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Digital Wallet| Meaning and Definition

A digital wallet is an application or service that runs on software and lets users store, manage, and exchange digital assets like loyalty cards, payment cards, and other virtual currencies. Digital wallets aim to give consumers an easy and safe way to conduct electronic transactions both online and in real-world retail establishments.

It is also called an electronic wallet, enabling individuals to securely store, organize, and conduct electronic transactions across diverse online platforms, including debit and credit cards. It typically diminishes the need for physical payment exchanges while encouraging a greater dependence on online transactions.

What are the features of Digital Wallet?

The key features of Digital wallets include:

Store all payment information: Users no longer need to carry actual credit or debit cards because digital wallets securely store this information and knowledge about other payment options.

Carry-on Transaction: Users can use the payment information they have stored to perform digital payments and transactions. This can apply to contactless payments in real stores, in-app purchases, and purchases made online.

Make use of Security Measures: To protect users’ financial information, digital wallets frequently use a variety of security measures like tokenization, biometric identification (such as fingerprint or facial recognition), and encryption.

Integrate with Mobile Devices: Many digital wallets are smartphone-integrated, making it simple for users to access their wallets through mobile apps. This makes transactions easier when moving.

Support Multiple Currencies: Certain digital wallets allow users to manage their financial assets more easily by supporting a variety of cryptocurrencies in addition to conventional fiat currencies.

What are the types of Digital wallets?

The digital wallets are divided into 3 types based on their functionality and ease of use- Closed, open, and semi-closed wallets.

  1. Closed Wallet: Digital wallets issued by a particular organization are known as closed wallets since they can only be used to deal with approved partners or within that business’s ecosystem.
    A common example of a closed wallet is the mobile app for Starbucks. Customers cannot use the money they load into the app elsewhere, but they can use it to make purchases at Starbucks stores.
  2. Open Wallet: Digital wallets known as “open wallets” can be used for a range of activities both inside and outside the issuing organization’s environment. Several payment methods, such as bank transfers and credit/debit cards, are frequently supported with these wallets. One popular kind of open wallet is PayPal. By connecting their credit cards and bank accounts to PayPal, customers can send money to other PayPal users and make purchases on a variety of websites.
  3. Semi-Closed Wallets: The semi-closed wallets are the ones that come between closed and open wallets. They are issued by organizations and are generally used by listed merchants and locations only. Some examples of semi-closed wallets are Paytm, Phonepay, MobiKwik, etc.

What are the Examples of Digital Wallets?

Some of the commonly used digital wallets are listed below:

  • Apple Pay: Apple Pay is the digital service provided by Apple Inc. Apple devices such as iPhones, iPads, Apple Watch, and Mac computers. Users can add their credit cards, debit cards, and payment methods using their Apple devices.
  • Samsung Wallet: Samsung Wallet is a mobile payment service provided by Samsung smartphones. It is available on select Samsung smartwatches and smartphones.
  • Google Pay: Google Pay is a digital payment service developed by Google. It is available on Android devices which are used to store credit cards, debit cards, and loyalty cards. Users can make payments online, in stores, or within apps using Google Pay.
  • Pay Pal: PayPal, a leader in peer-to-peer money transfers, provides a flexible online platform for e-commerce, personal transfers, and transactions. This makes it an excellent option for a variety of financial activities because users may transmit money securely using linked cards or bank accounts.
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