Digital wallets provide a secure, convenient way to make payments by encrypting transaction data and integrating with financial accounts. They solve issues associated with physical wallets, such as bulkiness and theft, while also enhancing online shopping efficiency. Despite disadvantages like high initial investments and security concerns, the trend towards digital wallets is expected to rise significantly in India due to government initiatives like 'Digital India.'

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Digital Wallets
Ease, Convenience and Security Redefined

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Introduction
Digital wallets allow making payments using a financial product in a simple, secure
and convenient manner.
To safely transfer the transaction value from a customer to the vendor/merchant,
all data are encrypted.
Functions of digital wallets:
Easy registration of customers
and storage of credentials.
1
Secure customers’ payment info,
shipping addresses, identity etc.2
Integration with sources like bank
accounts,credit/debit
cards, digital currencies.
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Categories of Digital Wallets
Server-side digital wallets
No software required.
Directly supplied to merchants as
a financial service.
Client-side digital wallets
Used to store the customers’ information on their own
computers and mobile devices.
Customers and merchants need
to download software/applications.
Automatically populates customer data
on forms.
Used to store the customers’ information with merchants
using a remote server.

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Popular Digital Wallets in India

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Problems addressed by Digital Wallets
When compared to the regular physical wallets, the digital wallets help overcome the most common problems such as:
The need to carry heavy and bulky wallets
The chances of losing wallets and its contents
The difficulty in finding right items during
rush hours
The possibility of theft of cash/cards inside
a physical wallet

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Digital Wallets - Advantages
Integrates with ecommerce portals to make online shopping easier.
E.g. Paypal was built as a dedicated e-wallet for EBay.
Saves time and effort by automatically populating data, minimising
the need to provide manual inputs every time.
Gives a competitive edge to merchants by being able to serve a larger base
of modern customers.
Reduces the cost of transactions by eliminating intermediaries at various
levels and lowering charges at POS.

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Digital Wallets - Disadvantages
Initial investments on digital wallets can be high.
The technology behind digital wallets (the right hardware and software) cannot be
compromised.
E.g. Phone readers need corresponding hardware.
Connectivity issues in remote areas.
Lack of adaptability of digital wallets due to security concerns.

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The Latest Development - India
The Government of India and RBI has
announced that from now on, all the
digital wallet providers too will need
to maintain the KYC for each of their
customers.
Failing this, the transfer of funds
between wallets using UPI will not be
allowed.
The last date to update the KYC has
been fixed as December 31, 2017.

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Conclusion
Considering the initiatives like ‘Digital India’ by Indian government, there will be a rise in digital banking.
Electronic wallets will soon become a personalised portal for individuals wherein they would:
Shop online via
mobile devices
Pay bills
Redeem loyalty
rewards
Transfer funds
Compare prices before
purchase
And do lots more.

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