What is a Digital Wallet?
Digital wallets are online payment tools, usually in the form of an app. A digital wallet, also known as an e-wallet, is an electronic device, online service, or software program that allows one party to make electronic transactions with another party bartering digital currency units for goods and services.
This can include purchasing items online with a computer or using a smartphone to purchase something at a store. Money can be deposited in the digital wallet prior to any transactions or, in other cases, an individual’s bank account can be linked to the digital wallet. The usage areas of digital wallets have increased rapidly in recent years. Users might also have their driver’s license, health card, loyalty card(s) and other ID documents stored within the wallet. The credentials can be passed to a merchant’s terminal wirelessly via near field communication (NFC).
Besides digital wallets are being made not just for basic financial transactions but to also authenticate the holder’s credentials. For example, a digital wallet could verify the age of the buyer to the store while purchasing alcohol. The system has already gained popularity in Japan, where digital wallets are known as “wallet mobiles”. A cryptocurrency wallet is a digital wallet where private keys are stored for cryptocurrencies like bitcoin.
How does a Digital Wallet Work?
The digital wallet uses application software to link your payment details from your linked bank account to the merchant with whom the transaction was made. Different apps allow different access; open wallets (accepted at most retailers) authorize online purchases, contactless in-store payments and cashback, and may even authorize withdrawals at certain ATMs. Semi-closed and closed wallets allow certain transactions with a specific group of retailers or only the retailer that issued the wallet.
Digital Wallets and Security
Consumers are not required to fill out order forms on each site when they purchase an item because the information has already been stored. It is automatically updated and entered into the order fields across merchant sites when using a digital wallet. Consumers also benefit when using digital wallets because their information is encrypted or protected by the software code. Merchants benefit by receiving a combination of protection against fraud, faster receipt of payment, decreased transaction costs and decreased theft loss.
Digital wallets are available to consumers free of charge, and they’re easy to obtain. For example, when a consumer purchases a merchant site that’s set up to handle server-side digital wallets, they type their name, payment and shipping information into the merchant’s form. At the end of the purchase, the consumer is asked to sign up for a wallet of their choice by entering a user name and password for future purchases. Users can also acquire wallets at a wallet vendor’s site.
Although a wallet is free for consumers, vendors charge merchants for wallets. Some wallet vendors arrange for merchants to pay them a percentage of every successful purchase directed through their wallets. In other cases, digital wallet vendors process the transactions between cardholders and participating merchants and charge merchants a flat fee.
Advantages for e-commerce sites
Upwards of 25% of online shoppers abandon their orders due to frustration in filling in forms. The digital wallet combats this problem by giving users the option to transfer their information securely and accurately. This simplified approach to completing transactions results in better usability and ultimately more utility for the customer.
Digital Wallets can also increase the security of the transaction since the wallet typically does not pass payment card details to the website (a unique transaction identifier or token is shared instead). Increasingly this approach is a feature of online payment gateways, especially if the payment gateway offers a “hosted payment page” integration approach.
Melasoft Digital Wallet Solution
Melasoft GmbH, which has made a name for itself with its global SAP Compliance and transformation solutions, has added a new one to its Fintech solutions: Melasoft Digital Wallet Solution. With the Melasoft Digital Wallet Solution, your personal information is protected by our encryption software while you shop securely and quickly on e-commerce sites.