With all the shopping people do nowadays, it’s no wonder that the world of transactions has rapidly evolved. Purchases used to only be made face to face, with an exchange of goods and currency by hand. Checks were then created to facilitate faster transactions and to draw upon funds in a bank rather than use cash withdrawn from accounts.
Then came credit cards and debit cards, which made transactions even faster with the swipe of a plastic card. Debit cards worked in the same way as checks did, but eliminated the tedious step of filling out the entire check with information. Credit cards gave you access to instant loans to be paid off in the future.
With the popularity of online shopping, credit cards and debit cards became highly utilized since it enabled people to purchase things from across the globe with the click of a button and authorization of a charge on their card. Although this seemed like the peak of technology for online transactions, something else was born to make shopping even easier — the online wallet.
What Is an Online Wallet?
The online wallet is a completely digital program that conveniently stores all of the necessary information in order for you to make a complete transaction. This means an online wallet stores your login usernames, passwords, credit card details, and your preferred shipping addresses. In many ways, it is just like a physical wallet, except you don’t have to flip through things online in order to use it — many websites have easy checkout systems that automatically link up to your online wallet and all you have to do is enter a PIN number to validate the payment.
The idea of the online wallet was first invented back in 1979 when Englishman Michael Aldrich invented online shopping. A year later, he then went on to create Redifon’s Office Revolution, which was a system that revolutionized business transactions by moving them online.
Types of Online Wallets
Although there is the broad term of online wallets when referring to a digital program that stores all your payment information, there is actually two types of online wallets within this broad term: client-side wallets and server-side wallets. We’ll explain more in depth what each type is below.
A client-side wallet is an online wallet that downloaded and installed by you, which means you maintain it by yourself as well. After downloading the program, you must enter in all of your information and it is all stored on your computer. When you go and make a purchase online, the program then completes all of the information in the necessary fields so you won’t have to do it all manually.
With server-side wallets, you don’t need to install any programs and when you fill in all of your information on the initial form, all of that is stored on the company’s computers instead of your personal one. This means that the company also maintains your online wallet. Because server-side wallets are much more standardized than client-side wallets, merchants prefer this type of wallet over the other.
How Does an Online Wallet Work?
Generally, on your first transaction, you must go through a signup process that makes it convenient and quick for you to make transactions later on. First, you have to register your account, which is linked to your phone number. Your phone number is needed in order for the provider to send you a SMS text with a PIN number for you to authenticate your phone number. This securely links your phone number to your online wallet. After you’ve authenticated your phone number, you can then enter in your credit card number online and then validate and complete your payment.
For future payments using your online wallet, you won’t have to enter in all that information again. Instead, you can easily check out and then authorize the payment with a few clicks. You can also use your wallet for other types of transactions, such as receiving payments and transferring money to your friends, family, landlord, or utility companies. Your online wallet essentially works like a traditional wallet except you don’t have to carry around physical cash with you anymore.
Do I Need a Bank Account?
When you think of a wallet and how you keep cash in it, you think of a bank account, right? Well, with an online wallet, you don’t need a bank account to fund it. If you’re paid by cash or just don’t want to link a bank account to your online wallet, you can always put money on an electric cash card or just use cold hard cash to add money to your online wallet. All you really need is a smartphone that can handle online wallet apps and you’re good to go.
Where Does My Money Go?
You may feel uneasy sending your hard-earned money into the vast spaces of the Internet, especially since you can’t visually see the transaction take place. But not to worry, all payments and transactions are made over secure and trusted electronic networks which have been used time and time again for transactions just like yours. Your money starts out in your account and goes directly to the recipient’s account. It never goes to a third party’s account, so that should quell any worries of your money going to places that it doesn’t belong.
Websites and Apps
Many popular websites offer you the option of using your credit card, debit card, PayPal, or online wallet to pay for your purchases. You may think it’s already extremely convenient to utilize an online wallet to pay for your shopping sprees, but technology has revolutionized online wallets even more by having specific apps for different wallets. This enables you to make transactions while on the go, which is very useful if you lead a busy lifestyle and can’t log onto a computer often to access your online wallet. You can even use your online wallet in physical stores and pay for things through your app to eliminate the need for carrying cash or your credit cards around.
