A digital wallet (or e-wallet) is a software-based 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 smartphones. A digital wallet can also be used to store loyalty card information and digital coupons.
- Digital wallets are financial accounts that allow users to store funds, make transactions, and track payment histories by computer.
- These pieces of software may be included in a bank's mobile app, or as a payments platform like PayPal or Alipay.
- Digital wallets are also the main interface for using cryptocurrencies such as Bitcoin.
Digital Wallet Explained
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 firm or branch, often allowing those in poorer and rural areas to be served as well and therefore enables a wider financial inclusion.
Example of Using a Digital Wallet
While a handful of top digital wallet companies in 2020 included Due, ApplePay, Google Wallet, Samsung Pay, PatPal, Venmo, AliPay, Walmart Pay, Dwolla, Vodafone-M-Pesa, – among others – the top 3 leading E-Wallets are those of Google, Amazon and Apple. As one example, Google's Wallet service allows its users to “store” cash on their phones. Customers can 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.
Recently, Google combined its two essential payment streams (Android Pay and Google Wallet) into a single service called Google Pay. Apple on the other hand entered into a strategic partnership with Goldman Sachs to issue Apple credit cards and expand its ApplePay services.