Digital wallet

A digital wallet also known as "e-Wallet" refers to an electronic device, online service, or software program that allows an one party to make electronic transactions with another party bartering digital currency units for goods and services. This can include purchasing items on-line with a computer or using a smartphone to purchase something at a store. Money can be deposited in the digital wallet prior to any transactions or, in other cases, an individual's bank account can be linked to the digital wallet. Users might also have their driver's license, health card, loyalty card(s) and other ID documents stored within the wallet. The credentials can be passed to a merchant's terminal wirelessly via near field communication (NFC). Increasingly, digital wallets are being made not just for basic financial transactions but to also authenticate the holder's credentials. For example, a digital wallet could verify the age of the buyer to the store while purchasing alcohol. The system has already gained popularity in Japan, where digital wallets are known as "wallet mobiles".[1] A cryptocurrency wallet is a digital wallet where private keys are stored for cryptocurrencies like bitcoin.

Technology

A digital wallet has both a software and information component. Secure and fair electronic payment systems are important issue.[2] The software provides security and encryption for the personal information and for the actual transaction. Typically, digital wallets are stored on the client side and are easily self-maintained and fully compatible with most e-commerce websites. A server-side digital wallet, also known as a thin wallet, is one that an organization creates for and about you and maintains on its servers. Server-side digital wallets are gaining popularity among major retailers due to the security, efficiency, and added utility it provides to the end-user, which increases their satisfaction of their overall purchase. The information component is basically a database of user-input information. This information consists of your shipping address, billing address, payment methods (including credit card numbers, expiry dates, and security numbers), and other information.

Digital wallets are composed of both digital wallet devices and digital wallet systems. There are dedicated digital wallet devices such as the biometric wallet by Dunhill,[3] a physical device that holds cash and cards along with a Bluetooth mobile connection. Presently there are further explorations for smartphones with NFC digital wallet capabilities, such as the Samsung Galaxy series and the Google Nexus smartphones utilizing Google's Android operating system and Apple's iPhone 6 and iPhone 6 Plus utilizing Apple Pay.[4] Others include Samsung Pay, Google Pay, as well as payment services like PayPal and Venmo.[5]

Digital wallet systems enable the widespread use of digital wallet transactions among various retail vendors in the form of mobile payments systems and digital wallet applications. The M-PESA mobile payments system and microfinancing service has widespread use in Kenya and Tanzania,[6] while the MasterCard PayPass application has been adopted by a number of vendors in the U.S. and worldwide.[7]

Digital wallets are being used more frequently among Asian countries as well. One in every five consumers in Asia are now using a digital wallet, representing a twofold increase from two years ago. A MasterCard mobile shopping survey among 8500 adults, aged 18–64 across 14 markets, showed that 45% of users in China, 36.7% of users in India and 23.3% of users in Singapore are the biggest adopters of digital wallets. The survey was conducted between October and December 2015. Further analysis showed that 48.5% of consumers in these regions made purchases using smartphones. Indian consumers are leading the way with 76.4% using a smartphone to make a purchase, which is a drastic increase of 29.3% from the previous year. This has inspired companies like Reliance and Amazon India to come out with their own digital wallet. Flipkart has already introduced its own digital wallet.[8]

Types

There are two types of digital wallets: hot wallets and cold wallets. Hot wallets are connected to the internet while cold wallets are not. Most digital wallet holders hold both a hot wallet and a cold wallet. Hot wallets are most often used to make quick payments, while a cold wallet is generally used for storing and holding your money, and has no connection to the internet. Another difference that is apparent when comparing the types of digital wallets, or e-Wallets, is the price. While most hot wallets are free, cold wallets can be expensive.

Security

Along with their different capabilities, these two types of digital wallets also come with a difference in security considerations. As a hot wallet is connected to the internet, they are more susceptible and vulnerable to cyberattacks from hackers. This makes them less secure and open to attack. On the other hand, cold wallets, are much more secure as they do not have an internet connection.

