Contactless payment introduced a handful of new norms to the entire payment ecosystem so that everyone can make safe online payments. Digital wallet or eWallet is such an inclusion that got instant acceptance for effortless online transactions.

Digital Wallet – What Is It?

Digital wallet or eWallet is an application or programmed software that stores all the payment information of the user. Later at the time of payment, the user can use that information. One can use a digital wallet on smartphone as well as on PC.

In case, a user saves his/her card information in the wallet, he/she can pay any merchant using that wallet even if he/she is not carrying the real card or not remembering the card information.

Just the way the users store credit/debit cards, gift cards, and discount coupons in a physical wallet, they can store the same in the eWallet too, and use those to avail the discounts.

At present, digital wallets aim at eliminating the use of physical wallets by allowing users to store tickets, and insurance cards, along with credit/debit cards and gift vouchers. No doubt, it has helpful functionalities and has the potential to be a go-to payment method for users.

Features of Digital Wallet

Digital wallets are made with the purpose of easy online payments, so, everything in it is very simple, user-friendly, and safe. Digital wallets come with:.

1. Easy to download

2. and register feature

3. Ample storage of all payment information

4. User-centric design

5. Permission of P2P, P2M, Bills, recharge – all types of payments

Types of Digital Wallet

Digital wallets are of 3 types:

1. Closed Wallets – Specific companies use it for their customers and after loading money in it, this wallet works only within the app or website of the company. Example: Amazon Wallet (only Amazon users can use it to pay after shopping with Amazon, it also can store the refund amount).

2. Semi Closed Wallets – Fintech companies develop these wallets and users of these wallets can transact with listed businesses. Example: PayTM wallet. 

3. Open Wallets – Banks issue these wallets and users can transact with anyone after loading money in it. Example: ICICI Pockets.

Is It Same As Mobile Wallet?

Though digital wallets and mobile wallets are somewhat similar – but not the completely same. Mobile wallet is just a type of digital wallet. Digital wallets have a broader use-case. Though both can store payment information, digital wallet can make any online payment. However, mobile wallets are for online payments through mobile or any other wearable device. So, mobile wallets have somewhat narrowed down scopes in comparison to digital wallets.

How Does A Digital Wallet Work?

Just like in the physical wallet, users store money, cards, etc. to make payments, the same is stored in digital wallets. But the only difference is everything (money or card information) stored here is in intangible form.

Sending Money Through Walllet

The wallet user has to save the card data or load money in the walletto pay with it. At the time of payment, the user will neither need to provide money in cash form nor the physical card nor the card details. Once, money and other payment information are loaded into it, users can pay by authenticating the transaction. The detailed process is as follows:

1. Download and install the wallet

2. Add money to it by linking it to the bank account or cards

3. Select digital wallet (as the payment mode) at the time of payment

4. Authenticate the transaction with PIN, OTP, Fingerprint, or Face recognition

Accepting Wallet Payments

Accepting payments with digital wallet is even easier! The merchant only needs to make their payment solutions compatible with digital wallets so that their customers can pay using them. If you are already running an online business, you are probably using a payment gateway. And almost all payment gateways accept wallet payments.

How Does Money Transfer from Digital Wallets to Destination?

Digital wallets use the following technique to transfer money to the destination:

QR Codes – Users can scan it and initiate a payment through the wallet.

NFC or Near Field Communication – Users can transact with a device within specific proximity with the help of radio waves through the wallet.

MST or Magnetic Signal Transmission – Users can transmit the data captured in card’s magnetic stripe in the form of magnetic signal to the card reader and complete a transaction

Advantages of Digital Wallet

Digital wallets ease contactless payments by cutting the dependency on cash/card/physical wallet. After online or offline shopping, a wallet user can pay very conveniently. As it uses radio waves and electromagnetic signals to pass the card data, an active internet connection will not be necessary always. Users, who often forget to carry their wallet, digital wallet is just their thing.

From the point of view of the merchants, they can widen their customer base by accepting wallet payments. The checkout process becomes even faster if the customer chooses to pay with digital wallet, so customers will get a better experience.

Due to faster and friction-free checkouts, there will be higher conversion. Merchants can consider the users who only use wallets for payments (who have to drop their purchases if merchants don't accept wallet payments) as their buyers by accepting wallet payments. Hence, there will be higher sales.

Disadvantages of Digital Wallet

On the downside, small shop owners, entry-level online businesses, etc. may not accept wallet payments at the beginning – so, buyers may not be able to pay all merchants using it. To pay, either Bluetooth or internet connection is essential – so, it is not dependency-free.

Are These Wallets Safe Enough?

Yes, digital wallets are very safe because they securely transfer the stored data to the destination by using wireless capabilities like WiFi, Bluetooth, magnetic signals, etc.

Also, it conducts card tokenization to save card data. And to authenticate a payment, users have to provide PIN or OTP or fingerprint or face recognition to initiate a payment. So, without users’ permission, there will not be any action.

How To Choose The Best Wallet For You?

A user needs to check the safety features (authentication, end-to-end encryption), features offered, reviews, and ratings of a wallet before starting to use it. These will help the users to get an idea about the reliability, authenticity, and performance of the wallet.

End Words…

Today, contactless payments are a necessity, because the end-users have accepted it. So, the merchants too need to encourage it by accepting contactless payments in all forms. Be it UPI, Cards, Net-banking, or Wallet – a merchant has to be open to all these payment modes.  If you are not yet accepting wallet payments, you are probably missing out on a few sales too – let's grab them! Reach out to us today to accept wallet payments.