A brief history of e-wallet

29th November 2022

Digital wallet features have come a long way since its inception. Many people aren’t aware that the popular innovation has quite a rich history filled with various developments, caveats, and various improvements over time.

Nowadays, a user can hold funds for upcoming online transactions in an e-wallet, as a kind of pre-paid account. A password is required to access an e-wallet, which leads to tighter security. Paying for groceries, internet purchases, and plane tickets, among other things, can also be accomplished with the use of an e-wallet.

However, the journey to this form of optimised efficiency was not easy or straight forward. To give you an idea of just how extensive the developmental process was, here’s a brief breakdown of the notable highlights throughout the history of the digital wallet.

Digital payments in the 90s

Sting's "Ten Summoner’s Talesis" CD (1994)

Prior to accepting credit card payments, the majority of payments made through online marketplaces were made by sending cheques or through other direct transactions between the buyer and seller without the involvement of a payment processor.

For both parties, this was a very time-consuming process that involved frequent email correspondence. The payment procedure could take up to 10 days to complete, not to mention the obvious security risks associated with disclosing consumer payment information.

In 1994, the first secure online transaction was completed. A studio album entitled ‘A Ten Summoner's Tales’ by Sting in CD format was purchased from the internet store, NetMarket. This was the first online transaction using encryption software to ensure that clients' personal data was private. In 1995, the payment technique paved the way for impending online marketplace purchases on sites like Amazon and eBay.

Initial online payment systems weren't at all user-friendly and required in-depth understanding of data transfer protocols or encryption.

Only PayPal (initially named Confinity) made low cost, simple digital payments possible in 1999. The founders' concept was straightforward and effective: get clients to provide their email addresses, banking, and credit card numbers in exchange for quick and inexpensive payments.

Coca-Cola (1997, Helsinki)

The world's first digital payment system is ascribed to Coca-Cola for introducing numerous vending machines in Helsinki in 1997. Customers could pay for their soft drinks via text message on their mobile phones thanks to digital payment processing technology developed by the multinational soft drink company.

PayPal (1999)

In reality, when technology entrepreneurs Max Levchin and Peter Thiel launched PayPal in 1998, it wasn't even given that name (the company’s original name was Confinity).

As the internet tightened its grip on customers worldwide, the corporation cleverly targeted an underdeveloped market: banking and payments.

The founders' concept was straightforward and effective: in exchange for quick, inexpensive payments, they persuaded customers to provide their email addresses, banking, and credit card information.

Within three years of becoming operational, the company handled more than $3 billion in payments from 10.2 million individual consumers and 2.6 million business clients. Small businesses, internet retailers, and consumers all rapidly signed up.

After deciding to concentrate solely on payments made over the rapidly developing internet, the founders of the company changed the name of their business to PayPal within two years. As no one was truly concentrating on a digital payment platform between customers and businesses at the beginning of the new century, Thiel and Levchin had skillfully exploited an opening in the payments sector.

Digital payments in the 00s

Alipay (2003, China)

Taobao was introduced as an online shopping platform in 2003 by Alipay. In June 2010, the People's Bank of China, China's central bank, released licensing guidelines for third-party payment providers.

Additionally, it released distinct requirements for payment institutions with foreign funding. In order to expedite the regulatory clearance for the license, Alipay, which made up half of China's non-bank online payment business, was reorganised as a domestic company under the management of Alibaba CEO, Jack Ma.

The 2011 media allegations that Yahoo! and Softbank (the main shareholders of Alibaba Group) had not been informed of the sale for nominal value following the 2010 transfer of ownership of Alipay, raised questions about the controversial transaction. Chinese business publication Century Weekly criticised Ma for saying that the purchase was known to the board of directors of Alibaba Group.

Foreign and Chinese media outlets criticised the episode for the confidence of foreign investors’ from investing in China. Alibaba Group, Yahoo!, and Softbank reached an ownership agreement in July 2011.

M-PESA (2007, Kenya)

Safaricom, the top mobile phone provider in Kenya, introduced M-Pesa, a mobile money service in March 2007. (Safaricom is a part of the Vodafone Group in the UK, which controls 40% of the business.) M-Pesa was initially created by Vodafone, and the UK's Department for International Development (DFID) helped pay a portion of the project's six-month pilot phase.

By utilising cell phones, users can deposit, transmit, and withdraw money using the SMS-based M-Pesa system. Customers can conduct business at any of the 40,000 agent stores across the nation without having a bank account.

In order to make the system accessible to users of all income levels, registration and deposits are free, and pricing for the majority of other transactions is based on a tiered structure. Transaction values typically range between US$5 and US$30.

Bitcoin (2008-2009)

Here’s something interesting about Bitcoin that you might not have known about.

In order to guarantee that the original 50 Bitcoins would always be present in the system, Satoshi Nakamoto produced them in January 2009 using blockchain technology. Thus, these 50 Bitcoins are useless and will never be used.

Hal Finney, a computer scientist and early adopter of Bitcoin who was also the first to tweet about it, received 10 Bitcoins from Satoshi Nakamoto in the first P2P Bitcoin transaction ever.

After people got involved and began to trade, the process for exchanging Bitcoins officially started. By the end of 2010, the value of a Bitcoin had increased from US$0 to $0.83.

Digital payments in the 10s

Google wallet (2011)

The public can now access Google Wallet, a mobile payment platform, through an application that can be downloaded from a United States mobile phone network.

With phones equipped with a special Near Field Communications (NFC) chip that can be touched against readers at cash registers in stores to facilitate purchases, Google Wallet is striving to displace credit cards. The company's mobile payment system using the same name, ‘Google Wallet,’ was first released in 2011 and then integrated with Android Pay to create a new app named Google Pay in 2018.

The Google Pay app had a significant revamp in 2020 that was based on Google's India-focused Tez app, becoming a comprehensive personal finance platform. While this took the role of the Tez app on Play Store, Android smartphones still came with the 2018 Google Pay app pre-installed as a separate app.

WeChat Pay (2013)

The mobile wallet within the Chinese social messaging app WeChat was launched with great success in 2013. WeChat Pay has taken advantage of China's custom of giving red packets filled with cash for a clever marketing promotional campaign. Around 16 million red packets were shared on Chinese New Year's Eve in 2014 after the mobile app introduced its own virtual red packet, which enables users to transfer up to US$29 to other WeChat acquaintances.

Sending red packets and sending money to other WeChat acquaintances are still common uses for WeChat Pay these days. Penguin Intelligence, a division of Tencent, found that 87.8% of users questioned in January indicated they sent red packets using WeChat Pay, with peer-to-peer payments coming in second at 63 percent.

Apple Pay (2014)

In 2014, Apple Inc. unveiled Apple Pay, a mobile phone payment system and digital wallet service. Customers can utilise near-field communication (NFC) to pay for goods and services at the point of sale, whether in person using iOS apps or remotely over the Internet.

Apple Pay is marketed as an alternative to credit and debit cards, including chip and PIN cards and the more conventional magnetic stripe cards. Apple Pay is presently supported by the majority of popular credit and debit cards.

Digital payments in the 20s

Digital wallets are anticipated to overtake physical wallets as the second most popular payment method by 2025.

We are now seeing the rise of digital wallets in their most advanced form yet, with various features, intricacies, and enhancements that correlate with this expensive digital era. The potential for future progress is vast, as with many of the Web 3.0 developments underway. Time will tell how many more developments will be added to the concept of the digital wallet which has been an integral part to our way of life.

EVOLET is a digital wallet app for migrant workers.

Learn more at https://evolet.io/