card issuer for authorisation. After approval, a confirmation appears on the user's device in seconds.

5 types of digital wallets in Malaysia

Digital wallets used in Malaysia fall into these five categories.

1. Device-based wallets 

Device-based wallets like Apple Pay and Google Pay come pre-installed on smartphones and smartwatches. They let you pay securely without downloading another app.

2. App-based wallets 

App-based wallets such as Boost Wallet, and Touch 'n Go eWallet operate independently on smartphones. These digital wallets serve as comprehensive payment solutions, letting users handle everything from transit fares to online shopping.

3. Bank-linked wallets

Bank-linked wallets like MAE by Maybank come from established banks, linking to customers’ savings accounts and banking services.

4. Card-linked wallets 

Card-linked wallets like BigPay are linked to either a prepaid or credit card. Such wallets focus on helping users with expense management and budgeting.

5. Ecosystem-linked wallets 

Ecosystem-linked wallets such as ShopeePay work as dedicated wallets to promote convenience and customer rewards for a brand or platform.

7 Popular digital wallet providers in Malaysia

Some of the most widely used digital wallets in Malaysia include:

1. Touch 'n Go (TNG)

TNG is Malaysia's most popular digital wallet, with 92% of consumers using it.³

2. Boost Wallet

Axiata Group's digital payment platform serves more than 500,000 merchants and offers cashback to users.

3. GrabPay

Grab's digital wallet lets you pay for rides, groceries, and more, while earning GrabRewards points on your purchases.

4. ShopeePay

Shopee's digital wallet that lets you pay at physical stores using QR codes.

5. Apple Pay

Apple’s mobile payment service that enables secure purchases in stores, apps, and online using your Apple device.

6. Google Pay

Google's mobile payment service that facilitates secure purchases in stores, apps, and online using your smartphone.

7. MAE

Maybank's digital wallet connects you to your bank accounts while offering expense tracking and lifestyle features.

How to choose the best digital wallet for your business

Here's how to pick a digital wallet that keeps your money safe and costs down.

Security features

Protect your business transactions by choosing wallets with strong security measures. Look for platforms that meet top security standards like:

• Encryption: Scrambles data to make it unreadable if intercepted

• Tokenisation: Converts card numbers into secure codes

• Biometric authentication: Verifies your identity using your fingerprint or face scan

• Remote card control: Freezes your cards and connected accounts when you spot suspicious activity.

Device support and geographic coverage

Select digital wallets with cross-platform compatibility for your team. While Apple Pay works only on iOS devices, Google Pay works across different operating systems. Choose a solution that lets all team members access company funds, no matter what devices they use or where they are.

Fees

Review all costs upfront to avoid surprises. Fees differ between providers, with varying costs for domestic and international transactions. Take time to compare providers' fees to find what works best for your budget.

Customer support options

Choose providers with dependable support to minimise business disruptions. Bank-backed digital wallets offer robust customer service through phone support and physical branches. Independent fintech providers like Airwallex excel at digital support with live chat, in-app messaging, and detailed help guides. When selecting a provider, look at their response times, support channels, and how they handle issues.

Pros and cons of digital wallets

Digital wallets provide convenient and secure payment options but have constraints to consider.

Pros of a digital wallet

• Simplify company spending: Eliminate physical cards and reimbursements while giving your finance team full control and visibility over employee expenses.

• Convenience: Empower your staff to handle company expenses instantly without physical cards or reimbursement delays.

• Secure: Protect digital wallet transactions and block unwanted access to company cards with strong security measures.

Cons of a digital wallet

• Limited adoption: Not every customer uses digital wallets, making it necessary to keep accepting credit cards and cash.

• Device requirements: You need a mobile phone or point of sale (POS) terminal that connects to the internet or Bluetooth.

• Security risks: Less secure payment providers put sensitive financial information at risk of cyber attacks.

The right digital wallet protects your business while automating expense management. Airwallex Corporate Cards work with digital wallets to give you clear oversight of global spending. When paired with multi-currency capabilities and no overseas fees, you can handle international expenses efficiently.

