What Is a Digital Wallet?

Digital Wallet Explained

Digital wallets largely eliminate the need to carry a physical wallet by storing all of a consumer's payment information securely and compactly. Also, digital wallets are a potential boon to companies that collect consumer data. The more companies know about their customers' purchasing habits, the more effectively they can market to them. The downside for consumers can be a loss of privacy.

Digital wallets allow many in developing nations to participate more fully in the global financial system. Digital wallets allow participants to accept payments for services rendered, as well as receive funds or remittances from friends and family in other nations. Digital wallets do not require a bank account with a physical firm or branch, often allowing those in poorer and rural areas to be served as well and therefore enables a wider financial inclusion.

Cryptocurrencies rely solely on digital wallets to maintain balances and make transactions, for instance with Bitcoin or other digital currencies.

Example of Using a Digital Wallet

While a handful of top digital wallet companies in 2020 included Due, ApplePay, Google Wallet, Samsung Pay, PatPal, Venmo, AliPay, Walmart Pay, Dwolla, Vodafone-M-Pesa, – among others – the top 3 leading E-Wallets are those of Google, Amazon and Apple. As one example, Google's Wallet service allows its users to “store” cash on their phones. Customers can spend this cash both in-store, as well as online at businesses that accept Google payments.

As noted above, this is supported by near field communication technology (the ability to enable two smart devices to communicate if they are in close range). If a business doesn’t currently accept Google's payment system, Google also recently developed a physical Wallet Card – essentially, a debit card connected with the Bank of Google.