E-wallet (payment)

eWallets: Definition, Pros & Cons 

eWallets have become a popular payment method, thanks to the convenience and safety they offer. Learn about eWallets, their benefits, and limitations.

Like the worldwide eCommerce industry, the electronic wallet market developed rapidly during the Covid-19 pandemic. As one of the most popular online payment methods today, it has become increasingly important for eCommerce businesses to offer them as a payment method.

We explain what eWallets are, how they work, the advantages they come with, and the limitations their usage may pose.

What Is an E-Wallet? 

An e-wallet, also known as an electronic wallet, is an online payment tool that usually comes in the form of a mobile application.

It securely stores a person's payment information and passwords, allowing them to make purchases using their device without having to carry their physical cards. Users can enter and store credit card, debit card, or bank account information in the e-wallet, allowing them to pay for their purchases using their device.

How Does an Electronic Wallet Work? 

A digital wallet uses software to connect your payment details from your linked bank account to the vendor where the transaction is happening, using various methods like:

• QR (Quick Response) Codes: These are matrix barcodes that store information. To make a payment, you use your device's camera and the wallet's scanning system.
• Near Field Communication (NFC): NFC is a technology that allows two close devices to connect and transfer information using electromagnetic signals.
• Magnetic Secure Transmission (MST): It is similar to the technology in magnetic card readers, in other words your phone creates an encrypted field for the point of sale to read.

Examples of E-Wallets 

An increasing number of eCommerce players are attempting to develop and introduce their own e-wallet in the market, as done by the Alibaba Group with Alipay. It is a way to differentiate themselves from the competition.

Here are a few more examples of electronic wallets:

• PayPal
• PayPal One Touch
• Walmart Pay
• Dwolla
• Apple Pay
• Google Wallet
• Samsung Pay
• Venmo
• Cash App

Depending on your needs, location, and the type of smartphone you have, there are different apps to suit you. For iPhone users, Apple Pay is a popular option, while Google Pay is popular amongst Android users. Some people prefer PayPal due to its worldwide recognition.

Pros of Electronic Wallets Payments 

• Security: Some digital wallet providers use tokenization to protect credit card details during transactions, preventing hackers from accessing consumers' data. They also use biometrics like fingerprint and facial recognition to secure account information.
• Fast checkout: Digital wallets make checking out faster and easier by skipping long forms or pages.
• No contact: Contactless payments allow consumers to make hassle-free transactions by using touch or Face ID on their phones, eliminating the need to carry or search for physical cards in wallets.
• Personal data: A digital wallet enhances security by limiting exposure to financial and personal information, safeguarding credit cards and identification.

Cons of Electronic Wallets Payments 

• Acceptance: While digital wallets are widely accepted among consumers, not all merchants, particularly small shop owners, support them, necessitating the need for people to carry cash and credit cards for specific transactions.
• Dependences: Digital wallets are device-dependent, limiting access to payments if the device is misplaced, its battery dies or bad internet connection.
• Security risks: While digital wallets provide transaction security, safety and privacy concerns arise, especially if the device is lost or stolen, posing a risk of hacking and potential access to the owner's account and transaction history.

E-Wallet: Key Takeaways 

• E-wallets, also known as electronic wallets, are digital payment tools usually in the form of mobile apps, which securely store payment information, enabling users to make purchases without physical cards by storing credit or bank account details.
• Those mobile apps employ different technologies such as QR codes, NFC, and MST to link user payment details to vendor transactions, offering various secure methods for making payments.
• While e-wallets offer convenience, they also come with security risks and limited merchant acceptance, ultimately leaving the choice between traditional wallets and digital options to the individual.