Digital wallets, secure applications software enabling consumers to transform their smartphones, watches, and laptops into mobile funds-transfer devices, are moving deeper into the mainstream of electronic payments.
“Digital Wallets” is a catchall term for services like Apple Pay, Samsung Pay, Google Pay, PayPal, Venmo, Zelle, and more. While unlikely to replace cash anytime soon, a survey found that 76% of people prefer businesses to accept card payments, such as debit or credit cards and digital wallets.
Introduced 25 years ago to pay for Cokes via text message from a Swedish vending machine, these contactless packets of financial-technology payments software downloaded to your smartphone or other mobile device are becoming common due to their convenience.
Worldwide, there was an estimated 3.4 billion digital wallets in circulation in 2022, and they are projected to reach 5.2 billion wallets by 2026.
Becoming more than digital payment tools
Digital payment tools make it easy to deposit or transfer funds between your Bank of Vernon accounts, pay bills, shop in-store or online, and dine out. However, digital wallets are expected to eventually show their potential as more than just facilitating the electronic transfer of payments between consumers and vendors. Soon, you and your family may be using digital wallets as a “virtual ID’’ to store and access information about you, from driver’s licenses, health care records, credit and debit cards, event tickets, and other items.
What are the advantages of using digital wallets?
The number one reason is the convenience of this payment method. With consumers doing more banking, shopping, and other funds payments online, digital wallets have replaced traditional payment modes. Information on transactions made with digital wallets is stored electronically, making it easy to track their spending. Also, the contactless nature is reassuring for users concerned about spreading germs from contaminated hands and surfaces.
What are the limitations of digital wallets?
Though the appeal of digital wallets has risen, they still aren’t fully embraced. A limited but growing number of retailers and service providers are equipped to accept digital payments, mainly due to the cost of the specialized terminals and scanners. Some cashless payment apps impose fees on users for each transaction – an expense that can quickly add up.
How secure are digital wallets?
Digital wallets have multiple layers of security. Digital wallet providers rely on digital “tokens” to track and protect their users’ identities. More levels of security kick in, including the software application that powers it. In addition, there is firewall protection from the retailer, the credit card company, and the financial institution issuing the digital wallet.
Funds in certain digital wallet accounts, like those from Google Pay, Cash App, and Zelle, are federally insured through their banking partners by the Federal Deposit Insurance Corporation. Others, like Venmo, have no coverage on funds in their digital wallet accounts.