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E-Wallet Comprehensive Guide: Why Digital Wallets Are Critical For Merchants?

Thursday, 16 Jun, 2022

Digital wallets are also known as electronic wallets (e-wallets), which are the waves of the future. They make both online and offline transactions a swift, efficient, and convenient process that’s beneficial for all parties involved. Merchants make quicker sales and customers waste less time. Let’s learn more about digital wallets, how they work, and how you can use them.

Digital wallets are the waves of the future.

Digital wallets are the waves of the future.

1. What is an e-wallet and how does it work?

1.1 - What is an electronic wallet (e-wallet)?

E-wallet meaning: E-wallet (also known as digital wallet) is a secure financial app or online web browser that allows you to:

- Make purchases with retailers on-site.

- Transfer or withdraw money: After topping up their accounts, customers can transfer funds to other users (Peer-to-Peer transfer) instantly via the service provider's internal network with cost-efficient fees.

Digital wallets allow you to store tickets.

Digital wallets allow you to store tickets.

- Store and track rewards programs:

Icon list Gift cards, membership cards, loyalty cards.

Icon list Coupons and vouchers.

Icon list Cloud coupons and promo codes.

Icon list Movie tickets, event tickets, plane tickets.

Icon list Hotel reservations.

- Make it easier to stay on top of your finances, since there are detailed records of every transaction.

A digital wallet needs to be linked with the individual’s bank account to make payments. To link your bank account, you need to set up your digital wallet first. Once you’ve got your digital wallet installed, you can use it to make online or contactless payments, and add boarding passes, store tickets and coupons, and much much more. Let’s get started.

For setting up a digital wallet, the user needs to install the software on
    his/her device.

For setting up a digital wallet, the user needs to install the software on his/her device.

Step 1: Download digital wallet app.

Step 2: Follow easy registration steps.

Step 3: Load your digital wallet.

Step 4: Link with your bank account or credit/debit cards.

Step 5: Enter your password or private key.

Step 6: Ready to pay.

While digital wallet and mobile wallet bear similar features, the digital wallet can be accessed on a wider range of devices, like a desktop, laptop, and mobile device, whereas the mobile wallet is exclusively accessible via your mobile device.

1.2 - How do e-wallets work?

QR codes

QR codes

Quick response codes are matrix barcodes that store information. You use your device’s camera and the digital wallet’s scanning system to initiate payment.

Near Field Communication (NFC)

Near Field Communication (NFC)

NFC is a technology that allows two smart devices to connect and transfer information using electromagnetic signals. It requires two devices to be within about an inch and a half (4 centimeters) from each other to connect.

Magnetic Secure Transmission (MST)

Magnetic Secure Transmission (MST)

The same technology used by magnetic card readers that read your card when you swipe it through a slot on a Point of Sale (POS). Your phone generates this encrypted field that the POS can read.

The card information you have stored in your digital wallet and choose to use for a transaction is transmitted from your device to the POS terminal, which is connected to payment processors. Then, through the processors, gateways, acquirers, or any other third parties involved in credit and debit card transactions, the payment is routed through the card networks and banks to make a payment.

1.3 - What is the best electronic wallet?

Apple Pay®, Google Pay®, and Samsung Pay® are the most popular digital
    wallets.

Apple Pay®, Google Pay®, and Samsung Pay® are the most popular digital wallets.

Apple Pay®, Google Pay®, and Samsung Pay® are three of the most secure and trusted digital wallets. Now is the perfect time to give the digital wallet a try.

Apple Pay

Payments with Apple Pay are verified using Touch or Face ID, so you can have maximum security with minimal effort.

Apple Pay

Google Pay

Google Pay uses NFC technology so you can pay with a fingerprint or a password, and your card information is always encrypted.

Google Pay

Samsung Pay

Samsung users can also set up Samsung Pay, another widely accepted electronic payment system equipped with MST and NFC technology.

Samsung Pay

In addition, there are lots of digital wallets out there currently available such as PayPal, Facebook Pay, Amazon Pay, etc.

2. How many types of e-wallets?

There are 3 types of digital wallets which are: closed digital wallets, semi-closed digital wallets, and open digital wallets.

How many types of e-wallets?

Digital wallets are divided into 3 types.

