The increasing usage of e-wallets

15th September 2022

An e-wallet is a form of pre-paid account in which a user can save money for future online purchases. After you choose and proceed to do an e-wallet download, a password is used to secure the e-wallet.

Payments for groceries, internet purchases, and aeroplane tickets, among other things, can all be made with the use of an e-wallet. Software and information make up the majority of an e-wallet’s metadata.

Personal data is stored in the software component, which also ensures data security and encryption. The information component is a database with the user's information, such as their name, shipping address, payment method, payment amount, credit or debit card information, and so on.

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To create an e-wallet account, the user must first download the software to his or her device and then fill out the necessary information. The e-wallet fills in the user's information on the payment form automatically when they shop online. The user must first input his password to activate the e-wallet. The consumer does not need to fill out an order form on another website after making an online payment because the information is saved in the database and updated immediately.

The History Of E-Wallets

Coca-Cola introduced a few vending machines in Helsinki in 1997 that allowed customers to purchase a can via text messages. Even though it is not at all like modern-day e-wallet transactions, this is considered to be the origin.

Mobile devices were soon being used to buy movie and airline tickets, as well as make hotel reservations and food purchases. By the year 2003, around 95 million cell phone users had completed a transaction. Google was the first major firm to introduce a mobile wallet in 2011. NFC (near field communications) technology allows consumers to pay, accumulate loyalty points, and receive discounts. It was a big hit, even though it was only accessible on one phone type and only accepted by a few retailers.

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In 2012, Apple announced Passbook, which could be used to store boarding passes, tickets, and coupons but not mobile payments. Apple Pay was announced two years later. It all started in the US and quickly spread to the UK and China. In 2015, Google released Android and Samsung Pay.

Since then, digital wallets like GrabPay, Lazada Wallet, PayPal, Touch n Go, vcash, and others have contributed to the widespread adoption of this payment mechanism. In 2019, over 2.1 billion people would use a mobile wallet to make a payment or send money, according to a Juniper Research estimate.

Did The Pandemic Push The Growth Of e-wallet Usage?

E-wallet transactions increased to an average of 25% post-Covid-19, according to Google's e-Conomy South-East Asia 2020 report, indicating that customers will continue to embrace digital payments due to their convenience.

Malaysians made an average of 170 digital payments in 2020, according to a survey by Boku Inc, and e-wallets are the most used payment method in Southeast Asia. The epidemic and the implementation of Movement Control Orders have spurred e-wallet use as customers' changing buying and paying habits have pushed them toward cashless transactions. The e-wallet is safe, thanks to advanced security features including biometric authentication, which can help prevent fraud and chargebacks.

Purchases via the e-wallet also require fewer steps. Businesses can also provide extra rewards on the e-wallet, while users receive discounts or reward points.

Purchases, bill payments, food delivery, road tax renewal, insurance purchases, mobile reloads, and other transactions have all become easier with the use of an e-wallet. Touch 'n Go e-wallet users can simply track their spending as the e-wallet digitally and automatically logs all transactions.

E-wallet adoption was aided by partnerships and cooperation. Malaysians were already used to internet shopping at the time, so the addition of an e-wallet as a payment option made it a more convenient option for them.

E-Wallet User Demographic

Young folks (25-34 years old) are the most common e-wallet users in Malaysia since they are the most comfortable with digital technologies. A higher rate of e-wallet usage is associated with monetary factors such as being in the PMEB and upper M40-T20 groups.

Notably, the KL/PJ region has the largest e-wallet usage, which may be attributed to a higher number of COVID-19 instances there, prompting consumers to go cashless and boost their online purchases. The most significant change is that the average age of e-wallet users has risen slightly from 33 in 2020 to 35 in 2021. This is a major indicator that Malaysian e-wallet usage is becoming more popular and that the e-wallet landscape has matured, as evidenced by the rising number of senior users, who are often the last to adopt new technologies, waiting until they become commonplace.

Where do people use e-wallets the most?

While waiting in line to pay for drinks at a coffee shop recently, it was observed 80% of people paid by waving their bank cards, while others scanned a QR code that deducted money from their e-wallet with their mobile phones.

Even for little purchases, people don't use cash anymore. This has long been the standard in more advanced areas of the world, such as Silicon Valley in the United States, where consumers frequently use Apple Pay and Google Pay to conduct business.

Small enterprises and roadside stalls will be more likely to accept electronic wallets if the

DuitNow QR, the national QR standard, is currently working on a project. Customers who use bank apps and major e-wallets can pay merchants with QR codes. One of the goals is to promote the usage of e-wallets and bank apps that can be accessed with a single QR code.

Consumers must scan a QR code with a mobile app to make a purchase, whereas businesses can take payments from any client, bank, or major e-wallet providers by simply displaying one QR code on the payment counter . For small businesses, another important aspect of DuitNow QR is the option to get money credited to their account right away. To make a payment, the consumer simply needs to launch a banking or e-wallet app, scan the QR code, confirm the amount, and complete the transaction.

