In 2021, nearly two-thirds of digital consumers worldwide used a digital wallet to purchase products from a physical store or online.

Along with convenience and ease of use, cash has also seen steep declines due to the pandemic as consumers look for ways to reduce points of transmission. Additionally, lockdowns and other protocols aimed at slowing the spread of Covid-19 have pushed consumers to shop online more than ever. Quite naturally, this has led to an increase in the use of digital wallets and their massive adoption in India and across the world. However, their phenomenal rise to popularity is really much more detailed than that.

Let’s explore what digital wallets really are and why they dominate consumer payments.

What are digital wallets and is there more than one type?

To answer the second question first: yes, there are several types of digital wallets.

Digital wallets are largely defined as software platforms that allow users to make purchases without having to enter their personal account credentials directly. These wallets store users’ payment IDs and passwords, making payments easier and shortening the checkout process. The technology is flexible enough to allow one-click payments and is widely available for use on mobile platforms, enabling 24×7 shopping.

Through digital wallets, retailers can also offer other services such as loyalty programs and gift cards.

There are a few main types of digital wallet designs.

The closed wallet model, in which purchases and services can only be made through the issuing merchant. Amazon Pay is a classic example of the closed wallet model The open wallet model, which allows the use of credit and debit cards for purchases and ATM withdrawals.

The semi-closed wallet model, which allows users to make purchases and payments through merchants in partnership with the main wallet provider. Wallets such as PayPal, GooglePay and ApplePay follow the semi-closed wallet model.

The semi-open wallet model, which takes into account all online merchant sites that accept MasterCard Masterpass and Visa Checkout cards are some examples of this model.

While convenience remains a common feature across all models, some of these models also go a step further and allow customers to make purchases with a Buy Now Pay Later (BNPL) option, giving consumers new ways to manage their finances and how they pay for their property.

Why have digital wallets become so popular with consumers?

Along with giving consumers access to a plethora of convenient payment options and simplifying the entire checkout process, here are a few other factors that have led digital payments to become a consumer favorite.

Customer-centric and engagement: No technology would be successful without customer adoption, and this is something that digital wallets understood early in the game. Digital wallets not only allow retailers to repeatedly engage with customers and allow them easy one-click payments, but they also help drive return purchases through rewards points and loyalty programs.

With their ability to provide detailed information and data on consumer preferences and interests, digital wallets are able to send personalized offers and tailored communications, helping to increase consumer loyalty.

Safety and Security: The fact that digital wallets often store crucial consumer information, from account details to personal information, and still have been successful in gaining consumer trust says a lot about the enhanced security that these wallets offer. From tokenization to biometric authentication to reduce fraud, digital wallets have successfully met the safety and security demands of their consumers. Digital wallets’ layered approach to security, in which they guarantee multiple levels of authentication to prevent data breaches, has been a major factor in their growing popularity.

Flexibility and Availability Anytime, Anywhere: Whether they function as automatic payment or allow easy transfer of funds at any time of the day, digital wallets rise to the occasion. In addition to eliminating the need to carry cash or cards, digital wallets also provide the ability to view account balance and transaction history without having to visit the bank. If even that isn’t enough, some digital wallets allow users to store copies of their credentials in a secure digital locker, in turn becoming the one-stop platform for a variety of consumer needs.

With all of this, there is almost nothing that can stop the continued rise of digital wallets and it is only a very short matter of time before they become the best option for consumer payments. .

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