The digital wallet revolution is the next phase of making it easy for you to spend your money from a mobile device.
But is it catching on?
Business Insider says that only 25 percent of U.S. consumers polled had an interest in digital wallets for purchasing products in a physical store. Almost 75 percent said they were concerned with the privacy of their information and potential mobile theft. What will it take to bring digital wallets into the mainstream?
The Digital Wallet Concept
Convenience is the principle reason for this technology. For example, PayPal is the oldest example of a digital wallet. You create an account, tie it to a bank account, and that’s it. You can use PayPal to purchase from anyplace that accepts it. You don’t have to re-enter bank or credit card information. The merchant accesses funds through the login information you provide, and PayPal does the rest.
Using PayPal online for purchases is as simple as a couple of mouse clicks. Mobile devices take this one step further by allowing apps to interact with your mobile wallet and physical store fronts. Near field communication (NFC) technology allows you to touch your smartphone to a store’s digital reader, or even just get near it to make a payment.
Another version of the wallet technology, Google Wallet, stores information about a consumer’s other credit cards and gift cards. They can pay for items at merchants that use the Visa’a payWave and Mastercard’s PayPass systems just by tapping their smartphone to a reader.
The Benefit of Digital Wallets
Digital wallets have solved at least two consumer problems. You literally can’t lose your mobile wallet because it virtually lives in the clouds. The data from your wallet doesn’t reside on the physical device. Consumers are familiar with this by using services such as Mozy to back up all of their other information to the cloud. The cloud is becoming a standard for mobile consumer information storage.
The other problem solved is that if you should lose your smartphone, your wallet is safe. If someone finds your smartphone, unlike a wallet full of cash and credit cards, they won’t be tempted to empty the contents into their own pocket.
The Challenges of Digital Wallets
The first challenge is similar to the days before Mastercard and Visa became the standards for credit cards. There are various digital wallets available but not all are accepted by every merchant. You’ll be forced to have a number of wallets to be able to shop at all of your favorite businesses.
NFC technology is not used everywhere so you’ll be restricted as to how you can pay with your mobile device in different shops. Various standards are being discussed for NFC which makes creating apps that work with all formats difficult.
Because digital wallets are in their early stage of adoption, they will show up on a number of mobile devices in a number of variations, according to a Market Watch interview with Jerry Irvine, CIO of Prescient Solutions. There is a concern that not enough emphasis has been placed on security and data privacy on mobile devices, so there is a risk that someone could steal personal data from a smartphone. Irvine states that there is no way right now to protect someone's data 100 percent on a smartphone or tablet. Until this threat of theft is reduced, he recommends only using a low balance credit card on your mobile wallet.