WHY DIGITAL WALLETS ARE A VITAL PART OF DIGITAL TRANSFORMATION

15th January 2021

Technology is transforming how we work. A shift in how we shop for goods and services and deal financially with each other is one of the most obvious outcomes. It has increasingly evolved from cash and cheque into real-time transactions, contactless payments, and app-based banking.

Mobile wallets, better known as e-wallets in Malaysia, are undeniably the latest advancement in payments, and they emerge in the sense of what is widely known as the smartphone revolution. The ubiquity of smartphones and other mobile devices means that an unprecedented amount of computing power is readily available to customers at their fingertips.

What are digital wallets?

A digital wallet is a form of multiple online payment options that securely stores the payment details and passwords of users. They use their digital wallets to make payments via phone. Digital wallets may be used on the user's phone, personal computers, or even in-store.

Digital wallet means that the user now simply uses their phones to pay for products and services. They can also be used to store loyalty cards and digital coupons as they are easily integrated into mobile payment systems. In the past few years, several major financial institutions have also encouraged the use of digital wallets.

Transforming conventional banking.

For several organizations that need to speed up their digital agendas in a short time frame, acquisitions of high-potential technology payment companies including alliances and joint ventures have been at the forefront. The aftermath of the current pandemic might accelerate this even more.

Banks have woken up to the reality that it is not only good to have, but a must-have, to build online payment products and services. They might have some digital infrastructure, but the structures of conventional banks are usually not straightforward enough and do not keep pace with the demands of the market. The right collaborations might be what makes or breaks these institutions.

Empowering the unbanked with financial accessibility

Financial accessibility is yet another great advantage to add to the ensemble of improvements that digital wallets have introduced to the current banking infrastructure - particularly in remittances. Innovative solutions are now developed to ensure more people have access to financial services in a highly connected world. A good example of this is with EVOLET's e-wallet capabilities, which focus on providing secure salary management for employers with migrant workers. This grants migrant workers and lower-income groups better financial accessibility, by providing a way for them to receive money, build their savings, and transfer their cash more freely. In the past, these groups were severely underserved in terms of financial services. Ever since EVOLET was founded in 2020, its objective has been to improve financial accessibility for the unbanked and improve their lives with the help of technology.

E-wallet innovation is growing rapidly

Digital payments in Malaysia have expanded over the last five years. Global spending on mobile wallets rose by over 30% in 2017 to $1.35 trillion, according to a survey. The value of transactions with digital wallets was $4.3 trillion in 2018. This amount is projected to swell to almost USD 14 trillion by 2022. By 2020, almost 1 out of every 2 dollars spent online is expected to come from transactions made using mobile devices.

Despite the explosion of mobile payment systems, however, there is still plenty of room for innovation and enhancement, particularly with the emergence of more developed mobile wallet technologies.

Convenience is a prominent factor

A digital wallet effectively stores the bank account and/or credit card details of a customer on the smartphone of that person, where they can access it using their phone to make in-store transactions. The digital wallet prevents a person from having to check for the correct card in their wallet and allows them to conveniently choose their preferred payment method correct from their phone, which interacts directly with the POS system of a store to complete the transaction.

Furthermore, e-wallets are time-saving. The customer may simply swipe and go, rather than carrying cash or card. Make payments online when on the move, as long as you have a digital wallet with you. Also, digital wallets offer benefits such as cashback, incentives, promotions, and discounts. Digital wallets, most notably, are mostly about customer comfort. Whereas corporations have access to funds instantaneously. By removing third parties or spending on a costly Point of Sale (POS) system, they can save money. They promote real-time data by allowing fast and safe payment methods to boost customer experience.

It's more secure than you expect

The initial reluctance among customers to accept digital wallets and mobile payment services had a lot to do with security concerns. People were mainly afraid of the possibility of getting their devices hacked for their financial details. Some customers were also hesitant, for fear of losing the phone itself, to store their bank and credit details on their phones. Although often emerging technology may indeed be a cause for concern, it might come as a surprise that mobile payments made through a digital wallet service are safer than any other current form of electronic payment!

As the majority of business owners who support online digital payments are aware, it is often encrypted once bank information is exchanged digitally. The same applies to the information transmitted using NFC during a mobile payment. It is encrypted and protected from hackers at every given point where data is transferred. Additionally, by using an ID token that is relevant to bank details, many mobile payment services can provide an extra layer of security. It suggests that they would see an ID token number used to reflect the credit card information, and would not be affected by hackers trying to hack into the transaction midway. Not only does this protect the customer, but this also prevents the company from becoming the victim of theft.

EVOLET is a digital wallet app for migrant workers.

Learn more at https://evolet.io/