Closed digital wallets: are created by businesses that sell products or services to their customers, and can only be used to transfer funds between the user and wallet-issuer. A closed digital wallet enables users to make payments via an app or website. If a transaction is canceled or a refund is issued, the entire amount is stored in the wallet.

Semi-closed digital wallets: are for users making transactions at a given list of merchants. Semi-closed digital wallets have a limited coverage area. To accept payment from the semi-closed digital wallets, merchants must accept the contract or agreement with the issuer.

Open digital wallets: are issued by banks or their partners, and can be used for any type of transaction, including ATM withdrawals. Open digital wallets allow you to easily transfer funds. Payments can be made both online and in-store at any time. The open digital wallets service provider allows users to conduct transactions from anywhere in the world; however, both the sender and the receiver must have accounts on the same application.

3. What are e-wallet advantages and disadvantages for consumers?

3.1 - Benefits of digital wallet:

Security

Security

The problem with walking around with large amounts of cash is that if it’s stolen or lost, you’ll likely never get it back. While a thief could grab your wallet and get access to your credit cards in seconds, digital wallets encrypt your information to help safeguard it from hackers. Even if somebody steals your phone, the thief would likely still need a passcode or biometric authentication to access the information in your digital wallet.

Digital wallets are actually one of the best options to keep your information protected as digital wallets are based on encryption software. This means digital wallets don’t use your actual card number, but instead a token. Therefore, if your business ever experiences a cyberattack, your private information won’t get stolen.

Convenience

Convenience

In the digital era, a large majority of merchants accept digital transactions, and implement more plans to provide those services in the future. When paying via your digital wallet, you are able to complete transactions in an easier, faster, and more secure way.

Efficiency

Efficiency

Say goodbye to filling out tedious checkout fields while you shop online or fishing through your purse for your debit card. Your digital wallet will make your transactions seamless and simple.

It’s free

It’s free

A major digital wallet is typically already downloaded to your mobile device, or can be downloaded from the app store for free. Besides, making the switch from physical cards and cash comes at no cost to you. Most transactions via your digital wallet do not come with any associated fees.

3.2 - Drawbacks of digital wallets:

Digital wallets could encourage overspending.

The convenience of having easier access to your cards can be a downside. It means your impulse buying increases because you constantly have your digital wallet at your disposal.

Digital wallets encourage impulse buying.

Digital wallets encourage impulse buying.

There may be fees involved with a digital wallet.

Be sure to look into any potential fees when you start using a digital wallet. For example, withdrawal fees may occur when you withdraw funds out of your digital wallet to a local bank account.

4. Four digital wallet security you need to know.

Digital wallets are becoming an increasingly popular alternative to cash or credit/debit card to make payments. Digital wallets give you the freedom to make payments at retailers without carrying a physical wallet with you. It can be more secure than carrying cash or using a debit/credit card.

If you're on the fence about digital wallets, understanding their security features can help. Here are 4 ways digital wallet work to keep your account secure:

4-1. Tokenization protects your card information.

When you swipe a physical credit or debit card at the store, they log your card information in their system, including your name, card number, expiration date, and service code. While retailers do their best to protect this information after your transaction is complete, unfortunately, data breaches occasionally happen when retail systems are compromised.

A digital wallet alleviates some of this risk using a system called Tokenization. Whenever you make a purchase with a digital wallet, the digital wallet generates a unique, single-use payment code. Instead of providing your personal information, this “token” code is only relevant for the immediate transaction. Tokenization makes your data much more difficult to track and adds an extra layer of security to your payments.

4-2. Every protection your phone has, your digital wallet has.

If you lose your wallet, it’s time to cancel your cards. It’s stressful, frustrating, unbelievably inconvenient. While losing your phone is similarly inconvenient, it’s far more secure than your wallet for 3 reasons.

First, Apple®, Samsung®, and Google® all offer “Find My Phone” functions that allow you to easily locate your phone. According to a survey by Pixie in 2017, on average, Americans spend almost 2.5 days annually searching for lost items, including wallets. With a digital wallet, you can immediately secure your information and track your device more efficiently.

Digital wallets are far more secure than your wallet

Digital wallets are far more secure than your wallet.

