A Basic Introduction to Digital Wallets

A Basic Introduction to Digital Wallets

As a consumer, you should demand for more quality service and at the same time, a convenient way of availing services and products. This has driven the improvement of various industries to compete in the market they are in. And thanks to the rapid advancement of today's technologies, you can now easily access such services and products with just one click on your device.

The creation of e-wallets and theirQ integration into different types of services and industries have brought the importance of cashless transactions. These benefit both a business and you as the consumer without hassle, especially when using it for day-to-day transactions. Although the e-wallet’s underlying technology looks new in the market, it actually has been around for more than a decade and it has been continuing to advance and offer new features.

In the past year, adaptability of users to this technology has been so popular that it has been changing the game of different industries. In fact, many companies have started to integrate digital wallets into their operations to enhance the quality of service for their customers. By using digital wallets, you can buy practically anything both online and in physical stores, withdraw money from ATMs, and transmit money peer-to-peer.

Since the COVID-19 outbreak, there has been a surge in the use of digital wallets due to their features and functions that are not just timely but also relevant. This situation has encouraged many people to go cashless for their daily financial transactions. In addition, many banks have developed their e-wallet systems to provide a viable alternative to traditional bank transactions.

The 3 types of e-wallets available in the market today are Closed Wallets, Semi-closed Wallets, and Open wallets; each having its own set of features and perks.

If you are new to digital wallets or have been a user, check out the following as this will help you understand the rising popularity of digital wallets, their use and purpose, the distinction among the different types, and their overall importance.

But First, What is a Digital Wallet?

A digital wallet, also known as an e-wallet, is a type of virtual payment method that is linked to your bank account. You can use it to transact financial transactions through the use of your smartphone or computer. In many situations, digital wallets are not just more accessible to use, but they are also safer than traditional wallets. For instance, you must first access a specific app designed by a bank or a trusted third party before you’ll be able to make a transaction. In 2011, Google became the first major company to develop a mobile wallet. Apple's Passbook was introduced in 2012 and while it did not support mobile banking, it used to store boarding passes, tickets, and coupons. Two years later, Apple Pay was released. It began in the United States and swiftly spread to the UK and China. Android and Samsung Pay followed in 2015.

Online payment solutions, generally in the form of an app, are also known as digital wallets. You don't need to enter your card data or carry a physical card to make payments because the wallet securely saves digital versions of your debit and credit cards. You can keep digital tickets and e-vouchers in this wallet as well, so you'll always have the documentation you need. Digital wallets use app operating systems to sync the payment details between your bank account and any seller you’re buying from.

What makes digital wallets popular is because they are simple to use. There’s no more fumbling for your real wallet at the store or entering your card information every time you check out. Most importantly, your account information is kept safe and secure in a single location, and funds are protected even if your phone is misplaced or stolen. Still, it’s very important to properly research the digital wallet's issuer before putting your money in it.

Closed Wallet

With the increasing popularity of digital banking and electronic payment systems, businesses can now set up their platform in the form of closed wallets. Making payments exclusively for one particular company through closed wallets has gotten easier since you can only use that wallet to buy products and services solely from the issuing company. Moreover, if you’re a loyal customer, you may also be rewarded through cashbacks, and the transmission of the funds between you and the seller has become more seamless.

This kind of wallet would be advantageous for both parties. If you’re running a business, this will instill loyalty, and complete patronage of the product or service that you offer because your clients can only use the loaded funds on that wallet to buy goods and services from their company. On your part as a customer, on the other hand, closed wallets will help you to pay the seller more efficiently.

Semi-Closed Wallet

A semi-closed wallet is the same as the closed wallet, except that instead of using it to just a single merchant, you can also use it to the other merchants that contract with the former so you can pay your purchases from them.

There are several advantages that you will benefit from using the semi-closed wallet. The broad coverage of service will enable you to pay your bills or purchases to multiple merchants so you can enjoy a great deal of convenience. In addition, this wallet simplifies your online shopping experience while also allowing you to benefit from a high level of security in settling your payments for your purchases. Lastly, this provides a more efficient way of sending and receiving money from other semi-closed e-wallet users.

Open Wallet

The open wallet is the type of e-wallet that banks generally issue. Institutions partnered with major banks can also issue open wallets to their system. These open wallets give you the maximum convenience in your daily transactions. Simply say: An open wallet is relatively like a credit card and only up to the pre-funded account’s amount.

What’s interesting about open wallets is that anyone can use it to purchase goods and services. These wallets are mostly accepted by retailers in the business, which helps online purchases, allows contactless in-store payments, and provides cashbacks to those who use e-wallets to avail their products.

Additionally, it also allows you as the customer to fund your e-wallet for different purposes other than purchasing products. You could transfer money to another party, withdraw money deposited from the account, fundraisings, removing the remittance centers in the process.

The Bottom Line

While it may take some time for some to get accustomed to, utilizing a digital wallet has various advantages. Digital wallets can provide you with convenience and security, from streamlining how to manage money to protecting your personal information from possible hacking, etc.

Using a digital wallet eliminates the need to enter both the sender and receiver's bank details, which speeds up and simplifies sending or receiving money or making payments at online and offline stores. It’s one of the many reasons why has rapidly become a growing trend and the most preferred mode of payment not just for business owners but most importantly for consumers because of their ease of use, security, and wide range of applications. And because of these numerous features, there’s no doubt that digital wallets will be around for a long time.

Maxim Ruvschenko
Author

Dealing with advanced digital wallet solutions since 2013.

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