Streamline global spend management with Airwallex Corporate Cards

Looking to cut costs on global business expenses without expensive transaction fees or FX rates? Review your corporate cards used by your company and employees. Bank cards typically carry annual fees, lost card fees, and card issuance fees, along with foreign transaction fees that accumulate over time.

Airwallex Corporate Cards, paired with digital wallets, offer a more streamlined way to manage company spending. Employees can add their cards to Apple Pay or Google Pay for contactless payments, without needing to carry physical cards or submit manual reimbursement claims. Meanwhile, finance teams get real-time visibility into spending and greater control over how cards are used.

With 0% foreign transaction fees and bank-beating FX rates across 20+ currencies, Airwallex Corporate Cards help businesses lower the cost of international spending. Transactions are visible instantly, reimbursements can be automated, and spending limits can be set from a single dashboard. Cards also sync with accounting software, simplifying expense reporting.

For example, Singapore-based digital lock company Igloohome reduced card-related costs by 5% on travel expenses and social media advertising after switching to Airwallex Corporate Cards.

How to use a digital wallet with Airwallex

With an Airwallex Business Account, you get local currency accounts in 20+ currencies and our full suite of solutions – competitive FX rates, cross-border payments, expense management tools and corporate cards.

Here’s how you can get started:

Step 1: Sign up for a free Airwallex Business Account 

Provide your business email, legal name, and create a password. Next, provide additional details, including your company size, primary area of interest, business name, business headquarters, and mobile number

Step 2: Verify your business and activate your account

Confirm your business location, provide your Business Registration Number (BRN), and provide documents for identity verification.

Note: Here’s a list of all the documents you’ll need for verification.

Step 3: Create your Airwallex Company or Employee Corporate Card

Click the ‘Cards’ section of your account > ‘Create Card’, then select Company card or Employee card. Select the card purpose, set spending limits, and configure a nickname. 

Finally, select up to three users to assign as card contacts for the corporate card, or invite your employee to get a corporate card

Step 4: Add your Corporate Card to your digital wallet

Open your digital wallet, select the option to add a new cars, and add your new Corporate Card.

Frequently asked questions (FAQs)

Are digital wallets safe?

Digital wallets are safe to use since they use multiple security layers. Your e-wallet balance is held in a dedicated customer account with a regulated bank, while access to your wallet is protected through PIN codes, biometric authentication, and two-factor encryption.

What are the best digital wallets for businesses?

Apple Pay and Google Pay provide the strongest security and widest acceptance for businesses. Choose digital wallets that work well with your corporate card provider. For example, Airwallex Corporate Cards work seamlessly with both Apple Pay and Google Pay, letting you manage spending in multiple currencies with no foreign transaction fees while maintaining full expense visibility.

What is the difference between an Airwallex employee card and a corporate card?

Both cards serve different needs. Company Cards handle shared expenses, while Employee Cards manage individual spending. The Company Card works best for shared team expenses like software subscriptions, advertising costs, and other company-wide purchases. This lets you manage and view your team’s payment histories from one place.

Employee Cards, on the other hand, are issued to individual staff members. These let your staff make purchases in multiple currencies using both virtual and physical cards, giving them the flexibility they need while keeping you in control.

Sources

1. https://www.visa.com.my/about-visa/research/consumer-payment-attitudes-study.html

2. https://www.ipsos.com/sites/default/files/ct/news/documents/2024-01/%5BIpsos%20Press%20Release%5D%20-%20Non-Cash%20Economy%20%26amp%3B%20Payment%20Evolution.pdf

3. https://www.statista.com/statistics/1106239/malaysia-leading-e-payment-services/

​​This publication does not constitute legal, tax, or professional advice from Airwallex nor substitute seeking such advice, and makes no express or implied representations / warranties / guarantees regarding content accuracy, completeness, or currency. If you would like to request an update, feel free to contact us at [[email protected]]. Airwallex (Malaysia) Sdn Bhd is licensed in Malaysia as a MSB Class B (remittance business only) licensee and is regulated by Bank Negara Malaysia (license number 00318).