Deconstructing myths around e-walletswritten by Sonia li on Sep 15, 2020
E-wallets have changed the way we make payments and exchange value. From fintech to techfin, many companies are building e-wallet solutions. E-wallets, or digital wallets, are wallets that aim to replace physical wallets. Users can use e-wallets for a number of things such as shopping (online and offline), paying bills, paying goods and services, and transferring money to another person. There are three types of e-wallets; 1) open wallets allow users to make payments, withdraw and transfer money within and between banks, 2) semi-closed wallets allow users to make transactions with only permitted merchants with the service provider, and lastly, 3) closed wallets are delivered by a company and allow their customers to pay for goods and services from that company.
Why is there a buzz around e-wallets?
Because e-wallets are extremely convenient. They allow us to leave behind our physical wallet and replace it with our phone which we already carry everywhere for communications, work, maps, entertainment, and so much more. Using e-wallets is also much faster than any other way of payments. A single touch-on and the transaction is done. It’s also easier to benefit from companies’ loyalty programs as they’re embedded in the e-wallet. Redeeming rewards becomes faster and simpler. E-wallets give an overall better payment and transaction experience.
Moreover, e-wallets allow many to participate in the economy. Having access to a bank account can often become a barrier to access financial services since numerous financial activities are closely tied to a bank account. However, e-wallets become an opportunity to have access to other financial products and services because they are not necessarily tied to a bank account. Hence, they allow people to participate more fully in the mainstream economy.
The most well-known examples are WeChat Pay and AliPay in China, and M-Pesa in Africa. WeChat Pay and Alipay dominate the country’s cashless economy. Everyone who has access to a phone can download the application to receive and send money. From the small street food vendor to the big corporation, they all use the application on a daily basis. M-Pesa, another success story, started in Kenya and now allows countless people all over Africa to receive, send, and make payments with a phone. There is no application, sending money is like sending a text message. Easy, fast, and convenient.
Our answer to three common misconceptions around e-wallets
While these two success stories demonstrate the convenience of e-wallets and how they can help people participate in the economy, there are still some myths around the usage of e-wallets.
Myth #1: Low security
One of the first myths about the usage of e-wallet is low security. Security and fraud risks such as device and e-wallet vulnerabilities, and malware represent a significant concern in the adoption of e-wallet. While these risks exist, e-wallets are highly secured, and perhaps more than physical cards and cash. Indeed, e-wallets use technology such as encryption and tokenization to mask payment card information when users enter their details. Hence, the wallet provider and merchants can’t see the details of customers’ purchases.
Others say that there’s a security risk of losing your phone and hence, your wallet. Truth is, the risk of losing your phone is as high as the risk of losing your wallet. And if it does happen, with a passcode and biometric features like fingerprint or eye scanning, your phone is more secure than your physical wallet. It’s also easier to trace your phone back if lost or stolen. In any case, there is no payment method that is completely safe from security and fraud risks. We always need to be vigilant. E-wallets offer many security features and advantages for the customer, merchant, and provider that physical wallets don’t have.
Myth #2: Poor merchant acceptance
The second barrier to the adoption of e-wallets is poor merchant acceptance. We believe that to overcome this challenge, one of the main efforts is to integrate payments into applications and mobile web experiences. The more integrations there are, the easier it will be for merchants, and thus, for customers to use e-wallets. The smoother the experience for customers to make payments, the better the value offered by merchants. We believe it also requires B2B and B2C marketing efforts to promote the advantages of e-wallets to both merchants and consumers.
Myth #3: Increased spendings
Lastly, there is a perception that e-wallets make you spend more. For many, using an e-wallet involves a fear of spending more because you lose the tangibility aspect of bank notes. While it’s true for bank notes, there is a delay with credit card payments. Until the monthly bill arrives, it’s difficult to see all the transactions. With e-wallets, payments are instant. Users can see their transactions and account balance immediately.
Moreover, budget tracking applications can help users manage their finance easily while giving them a better overview of their spending in a single application. Being cognizant of our spending habits as in to what, where and when we spend should be on the same level whether we use e-wallets, contactless payments, cards, or cash. Since cashless payments and e-wallets are still relatively new, it’s perhaps premature to conclude that cashless payments make you spend more.
Transforming early adopters in influencers
It’s up to us to spread the word about the benefits of e-wallets for both customers and merchants. Only by doing so we will be able to transform early adopters into influencers that will help spread the word to skeptics and unconvinced users. People interested in novel technology and products often have a powerful influence in helping people around them trying new things. And we believe we should leverage that. The bigger the adoption, the better we will transform the way the world makes payments.