Among the ways of reducing dependency on paper money, credit and debit cards still lead the way. As each year pushes technology more and more into digital territory, so does the financial side of it. The past few years saw a spike in e-wallet (also known as a digital wallet) usage due to many advantages it offers. It’s a secure and convenient way to operate, widely supported by a large number of service providers and e-commerce websites. In this post, we’ll present the concept of e-wallets, what makes them an increasingly popular choice, their advantages and shortcomings, as well as a few insider tips here and there.
Think prepaid cards. The principle is much the same - you load them with money (make a deposit through the issuer of the service) and pay for everything you need (shopping, bills, booking of rides, flights, and movies, groceries and so on). E-wallet is a digital equivalent of your physical wallet, where everything is stored online. This includes both financial and personal information about the cardholder. Why? Because e-wallets are made for financial transactions as well as for authentication of the holder's credentials.
Example of e-wallet usage
To incentivize the use of e-wallets, companies often offer discounts and cashbacks in return. Some of them have additional payment features like paying for services in various currencies, which can be extremely handy and cost-saving for merchants that receive a good portion of their sales internationally. We’ll get to that to next.
Is there any cost involved?
While companies that provide e-wallet services have different policies, it is usually free for merchants to set up the e-wallet account, deposit money into it or use it to pay somebody. Typically, you don’t have to maintain a minimum balance nor pay any maintenance fees. However, there might be a nominal transaction fee when the money is being transferred to and from the e-wallet to a bank account.
The bulk of costs relate to in-service transactions like receiving money to your e-wallet and withdrawing it. Receiving the money entertains the idea of paying a fee that is much lower than if the money was sent via an international transfer. The withdrawal part also has an interesting note as the better, more customer-centric e-wallets offer conversions to local currencies at very favorable rates. This helps you avoid paying your bank a fee for receiving foreign currency and provides a stark contrast to both banks and popular payment processors, where you have to pay both conversion and withdrawal fees. On the other hand, this allows an e-wallet to effectively cut out the intermediary for both e-sellers and buyers as it speeds up the checkout process and minimizes the cost of banking transactions.
How secure is it?
This is the million dollar question. In today’s increasingly digital world, security is under a magnifying glass in many cases. When it comes to e-wallets, their appeal largely comes from the fact that a customer is not sharing bank details with the store, both online or offline type. Any information is transmitted via an encrypted SSL (Secure Sockets Layer) connection, the standard security technology for establishing an encrypted link between a web server and a user in order for all the data passed between the two sides to remain private and integral. For extra layers of security, you might find a type of "mPIN" code or fingerprint for additional authentication. As a merchant, you benefit by receiving protection against fraud. Customers on your store also have the possibility to lock the e-wallet with a password or create a wallet without one, for a more general, non-confidential information.
What are the biggest issues with e-wallets?
Some e-wallet services (although not a lot) don’t provide a way to get your money back to the bank account after depositing it to an e-wallet or transfer money from one digital wallet to another. There may also be some transaction limits on a monthly basis regarding transferring money back. Make sure to look for e-wallet services that don't restrict you in any of those ways.
There is no doubt that an e-wallet is, first and foremost, a secure and convenient solution for both merchants and customers as they can pay for a wide array of services and cut down on fees while doing so.
It’s very important to note that policies vary across various e-wallet providers so you should thoroughly understand and compare what they bring to the table in terms of fees and support (de facto the number of customers they can attract). Only then will you be able to benefit from it.
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