Google, Amazon and Paypal are a just a few of a number of companies looking to break into the digital wallet industry and pries you away from the mass of credit, debit and loyalty cards that you have nestled in your pocket. Digital wallets are envisaged as a technology that will enable you to use one payment method whether you are shopping, whether this be online or in a shop; whilst many online payment services require you to use a credit or debit card like you would in a shop, the online balances maintained by some services such as Paypal can only be used online – a digital wallet would work by allowing you to spend this balance anywhere you like.
Digital wallets should make shopping online and in-store a much simpler and more enjoyable process because you will no longer have to carry around the vast amounts of bank card and loyalty cards that you have come to rely on to pay for goods and collect points at the same time. As an application that lets you store the details of all the cards that you rely on and more, a digital wallet would allow you to choose the card that you would like to pay with on your mobile device and you would then proceed to tap that device on a reader and the card details would be communicated wirelessly using a short-range technology such as NFC (Near Field Communication). Such technologies are becoming popular in the US because cards over there still rely on the magnetic strip, in the other hand here in the UK, digital wallet services could prove to be more complicated to implement since we are very reliant on chip and pin and contactless card technologies.
In either case, digital wallets could prove to be a very convenient solution, but widespread adoption is reliant on reducing market fragmentation and developing a standard around which all digital wallet services revolve.
Established authority versus Bitcoin
Although a digital currency, Bitcoin can be viewed as being a digital wallet, but one has to consider the benefits of choosing a service that is offered by an established authority versus an unregulated and volatile digital currency. Bitcoin provides a way in which funds can be transferred securely electronically, but because it is a digital currency the value of it can go up and down by large amounts a lot of the time; this has led to many retailer shying away from accepting it, though we have seen gradual adoption. Digital wallet services from Google and Paypal amongst others utilise the user’s local currency, therefore meaning that funds held here will be accepted anywhere the technology is available and the value of the currency held will be less susceptible to fluctuations. Established services provide more security than a digital currency such as Bitcoin because they rely on established authority, whereas with Bitcoin there is no single party responsible for the maintenance and security of the system.
Who needs to be working to advance digital wallet technology?
In order for digital wallets to develop, we need to see a union between mobile device manufactures, the software vendors, credit card suppliers/banks and mobile networks. I’m of the opinion that if these companies were to work together to develop a standard based around existing technologies. As a result of that, we would probably see faster widespread adoption of the technology in the UK along with a lot more entries into the market, therefore increasing competition. It should be noted that digital wallets aren’t just a product of the companies creating the software, but require mobile device manufacturers to include particular hardware and the cooperation of banks.
In conclusion, I think that we’re all going to be stuck with our physical wallets and purses for the time being. With the technologies that digital wallets rely on being readily accessible in some countries and not available in others, there is no global standard around which the technology can be developed and so companies offering the services will need to take into account the defining characteristics of a market before entering it so that they are able to tailor the product to meet the needs of consumers.