Why Digital Wallets Will Replace Credit Cards in the Near Future

Wednesday, June 23rd, 2021, 8:33:24 AM

The explosive growth of e-commerce during the pandemic led to a decline in cash transactions, according to results from FIS. In 2020, just 20.5% of global point-of-sale volume was due to cash payments—a dramatic decrease from 30.2% in 2019.

Credit cards, which are the primary payment method for e-commerce purchases, accounted for 32% of these transactions in 2020. This, surprisingly, is a drop of more than 2%, from 34.4% in 2019. Moreover, it is predicted to drop further in the next three years-- accounting for only 26.7% by 2024, with debit card usage at 19.5%.

Apart from the pandemic, the reasons for the decline are that customers are demanding an ever-more seamless online shopping experience. This has led to online merchants offering online shoppers options such as multiple payment options, including digital wallets.

Man paying with digital wallet using a mobile device

HLundgaardCC BY-SA 3.0, via Wikimedia Commons

What is a Digital Wallet?

Digital wallets are software-based systems for storing and transferring funds and making payments when online shopping with both traditional currencies and other products such as cryptocurrencies. Most commonly run on a mobile phone, they also allow users to make in-store purchases, thanks to near-field communications technology.

As well as providing high levels of security through creating and saving strong passwords, a digital wallet app can also store digital coupons and loyalty card information.

Using a digital wallet (also known as an ewallet) does away with the need to carry a physical wallet. Instead, all the user's payment information is stored securely and compactly in one place. This makes it easier to keep track of and control your spending.

Why are Digital Wallets preferred over Credit Cards?

With estimates that more than 6.1 billion people will use digital wallets by 2023, the market is clearly enormous. But why are they so popular? The fact is that they have some significant advantages over credit cards, which we've listed below.

Convenience

Have you ever been stuck in a checkout queue waiting while the customer in front of you searches endlessly through infinite pockets or an oversized handbag for the exact change? Or found yourself staring at your credit cards in abject confusion as you try to work out which will give you the most reward points for an online purchase? Digital wallets eliminate these situations by providing for practically instantaneous transactions both online and off. And all you have to carry is your phone.

Reduced Costs

Compared to credit cards, digital wallets have much lower transaction fees and other charges than banks and credit card providers. Contactless payment systems in brick-and-mortar shops also reduce the need for cashiers, lowering the business owner's overheads and allowing them to pass these savings on to the consumer.

Acceptance

Businesses that accept cash only are becoming something of a rarity these days. In 2018, 29% of businesses globally accepted digital payments. Thanks in part to the Covid-19 pandemic, these numbers have soared, and you can now use digital wallets almost anywhere. From farmer's markets to high-end retailers and everywhere in between, merchants now accept payments using digital wallets.

Security

Not all digital wallets offer the same levels of security, so you should do your research before choosing one. However, all the best-known providers take great pride in offering secure, encrypted systems that protect your money much better than your back pocket ever will. Even if you do lose your phone, the finder will not be able to access your funds as most wallets use two-step authentication, combining biometric data with PIN or password, for all transactions.

Woman shopping online with a laptop and credit card

Digital Wallets: The Future of Payments?

Digital wallets will likely be the future of payments, but we are not there yet. However, the benefits are apparent -- more effortless access to financial services and convenience for the customer. With fewer people using cash, e-wallet applications have become a much-needed resource.

Mobile banking on one's phone makes it very easy to pay and keep track of spending without needing to use an additional card in the wallet or worry about having enough cash on you and counting out notes and coins before making a purchase. They also create another platform for learning lessons in personal finance, which can help you make better decisions as you manage your money over time. Users can monitor their budgets, which makes it easier to save money by keeping track of it.

Conclusion

As digital wallets and mobile payments become more popular, we're seeing credit cards take a backseat. With all the benefits of this technology, it's no wonder that they are quickly becoming the new norm for transactions both in-store or online.

Digital wallets such as MyNeosurf offer convenience with faster transaction time and lower costs to consumers and merchants than traditional plastic card fees. And you can be assured your information is secure when using these wallets because most use biometric data like fingerprint scanning or retina recognition to authorize purchases in addition to a personal identification number (PIN) or security code.

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