The rise of smartphones has also transformed leather wallets into digital wallets, also known as mobile wallets. These wallets enable mobile users to conduct money transactions using applications installed on their smartphones.
They are used to make financial transactions and store coupons, receipts, business cards, bills, and many more.
What are digital wallets?
A digital wallet is a software program that enables users to store and manage payment information and credentials for transactions made online or in person on the cloud.
Users can save payment options, such as credit and debit cards, in their mobile applications to shop conveniently. Digital wallets are used to make secure purchases and payments directly from a mobile device or computer without entering lengthy card or account details each time.
Digital wallets allow you to pay while shopping, and you do not need to carry the cards. You can enter any store with your stored credit/debit card information and make purchases.
Here is what a digital wallet can also store:
Plane and transit tickets
Hotel reservations
Driver's license
Identification cards
Gift cards
Membership cards
Loyalty cards
Coupons
Event tickets
Why do we need digital wallets?
Before the widespread adoption of digital wallets, several challenges hindered their acceptance into mainstream financial practices. Some of the common challenges that created the need for digital wallets were:
1#. The hassle of physical wallets: Have you ever wondered why you carry a fat wallet or hold multiple cards and search for one card? It was a real struggle. No one likes to carry five cards, gift cards, and loyalty cards in the leather wallet.
2#. Security concerns: Carrying a physical card always risks being stolen or hackers breaking into the system to steal the information. It made everyone concerned about using the cards.
Data breaches and credit card fraud led to the need for enhanced security systems such as digital wallets.
3#. Contactless payments: When we entered the Covid era, there was a constant push for contactless transactions. Touch-free transactions have become necessary ever since, and digital wallets have made it possible. All you have to do is tap your phone. It's that simple.
4#. Rise of mobile: Everyone uses mobile phones nowadays, almost everyone. These devices have become go-to buddies for more than digital transactions.
Imagine you are out in the park or grabbing a snack. Previously, you had to carry cash or a card to pay for things, but when everyone has these phones, they can do something extra – digital payments.
Benefits of a Digital Wallet
The digital wallet industry has been growing rapidly in the past few years, and many companies have introduced them. These wallets offer numerous benefits. Here are some of them.
1. Convenience of Use: One of the topmost reasons why digital wallets are rapidly growing is their convenience of use. Today, digital wallets work with what is commonly known as NFC (near-field communication) or QR codes. To scan a QR code, you need to open a camera or QR reader app, while NFC only requires tapping the phone to the NFC tag.
2. Efficiency: You don't have to dig into your purse to find the right card. The speed of the process also makes people adopt this technology, as checkout lines become shorter in time.
3. Security of a Digital Wallet: Digital wallets offer many controls for enhanced security. Whereas if someone finds your physical wallet, it is prone to security breaches. However, it is not easy to get into phone security. When the payment is initiated online or in-store, it first requires the security password or fingerprint biometrics access to get into transactions.
4. Discounts and Rewards: When you use the digital wallet of particular services more often, you get point rewards and discounts for additional usage. You can use these discounts or rewards for further transactions and get benefits.
5. They are Free: Most digital wallet services are free. While some transactions could incur a flat fee, the simplicity and convenience of digital wallets will not incur any additional costs in most transactions.
Disadvantages of Digital Wallets:
Although the benefits of digital wallets outweigh the disadvantages, here are some risks involved with digital wallets.
1. Technology Breakdowns:
At times, it can happen to anyone. An app would crash, the battery could die, or you could even lose the internet connection, making it difficult to access the digital wallet. Any of these little surprises can test your patience at checkout.
2. Dependent on Technology:
Digital wallets are designed to make your buying experience super easy. You become more reliant on your smartphone or device functionality to transact. However, any glitch in the technology can break the access. Remember that technology is a superhero but sometimes needs a break.
3. Overspending Risks:
The ease of mobile payments may lead some users to overspend or make unnecessary impulse purchases. Mobile wallets give you the special power of a tap. You have the superpowers, but only when you use them wisely.
Are Digital Wallets Safe?
Yes, digital wallets can be considered safe options for managing payments if certain security precautions are followed. Wallets use functions like encryption, tokenization, biometrics, and passcodes to add a layer of security. If you use strong login credentials, avoid public Wi-Fi, and enable phone locking functions, these wallets will provide greater security than carrying a physical wallet.