In the USA, by next year almost one in every two US dollars spent online will be made using digital wallets, which are also known as “e-wallets”. For the uninitiated, a digital wallet is basically an account connected to a debit, credit or even a prepaid account through the medium of a smartphone or computer. Aside from active credit or debit cards, digital wallets are also designed to be able to store other sensitive personal data, such as loyalty cards and even driving licenses, which is handy for purchasing age-restricted goods or services.
Digital wallets are already proving particularly popular when it comes to online entertainment. In the iGaming industry, consumers are now able to play at online casinos that accepts all major digital wallets, such as Neteller, Skrill and EcoPayz. Furthermore, players only need to provide identification for proof of age once before the e-wallet stores it and passes on the confirmation for online casino operators for future deposits and withdrawals. Leading e-commerce platforms are also building their own “closed wallets” such as Amazon and Walmart. These e-wallets are restricted to purchases and services via the merchant.
The concept of digital wallets was first discussed way back in 1983. American cryptographer, David Chaum devised his own “digital cashback” system, even before the concept of cryptocurrencies was spawned. It was an idea that would gain further momentum still in the 1990s thanks to the rapid advancements in internet technology. The launch of PayPal just before the turn of the Millennium proved to be a significant turning point among consumers, looking towards e-wallets as a simple, decentralized online payment method.
Given the mobile sales in the US alone are expected to total almost 54% of all e-commerce transactions by 2021, it’s fair to say that digital wallets aren’t just the future of online payments, they are the here and now. If you are yet to experience a digital wallet and you’re curious as to the day-to-day benefits, here are a few pointers to help you make your mind up.
Increased transparency and visibility
Digital wallets put the power back in the hands of the consumer. There’s no longer any need for paper-based expense management. With an e-wallet, all your expenses are clearly listed in black and white on-screen in real time. This means that users get better visibility over their daily spending, allowing them to make conscious decisions to curb their spending should they wish to save money in the short or long term.
Improved customer security
Digital wallets are also built with enhanced security controls, which is invaluable in an era of cybersecurity risks. Two factor authentication (2FA) is regarded as the best form of e-wallet security. If you enable 2FA on your smartphone and computer, you will create a second barrier for fraudsters to have to overcome before logging into your account. This second barrier is virtually impossible for cyber-criminals to overcome as you will have a numbered code to input, given to you by your e-wallet app, that changes every 60 seconds for ultimate security and privacy.
Reduced transaction fees
Closed digital wallets are also particularly beneficial at reducing transaction fees. As consumers are only permitted to use their closed e-wallet at a specific merchant or retailer, these accounts are not subject to the interchange fees imposed upon other accounts by leading payment networks.
Reward opportunities for loyal customers
Another crucial benefit of digital wallets for retailers themselves is the opportunity to improve their engagement with regular and first-time customers. First-time customers can be given a slick user experience and rewarded with incentives to return for a second purchase in the future. Meanwhile regular customers can sign up to loyalty schemes via their closed digital wallet which can give them access to exclusive discounts. Furthermore, customer data obtained from closed digital wallets makes it easier for brands to tailor and segment their marketing messaging for a more powerful effect.
As online retailers increasingly realize that they cannot miss the boat with digital wallets if they want to make it easier for consumers to spend and easier for businesses to collect invaluable data on their customers, it’s easy to see why many believe that digital wallets are here to stay.