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The Rise of the Digital Wallet

The Rise of the Digital Wallet

By    |   Monday, 06 August 2018 09:58 AM

For years, paying at the register has looked and felt the exact same: Pull out your wallet from a purse or a pocket, and hand over cash to a store clerk. But in recent years, the "digital wallet" has given users the ability to resolve transactions with mobile payment options like Apple Pay or Google Pay. The technology has also given rise to a new question: Will the technology eventually spell the end for the old-fashioned leather wallet?

Statistics point to a fast-moving evolution in payments. According to a survey conducted by Finder, half of all 18- to 38-year-olds already use digital wallets. For Generation Y, the statistics are dramatic: About three-quarters of them have used an "e-wallet" at some point in the previous year. A separate survey conducted by PYMNTS revealed that 77% of adults have smartphones, meaning the infrastructure for mobile payments is already in place across the country.

But is it time to throw your leather wallet in the trash? Maybe not. In 2011, Scott Thompson, PayPal's president at the time, said he believed digital currency would be accepted everywhere in the U.S. by 2015. He also stated there will be no need to carry a wallet. While mobile payments have certainly increased in prevalence since then, the prediction might have been a little premature, given the lag in peer-to-peer payment adoption among some generations.

According to a 2017 study on consumer payments:

  • Only 22% of those aged 65 and above considered themselves "very or somewhat likely" to try peer-to-peer payments in the next year.
  • Most 55- to 64-year-olds echoed that sentiment, with only 34% responding in the affirmative.
  • 18% of survey respondents said they didn't know enough to answer.

How consumers can replace their wallets

Although mass adoption might not quite be here yet, there are a number of ways individuals can do away with a physical wallet altogether if they're ready for the leap.

  • The digital wallet: There are several app services, like Google Pay and Apple Pay, that are at the ready. These apps allow you to load your existing credit card information and then use it in transactions. The services make it easy to use your smartphone for in-store purchases as well as online transactions.
  • Digital driver's licenses: While you're still required to carry a photo identification for all sorts of activities—including driving—there have been grants awarded for pilot digital driver's license programs.
  • Credit cards: The advent of the credit card never gave the wallet its death blow—cards, after all, are still physical entities, even if the transactions are electronic. But today's credit cards yield the same cash-back benefits even if used in mobile wallets, which gives customers the flexibility to put their smartphones to work—and put away their physical wallets. Mobile phones have also provided extra security features for cards, like fingerprint scanners.

Everyday simplicity: Lightening the load

Why bother getting rid of wallets when they've served us perfectly well for years? In a word, simplicity. There's no reason customers should have to hold on to the tactile wallet experience when a smartphone can perform the same duties—and in many cases, it does so in an improved way.

Once you make the transition over to a digital wallet, you won't have to worry about dropping your physical wallet and being put at risk for identity theft. Keeping information readily available in a smartphone—and focusing on just one device—makes it possible to protect one's information with greater simplicity. Furthermore, digital wallets offer much better security than physical wallets. In fact, a survey conducted by JPMorgan Chase revealed that 50% of large businesses find the most appealing aspect of digital wallets to be increased security features.

Although predictions of the wallet's demise have been greatly exaggerated, it's clear the world is moving to mobile and electronic payments at an astonishing rate. Whatever your individual preferences, mobile wallets make it possible to improve your own experience when it comes to convenient shopping and added personal security.

Joe Resendiz is a Research Analyst at ValuePenguin, where he focuses on personal finance and credit research to assist consumers. Previously, Joe specialized on public sector and infrastructure financing at Goldman Sachs. He graduated from the University of Texas at Austin with a BBA in Finance.

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Whatever your individual preferences, mobile wallets make it possible to improve your own experience when it comes to convenient shopping and added personal security.
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Monday, 06 August 2018 09:58 AM
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