Digital wallets were made to replace the physical wallet. They store all the data of the consumer in a secured encoded format. Details such as bank account, debit, or credit card information to process payments and the payment details are stored in a digital wallet. This makes the payment process much more hassle-free and easier for both the sender and the receiver.
Picture yourself living in the year 2050. Anything you do will be technologically driven. Artificial intelligence helps you with each decision you make, even for a simple chore. With the digitalization of services booming at such an accelerated rate, do you think that payment options will be available only from the mode of cash or card?
We do not need to wait till the year 2050, for an initiative has already been made. Digital wallets are the simple solution that most consumers are switching to as shopping patterns are evolving ever since the pandemic. A digital wallet is an electronic version of a traditional wallet that stores consumers' payment information and passwords enabling them to make transactions without the bank account details of the receiver. The government has also boosted the growth of digital payments by promoting a ‘cashless economy’ in the country.
Understanding a digital wallet
Digital wallets were made to replace the physical i.e. “traditional” wallet which would require cash or card while making a transaction. It can be accessed by a website or a mobile or desktop application. They store all the data of the consumer in a secured encoded format. Details such as bank account, debit, or credit card information to process payments and the payment details are stored in a digital wallet. This makes the payment process much more hassle-free and easier for both the sender and the receiver.
How to use a digital wallet?
Upon downloading the application or visiting a website a user has to create his personal account by providing basic information and bank account details or debit card. Linked by KYC form(know your customer), a user can even link their mobile number with their bank details. Once the information is fed, a user can make as many transactions without having to re-enter their details and can make a payment by entering their receiver mobile number which is linked to their respective bank accounts, or even just scanning a QR code. Usually, merchants that accept mobile wallet payments can be identified through a contactless payment indicator (usually a sideways Wi-Fi symbol).
Mobile wallets are one of the most common and widely used digital wallets. When making a payment, users are required to tap or wave their device to the NFC-enabled terminal. NFC uses the personal identification format created for the user to communicate the payment information to the merchant’s POS(point-of-service) terminal. Near Field Communications or NFC-enabled mobile wallets to allow consumers to make ‘tap-and-pay purchases and use a single wallet for all purchases, including online and offline purchases.
Why go digital?
There are numerous advantages of a digital wallet that benefit both the sender as well as the receiver.
- It is a form of e-commerce model designed to be used with mobile devices due to their convenience and easy access.
- It eliminates the need for physical storage and the safekeeping of traditional payment methods.
- It lowers the payment processing time, making it a more efficient method of payment than cash or card.
- It reduces fraud. Users can track the receiver of their cash which makes fraudsters easier to navigate.
- It provides the company with data such as consumers' purchasing habits, making it more efficient to market to their audience.
- It promotes financial inclusion. Since there is no need for a physical firm or branch, those who are unbanked or underbanked can use these services can use this mode of payment with the ease of their phone.
India’s UPI payments volume has seen an increment from 1.3 billion transactions to 3.55 billion transactions.
The value of transactions has increased from Rs.2.16 trillion to Rs 6.39 trillion from January 2020 to August 2021. Their value of transactions has tripled in almost a year. PM Shri Narendra Modi has also recently launched a digital payment solution called e-RUPI. With the current growth rate of digital payments, digital wallets will be the future mode of transacting. It paves a path to the futuristic technology we have envisioned.