Second, while your wallet is full of information right at the surface, your phone hides sensitive information behind layers of encryption. By having a passcode or fingerprint lock on your phone, your digital wallet becomes impressively more secure.

Third, digital wallets offer several tools to secure purchases, ranging from passcode to biometric verification. Your information becomes much more difficult to access when you have a fingerprint lock blocking the way.

4-3. Access from anywhere.

If you’ve lost your phone or it’s been stolen, you may be worried about someone bypassing the protections on your digital wallet. However, in the unlikely event that a stranger accesses your digital wallet, you can still prevent your data from being stolen. By logging in from another phone or device, you can freeze your digital wallet, preventing new purchases from going through.

4-4. Sandboxing.

It’s no secret that some malicious apps seek to take information from your phone, but digital wallets protect against this by using a practice called Sandboxing. Through this process, the digital wallet is isolated from the rest of your phone, so if something does go wrong with your phone, your digital wallet will remain separate and secure. The app only interacts with programs and apps within its “sandbox”.

5. New trends of digital wallets: smart wallets & super apps.

The EU eID Wallet allows the EU citizens and businesses to access services
    online without having to use private identification methods.

The EU eID Wallet allows the EU citizens and businesses to access services online without having to use private identification methods.

A smart digital wallet called The European Digital Identity Wallet will offer the EU citizens and businesses that will be able to link their national digital identities with proof of other personal attributes (e.g: driving license, diplomas, bank account, Covid-19 vaccination details, and so on). In other words, this special digital wallet allows all Europeans to access services online without having to use private identification methods. These smart digital wallets may be provided by public authorities or certified private entities.

Moreover, smart digital wallets give consumers access to a wider spectrum of services as these smart digital wallets consolidate installment payments, bill payments, buy now pay later (BNPL), with shopping, support, delivery, rewards, gift cards, chat rooms, and return the goal of transforming themselves from being a smart digital wallets into being an end-to-end super app. Besides, this super app will allow a network of partners to send and receive money from more than 200 countries and territories easier.

However, some people prefer smart digital wallets to super apps as what they want to share is not identity but authentication. These users expect the digital wallets to present their credentials in privacy-maximizing order, and they only have to share their credentials when they are asked if they are over 18, or have a driver's license.

6. What are crypto digital wallets? What are the advantages of crypto digital wallets?

6-1. What are crypto digital wallets?

Crypto digital wallets are a unique kind of wallet used to store your cryptocurrency passwords in one central place. Crypto digital wallets allow you to manage all your currencies in one place, send and receive money, and even shop at stores that accept crypto. Crypto digital wallets can be accessed via your mobile phone or on another portable device, similar to how online banking apps work.

Crypto digital wallets are a unique kind of wallet.

Crypto digital wallets are a unique kind of wallet.

6-2. Advantages of crypto digital wallets:

- Funds transfer between two parties within crypto digital wallets will be easy without the need of third parties like credit/debit cards or banks.

- Crypto digital wallet is a cheaper alternative compared to other online transactions.

- Payments are safe and secured.

Learn more about the

Learn more about the benefits of crypto payment gateway.

Read more:

About PayCEC

PayCEC’s secure payment gateway was established in response to the growing need of global online businesses to accept online payments more quickly and easily. In the digital era, our payment flow has evolved to work seamlessly and effectively across all platforms and devices. We pride ourselves on combining superior technology with first-class customer service.

PayCEC’s secure payment gateway for online businesses is a truly global payments platform that not only allows customers to get paid instantly and securely, but also withdraws funds to their business accounts in various currencies.

We have created an open and secure payments ecosystem that entrepreneurs and businesses choose to securely transact with each other online and on any device. We proudly maintain the highest level of client advocacy in the industry.

PayCEC Team

[email protected]

+44 2032 864370

www.paycec.com

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We are honored to serve as your reliable business partner and financial service provider in the industry and other business-related services. With the help of our professional staff, to help merchants to achieve their goals for the development and expansion of the international business market.

Our payment flow has developed in the e-commerce world to perform seamlessly and effectively across all platforms and devices. We take pleasure in combining technology with customer service, to solve your concerns at the moment.

PayCEC is a fully worldwide payment network that not only allows merchants to be paid immediately and securely, but also allows them to withdraw money in multiple currencies to their company accounts.

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