At the end of 2020, nearly 3 billion digital wallets were used worldwide.
Despite the ever-increasing number of people using digital wallets, not many people know about the details of this easy-to-use payment tool. Nor are they aware of the several benefits that come with digital wallet transactions.
Keep reading to find out more.
What is a digital wallet?
A digital wallet is exactly what it sounds like it should be – an electronic version of your wallet and payment methods. They’re also aptly called e-wallets.
Whether it’s an app or an online service, digital wallets store payment information and passwords. But they don’t only hold credit cards or debit cards.
Depending on where you are in the world, your digital wallet can also store ID cards, driver’s licenses, and even digital car keys. You can also save digital tickets from airlines or events, along with hotel reservations and e-vouchers.
The biggest benefit of having a digital wallet is that you’ll have far less to carry. You’ll also never need a physical card again. And chances are, you’ll never forget anything, as everything is often available on your smartphone.
How do digital wallets work?
The majority of digital wallets come through apps that work on most smart devices, like phones and watches. These apps can then use the devices’ Bluetooth, Wi-Fi, or Magnetic Signals to communicate with any point-of-sale system.
There are different types of digital wallet technology, however, all of them make transactions convenient and easy. These technologies include Quick Response (QR) codes, Near Field Communication (NFC), or Magnetic Secure Transmission (MST).
What are the different types of digital wallets?
There are three types of digital wallets: closed, semi-closed, and open.
As the name suggests, closed wallets are company or app specific. This means that you’ll only be able to use the wallet when purchasing things from the issuer of the wallet. AmazonPay is a good example of this.
Semi-closed wallets work slightly differently. With these kinds of digital wallets, you’ll be able to make transactions from approved merchants or in certain locations. Despite these wallets being location specific, if these merchants have online stores, you’ll still be able to use your digital wallet.
An open wallet is one often issued by banks. Some institutions or companies can even partner with banks to issue open wallets. These wallets can be used at any store, to purchase any goods or services. You can also withdraw cash or transfer funds with open wallets. Apple Pay and Google Pay are popular open wallets.
Available digital wallets
There are several digital wallets to choose from. Whichever you choose will be based on a variety of factors, like your location and even the kind of smartphone you have. Below are some of the most popular digital wallets.
As with most Apple products, Apple Pay is exclusive to those within the Apple ecosystem. The app is built into iPhones, Apple Watches, and iPads. Because Apple Pay is an open digital wallet, you’ll be able to use it in any store. It’s also a perfect tool for online payments.
Like all digital wallets, Apple Pay is extremely secure. To make any payments, you’ll need to verify yourself using FaceID or TouchID.
Google Pay is another very popular digital wallet and one where you don’t need a specific smartphone. All you need is the GooglePay App to load all your cards’ details. Like Apple Pay, you can use Google Pay at any store and online.
It’s also extremely secure, requiring some form of verification before making any transactions.
Samsung Pay is exclusive to Samsung phones. It works with NFC technology, making it easy to use anywhere. Previous versions of Samsung Pay used both MST and NFC technology, but in 2021, Samsung began phasing the former out.
Despite this, Samsung Pay is just as convenient and safe as all other digital wallets.
Venmo’s use is slightly different from other digital wallets. It’s described as a "cash-free way of sending and receiving money." Many use it to split bills or send money seamlessly to whomever you like. This digital wallet has become so popular that it’s resulted in a fun colloquial term, "You can just Venmo me." For the Dutchies, this is the equivalent of “You can just Tikkie me”. But we prefer “bunq.me”.
Venmo’s functionality extends further than that. You can create a virtual Mastercard, which allows you to make purchases anywhere that accepts Mastercard. The app also allows you to buy and sell cryptocurrency within it, and quite a bit more.
Right now, it’s only available in the United States.
CashApp works just like Venmo. You can set up a digital virtual card, request and receive payments, and set up direct deposits. CashApp also allows you to invest in stocks and crypto coins.
This digital wallet is only available in the US and the United Kingdom currently.
As mentioned, Amazon Pay is a closed digital wallet. You’ll only be allowed to use Amazon Pay on Amazon.com, so you don’t get some of the digital wallet benefits that come with other types of e-wallets.
There are some unique features with Amazon Pay, though. Because the wallet is linked to your Amazon account, you can make payments with your voice using Alexa. Oftentimes, there are special offers on products that are only available to Amazon Pay customers, bringing you ease of use and savings.
What are crypto wallets?
With crypto growing in popularity, you’ve probably wondered about crypto wallets. While they may seem similar to digital wallets, except for cryptocurrency, they’re quite different.
Crypto wallets don’t store or hold currencies, they simply store your cryptocurrency passwords. This essentially just gives you the ability to access and manage all your crypto in one secure place.
Benefits of digital wallets
There are several benefits to going cardless and using a digital wallet:
- Secure and safe
- Reduces fraud
- Easy, streamlined, and convenient
Digital wallets: a complete guide
Using a digital wallet is easy. Setting one up too. The difficult part is choosing the right one for your needs.
So, when looking around, consider bunq – a banking app that offers a digital wallet and full control over your money, right on your smartphone. Compare our plans today and join the digital world of banking.