Digital wallets: What makes them so appealing?

Digital wallets have become ingrained in society since Google launched Google wallet in 2011.

The inception seemed to cause a wave of other corporations to create their own digital wallets and, by 2015, Samsung Pay and Apple Pay were fully functional too. This gave businesses a new way to operate, as their consumers had access to their debit cards and payment information at their fingertips.

But what makes them so valuable today? This guide details digital wallets and outlines what businesses need to know.

What is a Digital Wallet?

A digital wallet – sometimes referred to as an e-wallet – is a cloud-based software that allows customers to store financial information, which can be accessed easily and quickly. They act as a way for customers to pay from their bank account using a computer, smartphone or smart device and ultimately eliminate the need to carry around a physical wallet.

They typically include credit and debit card details, ready to be used for payments, whilst some other uses might be holding boarding passes and concert tickets.

Why Digital Wallets have become popular?

The pandemic accelerated the popularity of digital wallets and made them part of everyday life. They gave consumers options to conduct their financial activities – like sending money, transferring funds and even withdrawing cash- without needing to visit a physical branch.

Having access to financial information at the push of a button allows for greater freedom whilst also entitling customers to complete control over their finances. This element alone has sky-rocketed the use of digital wallets into the mainstream, but there are other reasons too.

Growing Awareness

With more and more people understanding the value of digital wallets, increasing numbers of people have become aware of their use and benefits. It has become an accepted way to make digital payments with a great amount of security and low risk.

Greater Acceptance

With the growth in awareness and businesses then focusing on minimising risks, customers have started to accept that digital wallets are becoming a normalised payment method.

More Options

Customers crave personalisation, which means they want something that works for them. With more options on the market than before, even just before the pandemic, it gives them the choice of their preferred digital wallet.

Youth Utilisation

Younger generations are growing alongside technological advancements, meaning they are more inclined to use digital wallets than their physical cards. They are also more prone to search for innovative versions of payments, including crypto wallets.

Mobile Shopping

The pandemic caused a colossal surge in online payments being made, with many of these transactions being completed through a mobile device or computer.

How many types of Digital Wallets Are There

Digital wallets might come with different names if a certain company provides them, but there are three distinct types with different uses and benefits. They are:

Closed Digital Wallet

A closed wallet only allows the customer to buy services/products from the company that issues the wallet. The digital wallet holds the funds for the customer, but it also stores the money from cancellations, returns or refunds. Amazon Pay is a great example of a closed digital wallet, whilst most retailers have this option.

Semi-Closed Digital Wallet

This type of wallet allows customers to make payments at a pre-approved list of merchants and locations. The coverage area of a semi-closed digital wallet might seem restricted, but it can be used for both online and offline buying. Merchants would need to create contracts or agreements with the issuers for accepting payments from mobile wallets.

Open Digital Wallet

Open wallets issued by banks or the institutes they’re partnered with. Customers who have an open wallet can use them for all the same transactions as a semi-closed wallet but can withdraw funds from banks and ATMs and transfer funds too.

What are some of the most popular digital wallets in the world?

Some of the most prolific digital wallets today are considered to be like that based on their security, versatility and ease of use. Below is a list of the most popular digital wallets on the market.

Google Pay

This allows Android users to store even more information than before – including cards and tickets, digital keys and IDs on their Android device.

Apple Pay

Exclusively available for Apple customers, it enables both online and in-store transactions. With built-in NFC technology, iPhone users need to unlock their password-protected device and hold it near a point of sale to complete the transaction.

Venmo

Aside from Apple Pay and Google Pay, Venmo is the digital wallet with the biggest user base – over 80 million users. This is due to the little-to-no waiting time before transactions are approved, meaning users can instantly transfer money between digital wallets.

PayPal

As an early adopter in the digital wallet market, PayPal is a key player in operating across multiple currencies. As a result, users can easily manage their bills and subscriptions on one platform.

Cash App

Not only does this help users to transfer funds and make payments online, it also offers additional services such as buying stocks, conversation cryptocurrency and storing digital passes.

Tokenised cards, much like the ones that Carta Worldwide provides, can exist in the main wallets listed above. They are compatible with many mobile devices and can assist with online payments by holding payment details in the mobile wallet.

In Conclusion

Digital wallets have truly established themselves as a necessity in today’s financial world and show no signs of stopping anytime soon. This trend is only set to become more profound so if you’re a fintech looking to venture into digital wallets, then now is your time.