To demonstrate how this works, a pilot project was launched in Pasar Payang, Kuala Terengganu, with roughly 60% of the traders on board. It's suitable for usage by a makcik that sells banana fritters. The Terengganu government, PayNet, Touch 'n Go, Maybank, Bank Muamalat, and Bank Negara are all working together on the initiative.

This demonstrates that e-wallets can work in a traditional market as well. More awareness and maybe incentives from service providers are needed now to attract a wider range of customers, not only the young and tech-savvy.

What Is The Future Of E-Wallets?

1. More Reliance On The Cloud
The cloud is essential to all aspects of digitalisation. Even in e-wallet apps where late payments might cause issues for consumers, companies are likely to integrate more of their digital wallets with the cloud . One of the most important problems with internet transactions is late payments. This can be mitigated by utilising a network of distant servers.

2. NFC (Near Field Communication) Based Payment To Gain Momentum
There’s been an uptick in transactions where you can pay with your card merely by tapping it in recent years. NFC is at the heart of this technology, which is set to explode in popularity over the next few years. Because NFC transmits encrypted data quickly to the POS device, it is considered superior to traditional PIN technology. NFC-enabled contactless cards are expected to account for 36% of all payments by 2027, according to UK Finance.

3. Voice-Activated Payments Are On The Rise
As the need for convenience develops, voice-based technology such as virtual assistants has become commonplace for many consumers in developed and developing countries. More apps may be integrated with the phone's speech AI or may include voice payment functionality.

As a result of this innovation, the customer experience has been elevated to levels never before seen. Many people all around the world have become accustomed to and rely on these devices to carry out their daily tasks. According to a poll, by 2021, the number of individuals using digital assistants will reach 1.8 billion.

4. Biometric Authentication Will Become More Common
As the use of digital payments has grown, so has the level of safety and security associated with them. Biometric-based verification may become more common in digital payments this year as a result of the risk of fraud and theft.

Biometric technology substitutes passwords with procedures that are unique to each user, such as fingerprint scanning, facial recognition, and heartbeat analysis. Around 2.5 million biometric payment cards are projected to be issued this year, according to Biometric, which means it is likely that the number of users will considerably increase. Transactions are safer and more efficient as a result of the increase.

5. Growth In QR codes
We do a great number of online transactions every day, and giving up your phone number to strangers can be distressing. QR codes aim to make scanning and making payments as simple as possible while also reducing the chances of human error while entering a number. QR code payments have surpassed NFC payments as a great way to make contactless purchases in-store.

It does not necessitate the construction of any additional infrastructure. It's also backed up by the promos and deals that payment service companies regularly give. QR codes have the potential to be a great payment and response mechanism for mobile users, with over 12 million users every week. It also has numerous applications for retailers and service providers.

6. Artificial Intelligence & Machine Learning Come To The Rescue
The creation of AI-powered e-wallets that automate routine transactions will make our day-to-day payment operations easier. The use of artificial intelligence (AI) and machine learning in digital wallets will help to prevent cybercrime and theft.

Not only that, but these technologies will help detect software threats. Fraud detection with Artificial Intelligence and Machine Learning is achievable because of the power of Machine Learning algorithms. These tools let firms follow the history of any transaction, learn from fraud patterns, and identify fraud tendencies early enough to avoid future payments. ML Algorithms outperform humans when it comes to processing information.

7. Cryptocurrency Digital Wallet
It has been determined that there are over 40 million wallets devoted to bitcoin transactions. We believe that this number will soon climb. In addition, the number of people who utilise these cutting-edge bitcoin wallets is rapidly growing. Small and medium enterprises, as well as entrepreneurs, have started to embrace the bitcoin movement.

Third parties are no longer required in digital transactions thanks to blockchain technology and cryptocurrency. In addition, low-cost, secure transactions benefit the user the most. As a result, several businesses have expressed interest in using bitcoin wallets.

8. Loyalty Programs
One of the most effective ways to achieve success in your company is to implement a client retention rewards programme. As a result of this mobile-driven, digital loyalty programme, your customers will be able to use digital wallets to get rewards, discounts, and offers.

9. Effects Of Hyperconnectivity & 5G On Digital Payments
Many companies have begun to make use of new technology. The speed at which transactions can be performed from any place will also be affected by digital payment systems. In addition, future transaction patterns will include IoT-based mobile payments. Several payment alternatives will be available, all of which will be compatible with the connected devices.

It’s clear to see that digital wallets have added significant advantages to the current landscape in many ways, and the future of this technology points to the expanding adoption as well as the growth of appeal across the world for digital wallets. More people are beginning to see its efficiency for payments, financial management and organisational implications moving forward.

EVOLET is a digital wallet app for migrant workers.

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