Digital wallets have been around for more than a decade now. PayPal is one of the oldest digital wallets and was the first one to offer online banking services. As we reached 2020, when the global pandemic hits the world, online banking solutions and digital wallets become a critical solution. Hundreds of households who suffered due to the lockdown used digital wallets to send and receive money.
While the world always understood and appreciated the digital wallets’ scope, the 2020 pandemic made everyone realize how vital they are. They are easy to use and faster than traditional banking services, which has led to their vast popularity.
Let’s discuss a few things about digital wallets.
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What is a digital wallet?
A digital wallet is also known as an e-wallet or a mobile wallet. It gives the user the ability to transact without carrying cash, check, or cards. All you have to do is store your payment information on a smart device like your smartphone. Since the payment information is sensitive, digital wallets use a password to protect them. The idea of going cashless is a hot trend in the finance sector, with more and more organizations, are investing in digital wallets and similar concepts.
Another big reason for its popularity is that digital wallets effectively eliminate the lengthy checkout process. And, of course, a user does not have to carry a bulky wallet. On top of it, they can link their ID documents like driver’s license, loyalty cards, etc., to their smartphones.
The origin story
When mobile phones progressed, people used them to order pizza, book hotel rooms, buy travel and movie tickets, etc. Till we got to 2003, nearly 95 million mobile users had used their device to make a purchase.
In 2011, Google was the first organization to launch a mobile wallet. The wallet required users to use NFC (near field communication) to pay, redeem coupons and earn loyalty points on their purchase. Although only a few phone models could run the wallet and fewer merchants accepted the payment through it, it created many buzzes.
In 2012, Apple launched the Passbook, which you could use for coupons, tickets, and boarding passes. The only thing about Passbook was that it was not meant for mobile payments. Two years later, the company launched Apple Pay in the US and quickly gained popularity in the UK and China. In 2015, Google released Android Pay, and Samsung followed suit with their Pay application.
How does a digital wallet works?
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Digital wallet software is ideally installed on a smartphone, but people can use them on their desktop or tablet, or other such devices. The smartphone application version of a digital wallet is the most widely used one since people can easily carry their phones around.
You can download the digital wallet app on your smartphone and then complete the KYC process by providing legitimate information. Before you give your details, make sure to check whether the third party is trustworthy. Once you have set up your account, you can pay using your digital wallet at a point of sale system that accepts payment from your vendor wallet. Some POS systems even offer Magnetic Secure Transmission technology. While contactless payments might be difficult to spot, most modern POS systems support Magnetic Secure Transmission payments.
Where can you use a digital wallet?
There are different ways to use your wallet, and the three places where you can successfully use them are:
On the go
You can use your digital wallet to pay at any store with a POS system that supports your purse.
Many online shops and eCommerce websites support digital wallets for payments. You can select a digital wallet as a payment mode during the checkout process instead of filling in your card information each time.
You can use your digital wallet app to pay for Uber rides or food delivery payment.
Some banks are now offering contactless cash withdrawals from their ATMs. All you have to do is add your debit card into the digital wallet, select it, and hold your phone above the contactless symbol.
Some advantages of a digital wallet
The biggest and the apparent advantage of a digital wallet is how easy it is to make a payment. Generally, every transaction you make leads to an immediate money transfer. Once they receive the money, the retailer can process your order and dispatch it quickly. As the user has already provided their information in the digital wallet during the onboarding process, they don’t have to give the details. To provide extra security, some digital wallets require biometrics after your standard passwords.
Security in Digital Wallets and Identity Verification
As the number of digital wallet users grows, there is an urgent need to beef-up security on these wallets. Banks and other financial institutes with digital wallet services use KYC to filter customers during the onboarding process. It requires clear-cut ID verification of the customer through the documents they provide. Here, accurate identity verification plays a considerable role in stopping identity theft and other security breaches to the system.
Identity verification is a valuable tool during remote user onboarding for digital wallets. Once you verify your identity, the digital wallet is upgraded with security features like biometric technology to safeguard your data.
At iDenfy, we are developing AI-based ID verification technology for businesses and financial institutions that provide digital wallets and related services. We are successfully working and upgrading our technology so that your digital wallet becomes impervious to fraudulent attacks.
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