What is a Digital Wallet?

E-wallets or Digital Wallets are becoming increasingly popular as a convenient and secure way to make transactions, especially in countries where cashless payments are more common. No business can ignore this novel payment method.

How is this useful?

An e-wallet (or electronic wallet), also known as a digital wallet, is a financial transaction application system that enables individuals to securely store and manage their financial payment information, including credit and debit card details, bank account information, and other forms of electronic currency, in one place.

E-wallets allow individuals to make payments or transactions without having to use traditional payment methods, such as cash or cheques. It replaces the actual card number with a unique digital card number, ensuring businesses do not see or store the full card number.

Digital Wallets can be accessed through a mobile app or website and enable users to make online transactions, paying for goods and services in-store or online, paying bills, and transferring money to other individuals. Some also offer additional features, such as loyalty programs, discounts, and cashback rewards.

You have most likely already encountered popular digital wallets including Apple Pay, Google Pay, Samsung Pay, PayPal, and Venmo, which allow users to send money to retailers and friends. It replaces the actual card number with a unique digital card number (token), ensuring businesses do not see or store the full card number.

When a user adds their payment information to an e-wallet, it is stored securely on the e-wallet provider's servers, rather than on the user's device. This provides an added layer of security for users' financial information, as they don't need to enter their payment information for each transaction.

However, users should always be cautious when using e-wallets and take appropriate measures to protect their financial information, such as using strong passwords and regularly monitoring their account activity. Many e-wallet providers also offer additional security features, such as two-factor authentication and biometric authentication, to protect users' accounts.

In Summary:

• A digital wallet refers to a software, electronic device, or online service that allows individuals or businesses to make electronic transactions

• A digital wallet stores all the payment information of users in a secure and compact form, reducing the need for physical wallets

• A digital wallet requires users to download the digital wallet app on their smartphones or other physical devices.
Significance of a Digital Wallet

• A digital wallet securely stores all the payment information of users in a compact form. Thus, it greatly reduces the need to carry physical wallets

• Many developing countries using digital wallets may be able to increase their participation in the global financial market

• Digital wallets allow users to transfer funds to friends and family residing in different nations

• Digital wallets eliminate the need for physical banks and companies in order to open and maintain a bank account. Hence, they also connect individuals and businesses in rural areas