The Revolutionizing World Of Digital Wallet Payments

Sep 20, 2022 · 7 mins read
The Revolutionizing World Of Digital Wallet Payments
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In today’s fast-paced world, traditional methods of payment like cash are quickly becoming a thing of the past. With the rise of digital wallets and smartphones, the world of payments has been revolutionized. E-wallets have made it possible for us to make quick and convenient payments with just a few taps on our smartphones.

The options available in the market differ in terms of safety, making it essential to choose the right e-wallet that suits your needs. You can get an e-wallet through your bank, which acts as an extension of your regular bank account on your smartphone. Some e-wallets are linked to your mobile plan, making transactions as easy as sending a text message.

For those who need to make payments globally, there are global players like Google Pay or PayPal that offer a wide range of payment options. On the other hand, for those who want to stick to local currencies, there are country-specific e-wallets like Alipay in China or Paytm in India. The basic principle remains the same: e-wallets are for storing money, and you can fund them using your bank account, credit card, or by topping them up in cash.

E-wallets offer the convenience of making payments from anywhere, at any time, with just your smartphone. However, it’s essential to be mindful of any fees that may be associated with using an e-wallet. For example, while sending money to friends may be free, other transactions may not be. PayPal, for instance, charges a 5% fee on international money transfers. To choose the best e-wallet, consider the countries and currencies it supports, how you can add funds, available payment options, and associated costs.

Your Security and Data Protection in Mind

Security and protection of personal data are also important factors to consider when selecting an e-wallet provider. To ensure you choose a secure e-wallet, look for:

  1. Multi-factor authentication
  2. Backup practices
  3. Clear warnings about safe usage practices.

The safety of your money depends on how you handle it. Leaving your wallet out in the open or using a simple password such as “1234” is not recommended. Most serious e-wallet providers encrypt data and store it on secure servers, and it’s a good idea to choose an e-wallet that has been evaluated by at least two IT security companies. However, one risk remains: human error. Passwords must be protected, and e-wallet users are a popular target for phishing attacks, which enable criminals to access others’ digital wallets. This is both the power and the danger of mobile banking. You are essentially your own bank, and if you have poor security practices, lose your phone, or experience some other issue, you will suffer the consequences. Similar to online banking, most e-wallets use two-factor authentication, such as a password and fingerprint, but what about transferring funds?

Some e-wallet providers have rules that are similar to those of a bank, but this is not always the case. E-wallets typically circumvent middlemen and their fees, but if there is no intermediary to handle disputes, there is a risk that you will not be able to recover a charge. There is nobody to charge or send the money back to you, so e-wallets do come with some risks, but doesn’t money always come with risks?

The Trade-Offs between Security and Privacy in Mobile Payments

When comparing mobile payments to other common methods, it depends on the e-wallet and the online payment system being used. Some e-wallet systems are more secure than some online payment systems, and vice versa.

Regarding user data, any electronic transaction leaves a digital footprint. With e-wallets, you must be aware that your data will be used for various purposes. Cash offers a level of anonymity that is not present in digital currencies. Digital transactions create footprints, which many wallet providers also use to gather data about payments. It is a huge industry, and people make a lot of money from it.

However, the benefits of digital currencies outweigh the risks. Private companies have a clear understanding of your spending habits and shopping behavior, as your behavioral patterns are revealed through payment analysis. This might be unsettling for some people, but it’s important to weigh the options. I’d rather have my transactions tracked but be safer than not have them tracked but not be safe. Ultimately, we have to determine what’s most important to us.

Financial Inclusion and the Changing Landscape

In Germany people are huge fans of hard cash, and hardly anyone uses wallets. In other European countries, people are less cash-crazy, and in Scandinavia, more people prefer mobile payment. In many Asian countries, it has long become a part of daily life. China expects over half a billion customers to use e-wallets and it’s no wonder. It’s simpler, less expensive, and quicker than your classic bank.

The World Bank estimates that globally about 1.7 billion people don’t have access to bank accounts. For them, e-wallets can enable access to the financial system. One example is the digital payment system M-Pesa. It started in 2007 in Kenya and is available in other African countries, India, and parts of Eastern Europe. The account is linked to a mobile phone number, and users can pay bills or transfer money by text message. A large network of M-Pesa agents allows for the digital wallet to be topped up.

One of the interesting things about electronic wallets is that in places where the banking system is less developed, you find the highest levels of comfort with using digital wallets. Simply because people will grasp onto any alternative to banking. I think in the next five years, we will see big movements towards global e-wallet capabilities because of players like WeChat and Facebook, among others, with their massive platform reach pushing the sector forward. As they help break down the barriers with governments to get on board and allow cross-jurisdictional use of these kinds of currencies, it will become easier and easier.

Balancing Security and Anonymity in Digital Payments

Facebook’s idea isn’t necessarily new. Cryptocurrencies like Bitcoin have been around for years, encrypting transactions with blockchain technology, making them particularly safe. Cryptocurrencies only exist digitally and are not regulated by any bank. The most well-known ones are Bitcoin, Ethereum, and Ripple.

The term “cryptocurrency” comes from the Greek word “krupto” meaning secret or hidden, pointing towards the cryptographic encryption used for all components of the currency system. This technology is much safer than usual encryptions, as all information from the balance to the transaction is secured in a blockchain, meaning a cryptographically encrypted protocol. This way, user data is stored safely.

Depending on the type of cryptocurrency, some of them are fully anonymous and nobody can see your payment history. This is a much more secure way of maintaining anonymity in payments and could potentially be as secure, or even more secure than cash. But this anonymity only comes with specific cryptocurrencies.

As technology continues to advance, it’s clear that digital wallets will play a larger role in our daily lives. Whether you’re a fan of hard cash or not, it’s important to consider the pros and cons of each payment method. Digital wallets offer a high level of convenience and security, but it’s important to be mindful of the personal information that you may be leaving behind. Ultimately, the choice between traditional payment methods and digital wallets will come down to personal preference and individual circumstances. As technology continues to advance and the industry continues to evolve, it will be interesting to see how people balance the benefits and drawbacks of these two payment methods.

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