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How do digital wallets work?

In the recent, technology has been advanced and new online payments methods have been introduced The availability of cheap and convenient payments methods such as Electronic Visa and smartcards, mobile wallets among others, pose a worry of losing your wallet. Unlike the traditional wallets where you must possess the cards physically, the e-wallets hold them electronically. Digital wallets have a complex system which stores passwords and payment information for online check-outs. The digital wallets provide extra security features e.g. strong passwords, to secure all your credentials safely.

In addition, the digital wallets are the most convenient payment modes. They are easily assessed on the Internet and using secure application. Handling a physical wallet may be hectic and risky. One is predisposed to losing his cards. E-wallets are a solution for the above problems. Examples of digital wallets are the Google wallet and the Apple’s Passbook.

Digital-wallet

Types of Digital Wallets :

  1. Open Digital Wallets – These kinds of e-wallets include the electronic debit and credit cards. The open wallets allow the users to purchase goods, transfer funds and also transact. Additionally, they are flexible. They don’t require a specific application from the provider. They allow for cash withdrawal.
  2. Semi-Closed Digital Wallets-These kinds of digital wallets allow one to transact and purchase goods and services from both the defined and pre-defined vendors. They are easily accessible all around the globe, unlike the closed wallets. They don’t allow for cash withdrawal.
  3. Closed Digital Wallets- These kinds of digital wallets are provided by companies for specific vendors. They have specific applications for managing transactions.

How Do Digital Wallets Work?

Using the e-wallets is simple and efficient-one does not need a special training for him/her to know how to use the digital wallets. The core purpose of the digital wallets is to store payment information and for transactions. The e-wallet system works in either of the two ways below.

A bank can issue a digital wallet as the first party and not as a third party or

A third party application can provide storage space for your payment information and electronic cash.

The digital wallets issued by banks are more secure and personal details (payment and banking information) are never compromised. The examples of third-party applications used as e- wallets include: paytm and free charge. The third-party applications store money electronically and allow the user to purchase at his/ her convenient time. Do you think theft will stop if each state runs in a cashless economy? The e- wallets such as MPESA, Oxigen, Chillr and Freecharge are a great deal!

Uses of the Digital Wallets :

  • Shopping for goods and services- the e-wallets are used to purchase various goods and services electronically.
  • Performing financial transaction- you can use the digital wallets to send money.
  • Paying utility bills.

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