How Does a Mobile Wallet Actually Work?

Added 8 months ago     By Kirby Dela Cruz



The mobile wallet (or digital wallet, in many cases) is one of the fastest rising trends in financial technology today. There has been a great deal of innovation and discussion going on about it, particularly when it refers to cashless payments that can be done offline or online. But what exactly is it, and how does it work?

The Digital Wallet

The digital or mobile wallet (sometimes called an e-wallet) is most often an app that can function within a smartphone and aims to replace carrying cash or checks, and stores all your credit and debit cards for you. In essence, it is an advancement of technology that aims to give you convenience and protection. Instead of carrying a wallet full of bills or credit cards, many of which containing your personal information and could very easily be stolen by a thief, the mobile wallet will hold everything for you.

The mobile wallet bolsters a new era of digitized finances. One of the chief advantages of this innovation is convenience. By far, convenience is its biggest selling point, as the mobile wallet can usually be used in Point-of-Sale retail terminals, for online transactions, as well as in-app transactions. It virtually eliminates the need to bring cash or even credit cards.

These digitized wallets work with banks all around the world in order to be able to facilitate the transactions.

 

What It Can Do

 The features of a mobile wallet differ depending on the service provider. There are many different forms of the service currently available. However, all of them generally handle digitized, cashless transactions. The features may vary from provider to provider, but on average, a good mobile wallet should be able to:

  • Allow you to make cashless transactions online, through payment gateways, and at physical payment terminals
  • Can transmit currency from one account to another
  • Can link up with a bank account or bank card (credit or debit)
  • Safely and securely store personal information, identification, and authentication access to your cards or accounts.
  • Contains access to goods or services (rewards points, ticket information, gift cards, coupons)

Any or all of these features could feature on a mobile wallet service. Mobile wallet apps often make use of a phone’s contacts and features in order to work. For point of sale transactions, phones with Near Field Communications (NFC) capability can communicate with a port in the register that allows people make the payment with a tap. When sending money, the app will make use of a phone’s contacts to determine to whom to send the funds.

 

Who Uses the Mobile Wallet

Mobile wallets are a benefit to both consumers and merchants as it simplifies the transaction and makes everything move forward more efficiently. For consumers, it would be a lot easier to use the mobile wallet instead of digging through one’s bag to find the appropriate amount of cash or looking for a card that can be used. At the same time, if the wallet holds rewards or loyalty points, they can be used just as easily and immediately.

For merchants, mobile wallets speed up the process of the transaction as well, and provides them with instant records of the transaction, and even allows them to sell and make transactions online as well as offline.

The mobile wallet is a rapidly growing field in fintech, and it could mean a great change in how the world does its payments.

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