A digital wallet is a virtual wallet on a software app or a service, in contrast to a physical wallet. It is a software-based electronic version of wallets and therefore, it is also known as an e-wallet or mobile wallet.
Just like people keep their cash in a wallet, a digital wallet allows them to store money virtually in their e-wallet. Some examples include Paytm Wallet, PhonePe, Mobikwik, etc.
They are secure and safely securely store money and related data like transaction records. It manages the information for both received and sent payments and has a unique reference for each transaction. One can also report if there is any failure or fraud activity.
Digital wallets enable customers to make electronic payments, for instance, paying from their e-wallets to a merchant’s e-wallet or bank account. Customers can also get cashback, coupons, loyalty cards, etc.
These virtual-cum-electronic wallets can also store event tickets, hotel/travel tickets, restaurant reservations, etc. One can recharge their mobiles, pay their utility bills, credit card bills, book movie/travel/hotel tickets, etc. While customers can use it for online shopping, they can also pay at offline stores
For adding money to the e-wallet, customers can add it from their bank accounts via net banking. Alternatively, they can also add money using credit or debit cards. They can choose to store this information on their digital wallet app.
Digital wallets provide payment convenience to customers. They can make payments by simply opening their digital wallet app and authorizing the transaction. This eliminates the need to carry physical cards or enter payment details for each transaction. Digital wallets allow users to make payments quickly and easily with just a few taps on their smartphone or tablet.
With the digital revolution, internet penetration and more people are using their smartphones and tablets to make purchases, digital wallets are becoming increasingly popular. It also draws several advantages over traditional payment methods.
Digital wallets provide convenience and speed of payments to customers. Some benefits of digital wallets are –
- Customers can access these wallets at any time and at any place. They are not restricted to any geographical locations like in case of bank visits or bank’s working hours. All that one needs is a smartphone, an internet connection and a linked bank account
- They are secure because they are usually password-protected and nowadays they add an extra layer of security like encryption, biometric authentication (e.g., fingerprint or facial recognition) or two-factor authentication. All these enhanced security measures provide added protection
- Unlike bank accounts, they need no minimum balance requirement and customers can use their e-wallets for various uses. They can add money as and when they want. Many wallets allow auto-debits for bill payments as well
- It offers instant transactions where digital wallet companies quickly transfer money from one wallet to another and even to the other bank account. Most wallets are easy-to-use and user-friendly
- Usually, they don’t have charges for wallet-to-wallet transactions. Some wallets previously took some charges for wallet-to-bank account transactions which were nullified later. No wallet has any charges for setting up accounts
- One can make payments at online stores, offline shops, and even in apps. This provides flexibility to the customers. They can scan QR codes to make payments
They have gained significant traction in e-commerce, in-app purchases, contactless or cashless payments at physical stores, and person-to-person transactions. However, customers need to choose reputable and reliable digital wallet providers that ensure best practices for securing their devices and payment credentials.
