DEFINITION of Digital Wallet
A digital wallet is a system that securely stores users' payment information and passwords for numerous payment methods and websites. By using a digital wallet, users can complete purchases easily and quickly with near-field communications technology. They can also create stronger passwords without worrying about whether they will be able to remember them later.
Digital wallets can be used in conjunction with mobile payment systems, which allow customers to pay for purchases with their smart phones. A digital wallet can also be used to store loyalty card information and digital coupons.
A digital wallet is also known as an e-wallet.
BREAKING DOWN Digital Wallet
Digital wallets largely eliminate the need to carry a physical wallet, by storing all of a consumer's payment information securely and compactly, Also, digital wallets are a potential boon to companies that collect consumer data. The more companies know about their customers' purchasing habits, the more effectively they can market to them. The downside for consumers can be a loss of privacy.
Digital wallets allow many in developing nations to participate more fully in the global financial system. Digital wallets allow participants to accept payments for services rendered, as well as receive funds or remittances from friends and family in other nations. Digital wallets do not require a bank account with a physical fim or branch, often allowing those in more rural areas to connect.
Example of Using a Digital Wallet
While a handful of top digital wallet companies in 2016 included Due, Accelitec WalletBuilder, Adyel, Airtel Money, AlliedWallet, Alipay, American Express, Android Pay, Bank of America, and Boost Mobile – among others – the big three remain Google, Amazon and PayPal. As one example, Google's Wallet service allows its users to “store” cash on their phones. Customers are able to spend this cash both in-store, as well as online at businesses that accept Google payments.
As noted above, this is supported by near field communication technology (the ability to enable two smart devices to communicate if they are in close range). If a business doesn’t currently accept Google's payment system, Google also recently developed a physical Wallet Card – essentially, a debit card connected with the Bank of Google.
In January 2018, Google announced that it would be combining its two essential payment streams (Android Pay and Google Wallet) into a single service called Google Pay. With Google Pay users will be able to save their payment information in their Google account and make purchases wherever Google products are present (e.g. Chrome Android, Youtube, and retail outlets with NFC payment options).