Digital wallet

Digital wallet payment system

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Saturday, 23 April 2016 - Last Updated on April 29, 2016
Digital wallet
Digital wallet

Digital wallet

Digital wallet, also referred to as mobile money, mobile payment, e-money, or digital money refers to online payment services made using mobile or other electronic devices. It’s a modern alternative payment method that eliminates the need to present the usual cash, check, debit card, or credit card. This mode of payment is increasingly becoming popular and catching up with buyers.

Mobile payment is now widely adopted in different parts of the world. Examples of digital wallet services are Google Wallet, Apple’s Pay, Samsung Pay, Android Pay, Lemon Wallet, Square Wallet, Chase Pay, Isis, Geode by iCache, Chirpify, Venmo, Dwolla, PayPal, Square, Flint Mobile, Breadcrumb Payments, LevelUp, Intuit GoPayment, Spark Pay, iZettle, PayAnywhere, and Innerfence.

In the Philippines, giant telecommunication companies like Smart Communications Inc. (SMART) and Globe Telecom Inc. (Globe) have their respective digital wallet services namely SMART money and GCash.

Types of digital wallet

Today’s technology allows a consumer to use a mobile phone to pay for a wide array of goods and services. Digital wallets may be divided into two types: device-based and Internet-based. A customer can download the digital wallet application and register.

A device-based digital wallet use Near Field Communication (NFC) technology, an “offshoot of radio-frequency identification (RFID) with the exception that NFC is designed for use by devices within close proximity to each other.” It lets a consumer make purchases without physically handing a credit or debit card. A customer simply waves his/her mobile phone or other handheld device near a contactless reader.

An Internet-based digital wallet allows an individual to add credit or debit card information to a personal account or profile. The customer signs in to his/her account then the person can pay for online purchases without entering card details on the shopping site. An Internet-based digital wallet uses an online profile where the person’s card information is stored.

Advantages of digital wallet

Mobile payment services offer a range of benefits for companies, small merchants and customers.

  • A customer can enjoy the ease of cashless payment. One can shop and pay for his/her purchases using his/her mobile phone without the need for cash, credit card or debit card. It is now possible for a customer to eat in a restaurant and pay for his/her meal with his mobile phone. A shopper can buy clothes, books, toys, gadgets, and other things online or a physical store and pay with his/her smart phone or other mobile device.
  • It’s more convenient for a consumer to use his/her phone to pay for a certain product or service than to fumble through his/her bag or wallet to get a credit card, debit card, discount card, or loyalty card.
  • With digital wallet, you don’t have to carry numerous plastic cards (credit cards, debit cards, loyalty cards and discount cards). You can use a digital wallet with a simple tap or scan of your mobile device.
  • This payment option speeds up the checkout process for a customer because the person can complete the payment transaction within a few minutes. It eliminates the need to physically carry your credit card or debit card and swipe it at the counter. Mobile payment also lessens queues at the cashier compared to traditional and credit or debit card payment systems.
  • Sometimes a buyer can put off buying a product or availing a service because he/she doesn’t have enough cash with him/her. Many small businesses rely on cash transactions only. Mobile payment services can capture the interest of impulse buyers who like to shop at the spur of the moment. Businesses can use this payment system to draw in buyers who feel the need to satisfy a sense of instant gratification.
  • It can help a consumer maintain a budget. A digital wallet can track a consumer’s expenditure and prevent him/her from overspending.
  • Businesses can use mobile payment processing to merge loyalty and incentive programs into itself. Each time a customer makes a purchase and payment using his/her mobile phone or other wireless gadget, the information is automatically stored in the application/software. It makes it easy for the person to keep track of his/her purchases, reward points, etc. This ease of this kind of payment option enhances customer experience and encourages the person to make repeat purchases. It helps enhance sales and boost revenue.
  • The efficiency of digital wallet services enables a business to serve more clients especially during peak hours.
  • This online payment option can help a business increase its customer base. It allows an organization to make their products and/or services more accessible to clients in different parts of the globe. A business can reach more clients, even international customers.
  • Some digital wallet services offer lower fees and transaction charges compared to credit card companies.
  • Mobile payment service is a good way for a small business to track product inventory and services that it offers and understand customer behavior. The organization can use the information to increase sales and improve customer service. For instance, a small restaurant can use mobile payment data to determine best seller meals during weekdays and weekends. The information can be useful in adjusting stocks and ingredients according to demand patterns.
  • Some digital wallets offer other features like money transfer. It allows an individual to send money with their mobile phone or other mobile device. It may also be possible to pay bills using your digital money.

Disadvantages of digital wallets

  • Your choice of digital wallet may not be accepted in all countries. International restrictions may become an issue when making a purchase especially for those who frequently travel to different countries.
  • Although mobile payment services have become popular, there are merchants that do not support this kind of digital payment option.
  • Mobile payment system is dependent on your mobile or handheld gadget and Internet connection. You cannot complete your transaction when your mobile or handheld gadget has battery problem, poor signal or no Internet access.
  • Another person can use your digital wallet if your mobile device gets lost or stolen especially if it is unsecured. If there is a password, it is possible for someone to crack it. To protect your finances safe, it is best to choose a digital wallet that offers extra security features. You can prevent unauthorized access by taking care of your mobile device.


Photos from Pixabay. Public domain.
Rachel Yapchiongco, also known as Rach to her friends, is a Psychology and Marketing Management graduate of De La Salle University. Rachel is a mom to a charming boy and married to an entrepreneur who has a passion for cooking. She shares parenting experiences and slices of everyday life on her personal blog called Heart of Rachel.

Ma. Rachel Yapchiongco (389 Posts)

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