Payments for goods and services purchased online

A client-side digital wallet requires minimal setup and is relatively easy to use. Once the software is installed, the user begins by entering all the pertinent information. The digital wallet is now set up. At the purchase or check-out page of an e-commerce site, the digital wallet software has the ability to automatically enter the user information in the online form. By default, most digital wallets prompt when the software recognizes a form in which it can fill out; if one chooses to fill out the form automatically, the user will be prompted for a password. This keeps unauthorized users away from viewing personal information stored on a particular computer.

ECML

Digital wallets are designed to be accurate when transferring data to retail checkout forms; however, if a particular e-commerce site has a peculiar checkout system, the digital wallet may fail to properly recognize the form's fields. This problem has been eliminated by sites and wallet software that use Electronic Commerce Modeling Language (ECML)[9] technology. Electronic Commerce Modeling Language is a protocol that dictates how online retailers structure and set up their checkout forms.

Security

Consumers are not required to fill out order forms on each site when they purchase an item because the information has already been stored and is automatically updated and entered into the order fields across merchant sites when using a digital wallet. Consumers also benefit when using digital wallets because their information is encrypted or protected by a private software code; merchants benefit by receiving a combination of protection against fraud, faster receipt of payment, decreased transaction costs, and decreased theft loss.

Digital wallets are available to consumers free of charge, and they're fairly easy to obtain. For example, when a consumer makes a purchase at a merchant site that's set up to handle server-side digital wallets, they type their name, payment and shipping information into the merchant's own form. At the end of the purchase, the consumer is asked to sign up for a wallet of their choice by entering a user name and password for future purchases. Users can also acquire wallets at a wallet vendor's site.

Although a wallet is free for consumers, vendors charge merchants for wallets. Some wallet vendors make arrangements for merchants to pay them a percentage of every successful purchase directed through their wallets. In other cases, digital wallet vendors process the transactions between cardholders and participating merchants and charge merchants a flat fee.

Advantages for e-commerce sites

Upwards of 25% of online shoppers abandon their order due to frustration in filling in forms.[10] The digital wallet combats this problem by giving users the option to transfer their information securely and accurately. This simplified approach to completing transactions results in better usability and ultimately more utility for the customer.

Digital Wallets can also increase the security of the transaction since the wallet typically does not pass payment card details to the website (a unique transaction identifier or token is shared instead). Increasingly this approach is a feature of online payment gateways, especially if the payment gateway offers a "hosted payment page" integration approach.

Regulation

In some countries, such as Hong Kong and Singapore, digital wallets are regulated as stored value facilities.

See also


References
  1. Clark, Sarah. "NTT Docomo to take Japanese mobile wallet global". NFC World. Retrieved March 23, 2013.
  2. "SAGE Journals: Your gateway to world-class journal research". doi:10.1177/1748301817727123. Cite journal requires |journal= (help)
  3. Murphy, David. "Dunhill Wallet Uses Biometrics". PC Magazine. Retrieved March 23, 2013.
  4. OLIVAREZ-GILES, Nathan (April 17, 2012). "Sprint's Galaxy Nexus: Can a Second Google Wallet Phone Ignite Mobile Payments?". Wired. Retrieved March 23, 2013.
  5. "Understanding Digital Wallets". Alliedwallet. August 5, 2018. Retrieved March 23, 2013.
  6. "Dial M for money". The Economist. June 30, 2007. Retrieved March 23, 2013.
  7. "PayPass Adoption Study". MasterCard Advisors. Retrieved March 23, 2013.
  8. Chanchani, Madhav (7 March 2016). "Amazon India planning launch of digital wallet in a bid to build online payments business" – via The Economic Times.
  9. "Electronic Commerce Modeling Language (ECML) Parameters". www.iana.org. Retrieved 2020-04-24.
  10. Graphic Arts Monthly, 1999
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