Digital payments have evolved enormously in recent years, to the point where tech-savvy consumers are now wondering what the future of this technology is. With over 3 billion smartphone users around the world, the concept of digital wallets sped up once the pandemic took over. Consumers found comfort in using such a tool and avoiding physical cash as much as possible.
Today, developers are working on innovative apps for a wallet of the future: one that could hold all our digital assets in one place. However, there are as many benefits as there are disadvantages in using a digital wallet. What are they? Read the article to find out.
What is a digital wallet?
A digital wallet is a device that eliminates the need to carry a physical wallet, storing payment information securely and compactly. Also called an e-wallet, it may save ID documents, such as driver’s license, health information, and loyalty cards.
Nowadays, this technology is evolving towards a more organized approach to tracking, trading, converting, and cashing in. Experts say the centralized digital wallet is a necessity in the future, being a tool used not only for financial transactions but also to authenticate the holder’s credentials. It could verify the age of the buyer, for example, in a store while purchasing alcohol.
Benefits of a digital wallet
Enhanced security
An e-wallet provides security and encryption for personal info and transactions, as it typically doesn’t pass payment card details to websites. So, the payment information is secure online during a purchase, as a unique transaction number or token is generated for future reference.
In the era of cybersecurity risks, enhanced security controls are priceless. Fortunately, two-factor authentication is viewed as the best method for securing your digital wallet.
Improved comfort and time-saving
An e-wallet is easily self-maintained and compatible with most e-commerce websites. According to recent studies, 25% of online customers drop their order to avoid filling in (more) forms, which are time-consuming.
The digital wallet overcomes this issue by enabling users to transfer their information securely and accurately. It offers a simplified and fast approach to making purchases, with improved usability.
Special rewards
One of the benefits of e-wallets is the possibility to increase customer engagement and loyalty. As such, first-time customers will have an enhanced user experience and receive a reward, boosting their chances to return for a second purchase. Regular customers can sign up for loyalty schemes and receive substantial discounts.
Customer data improves tailoring and segmenting marketing offers, a benefit for both the brands and the clients.
Lower costs
E-wallets are available free of charge and easy to obtain. They also come with perks by reducing transaction fees.
A few disadvantages
Resistance to change and international restrictions
Using a digital wallet is a big stretch from a well-known and safe payment method, which might slow down its adoption. Habits may be hard to change, especially for people who consider using cash as an easier way to control spending.
Moreover, not all businesses and online merchants accept all digital wallet payments. And when traveling to different countries, there could be some restrictions.
Concerns about privacy and security
Digital wallets bring several benefits to companies collecting consumer data, so this could mean the loss of privacy for clients.
The security of a smartphone is dependent on its settings, so if a mobile device lacks protection, the e-wallet is exposed to cyberattacks. This new technology requires responsible management.
Possible hassle in budgeting
It’s no surprise that many people struggle with spending habits. We don’t always have budgeting skills. Although digital wallets are designed to offer seamless transactions, one could end up spending more.
The good news is that some tools incorporate budgeting features and spending alerts.
Dependent on the devices
An e-wallet requires the customer to carry a mobile device (laptop, smartphone, tablet). This makes it highly dependent on other devices. If you’re unable to use your smartphone due to a battery problem, it could be inconvenient.
Conclusion
As we are moving towards a cashless society by making the largest part of our purchases online, e-wallets are becoming essential tools. So, a great way to start adopting the technology is by knowing its benefits and disadvantages and getting to understand better the future of digital payments.
