In today’s world, digital transactions are increasingly becoming the norm. With the rise of online shopping and mobile payments, digital wallets have become more common. This is mirrored in consumer behaviour: in the UK, shoppers make nearly half of their weekly purchases (43%) using mobile phones.
This article will discuss what digital and mobile wallets are, what they are used for, the types of digital wallets available, and their advantages and disadvantages.
What is a digital wallet, and what is a mobile wallet?
A digital wallet, also known as an eWallet, is a software application that allows users to securely store payment information, such as credit card details and bank account information. This wallet can then be used to make purchases online or in person without entering the payment information each time.
A mobile wallet is a type of digital wallet specifically designed for use on mobile devices, such as smartphones and tablets. Mobile wallets can store payment information, loyalty cards and coupons, making them a convenient way to keep all your payment information in one place.
What are digital and mobile wallets used for?
The COVID-19 pandemic has accelerated the trend towards a cashless society. Many people preferred mobile payments over cash or other traditional methods because of hygiene concerns and limiting contact with surfaces.
Retailers and businesses have adapted to this by accepting mobile payments and making it easier for consumers to purchase via QR codes or NFC technology.
Next, we’ll be sharing a few ways businesses and consumers can use digital and mobile wallets:
Digital and mobile wallets can be used to make purchases online without the need to enter payment information each time. Many digital wallets use biometric authentication, such as fingerprint scanning or facial recognition, to ensure secure access and prevent fraud.
Many retailers now accept mobile payments from mobile wallets in-store. Through mobile wireless connections like Bluetooth and Wi-Fi, digital wallets transmit payment data securely and conveniently to a point of sale (POS), offering fast and secure payment experiences.
Some digital wallets, such as PayPal, allow users to send and receive payments from other users. Sometimes customers also use QR codes that can be scanned using a mobile device’s camera to transmit payment information and initiate transactions securely.
Loyalty cards and coupons
Many digital wallets allow customers to store loyalty cards and coupons, making tracking rewards and discounts easy. They also use automatic loyalty card updates and reminders, ensuring that customers never miss out on earning or redeeming rewards.
Types and examples of digital and mobile wallets
The most popular types of digital and mobile wallets are:
Mobile payment apps like Apple Pay and Google Pay allow storing payment information on a mobile device for in-store and online purchases
Self-checkout systems – such as PayPal, Skrill or Neteller, allow users to store payment information and make purchases online.
Bank mobile apps – many banks now offer their own mobile apps, which allow users to store payment information and make purchases.
Cryptocurrency wallets like Coinbase and Binance allow you to store and manage cryptocurrency.
From providers such as Bitpay, Giropay, PayU to Chinese providers such as Alipay, Trust Payments has a wide range of international digital wallet partners. See the full list.
Advantages and disadvantages of digital and mobile wallets
Like any technology, there are advantages and disadvantages to using digital and mobile wallets. We’ll dive into them next:
|Convenience. Digital and mobile wallets are very convenient, allowing users to store all their payment information in one place and make purchases quickly and easily.||Limited acceptance. Some retailers don’t accept mobile payments, which can limit the usefulness of digital and mobile wallets.|
|Security. Digital and mobile wallets are generally very secure, with many using encryption to protect payment information.||Fees. Some digital wallets charge fees for certain transactions, such as transferring money to a bank account.|
|Loyalty and rewards. Digital wallets often include loyalty programs and virtual cards, so customers earn rewards faster.||Compatibility issues. Some digital wallets are not compatible with all devices or operating systems.|
|Speed. Digital and mobile payments are generally faster than traditional payment methods, such as cash or checks.||Security risks. While digital and mobile wallets are generally secure, there is always a risk of security breaches and fraud. Using strong passwords and authentication measures is important to protect your payment information.|
|Frictionless experience. Using an eWallet simplifies the checkout process, which improves the customer experience and minimises frustration.|
|Real-time monitoring. Digital and mobile wallets offer real-time monitoring of transactions, making it easy to track spending and account activity.|
|Analytics. Digital wallets allow you to see a customer's shopping history and preferences, which makes marketing more targeted.|
How do you set up a digital wallet?
Setting up a digital wallet is a pretty straightforward process:
- Choose a digital wallet provider. Choosing the one that best fits your needs and preferences is important.
- Contact your payment processor. If you already accept credit and debit card payments, contact your payment processor to see if they support your chosen digital wallet provider.
- Create a business account with your digital wallet provider. You may be required to go through an application process.
- Add payment methods like credit or debit cards, bank accounts, or other payment options to your eWallet.
- Integrate your payment gateway. If you have an e-commerce website, you may need to integrate your payment gateway with your digital wallet provider.
- Test your payment system before accepting digital wallet payments to ensure that it is working correctly.
Trust Payments can help you set up a digital wallet and offer online and in-store payments through our digital payments gateway. You can request digital wallet functionality on your account, and we have a comprehensive guide to help you set it up. Find out more.