A mobile wallet is something getting popular nowadays due to its benefits. It is basically a virtual wallet that serves the same purpose a physical wallet does. It stores valuable information such as debit card numbers, credit card numbers, loyalty card numbers, and coupons on a mobile phone. Mobile wallets facilitate users to make certain payments. But these wallets can only be used in transactions with merchants that provide mobile wallet payment facilities.
In the past few years, we have seen a digitalization trend in every field, especially in business. People are moving towards digitizing most of the steps involved in a business transaction. The adoption of eCommerce on a large scale is not hidden from anyone. Mobile wallet is a part of this transition from click and mortar to click only. A mobile wallet can be used by installing it on a smartphone. Most of the latest smartphones may offer a built-in feature of mobile wallet that can e accessed easily. If your smartphone does not provide this facility, you can easily download its app on your phone. After installing the app, the user needs to enter relevant information to access the app. This information includes payment detail which is then stored by the wallet. It links a personal identification format, a QR code, a number, owner’s image, or a key.
How it works:
For making the payment to the merchant by the user, it takes place through a technology known as NFC (Near Field Communication). This technology communicates through devices using radio frequencies. NFC transmits the payment information of the user to the merchant’s point-of-service terminal (POS). This information is transmitted through the user’s personal identification format. All this process takes place when the user proceeds to make the payment.
One thing that must be kept in mind is that not every smartphone facilitates Near Field Communication technology. Even the iPhones do not provide this service; however, they offer an alternative way too their users to use a mobile wallet. Similarly, PayPal provides a different procedure. It enables its users to make payments using their mobile numbers. The number that the user uses must be linked with his PayPal account to complete the payment successfully. Some other mobile wallets use other features to facilitate payment. For example, LevelUp mobile wallet needs QR code scanning and the defunct Square Wallet that uses the user’s image at the time of checkout. Some other examples of mobile wallets are Samsung Pay, Android Pay, and Apple Pay which are accessible through wearable devices also.
Types of mobile wallets:
There are various types of mobile wallets, such as open wallets, closed wallets, and semi-closed wallets.
Open wallets are used through a third party or directly by a bank. Like a debit card, open wallets allow users to make a payment or withdraw cash from the amount present in their purse. PayPal is an example of an open wallet.
Closed wallets have limited use. It can only be used with specific merchants who are linked to them. It also does not facilitate the withdrawal of cash from funds. Users cannot make payments to other merchants or third-party service providers who are not linked with it. Amazon Pay is a famous example.
Semi-closed wallets enable users to use the funds for transactions with different merchants. These merchants should have a contact build with a mobile wallet company. Withdrawal of funds in a bank account is also allowed, but cash withdrawals are not facilitated.
Advantages of mobile wallet:
- The use of mobile wallets for making payments prevents fraudulent activities like identity theft.
- Smartphones are comparatively challenging to steal than credit cards that are easily duplicated. Even a stolen smartphone is difficult to access if the access requires fingerprint scanning, password, or face scan.
- Mobile wallets are best for users who deal with large numbers and high volumes of transactions daily, such as freelancers offering essay writing service UK or other services, online retail businesses, and others. It not only decreases the payment time but also makes repetitive payments quick. It facilitates both the customers and the company.
- As mentioned earlier that mobile wallets function just like physical wallets; they can store information on almost every card that you usually keep in your pocket. They include social security numbers, driving licenses, loyalty cards, health information cards, train or bus tickets, and hotel key cards.
- One of the most important benefits of mobile wallets is that they are accessible through mobile phones. People usually keep their mobile phones with them everywhere they go; however, they do not carry their wallets around.
- It is more convenient to pay through a mobile wallet than carrying cash or cards for making payments. You have to keep the cards and cash highly secure from thieves, and usually, it happens at impulsive buying that you do not have the exact amount required at that moment.
- Mobile wallets provide high standards of security as the information stored in these wallets is encrypted. This means that it is not accessible by any third party or cybercriminal. Therefore, fraudulent activities are difficult to conduct compared to debit and credit cards that are not that secure.
- The merchant can change or update his personal information and bank details anytime he feels the need to do so.
- It allows cash-less transactions.
- AES encryption is used to protect the passwords and other details stored in the wallet.
- The amount paid to the merchant does not go to his bank account directly. It is first transferred to his wallet and then to his account.
Disadvantages of mobile wallet:
With so many benefits and valuable advantages, mobile wallets also have some downsides that must be eliminated to make them more reliable.
Transactions through a mobile wallet require an active internet connection to operate. That means if you do not have an internet connection somewhere, you can simply not use your digital wallet.
From the merchants’ point of view, it is a disadvantage that payment is not directly transferred to this account. It is instead first moved to his wallet and then the bank account.