Advantages of Having an Online Wallet
As you can see, the online wallet is a superior upgrade to a traditional wallet. But what exactly are the perks that you can enjoy when you sign up for one? Find out the factors of online wallets that’ll make you ditch bringing around your wallet full of cash and your credit cards forever.
When you walk around with your physical wallet, you run the risk of losing your wallet or getting pickpocketed. Even if you get your wallet back, the cash you had in there is probably long gone, as well as your credit cards. You’ll then have to go through the tedious process of cancelling all of your credit cards then waiting forever to receive your replacement cards.
With an online wallet, all of your information and online wallet app is on your phone, which is harder to lose or have stolen. Because online wallets use encrypted data, the information stored inside your online wallet cannot be digitally stolen like with credit cards. The thief would have to physically have control of your phone in order to make fraudulent transactions with your money. Online wallets offer you the extra layer of protection when it comes to fraud.
Also, you won’t have to send cash or a cashier’s check through snail mail, which would take days or even weeks for your recipient to receive. Traditionally, this would cost you money in envelopes and stamps, plus there is the small chance that your money would get lost in the mailing process. An online wallet makes sure that your money is received almost instantaneously, and without mistake, since all of your information is already stored and you won’t have to reenter any data. Your bank won’t have to enter any data manually too, which also reduces the chances of errors when transferring money.
It can be a pain ensuring that you leave the house with adequate amounts of cash and the proper credit cards, especially if you’re a forgetful person. Forget just one thing, and it may ruin your whole day. With an online wallet, all you need to remember to bring with you when you step out of the house is your phone, which you probably already have with you at all times. With how much we rely on phones nowadays, it is much easier to forget your wallet rather than your phone when you go out. By using an online wallet, you’ll always be ready to make payments when you go shopping or when you need to pay your friends back for an activity during an outing.
Online wallets also consolidate all your gift cards, concert tickets, bus tickets, train tickets, and more into one place. Instead of fussing with multiple ticket stubs for each of those things, your online wallet stores it all in one place in the app on your phone.
No longer will you have to fumble with your purse to find your wallet, open it up, swipe your card, enter your PIN number, take out the card, put it back in your wallet, then put your wallet back into your purse. You won’t have to fish out your cash and change from all your pockets and small crevices of your purse to have the cashier slowly count them out either. With an online wallet, you can streamline the whole transaction process so you’re in and out of the checkout line in a blink of an eye.
This goes for online transactions as well. Many website require you to rekey your information each time you make a purchase, which can get annoying when you’ve entered in your credit card information and shipping address for the 100th time. With an online wallet, all you have to do is provide that information one time and never again. All it takes is confirmation of the transaction and you’re done.
Access Different Accounts Easily
If you find it hard to keep track of all your money and where it goes, or are tired of going the old-fashioned way of stuffing cash into envelopes designated to each bill, online wallets can make your life a lot simpler. With just one app, you can create multiple accounts, designating each one to a specific bill or purpose. You can also add secondary bank and credit card accounts to the different accounts should you want to split the costs between your bank and credit card accounts. Having all of your financial accounts at your fingertips will make your life more organized and efficient.
Make International Transactions Easier
Are you a businessperson who deals with multiple types of currencies? Or do you have family members in other countries who you wish to make multiple transactions with? This can be difficult if you’re trying to convert currencies back and forth, not to mention costly as well. Online wallets allow you to easily transfer your money to another person or business in another country without the hassle of withdrawing cash, converting it to another currency, and then sending it over to them. Online wallets also give you the exchange rates in real time as well, so you can pick a transfer time when the exchange rate works best in your favor.
Retailers want to encourage the loyal use of online wallets, so you may find many great deals when you sign up for your online wallet. After you’ve signed up, you may be sent discounts, coupons, and even instant freebies. It doesn’t hurt to sign up for an online wallet, so it is in your best interest to get an online wallet and take a look at what kinds of great deals are in store for you if you’re a loyal customer.
Disadvantages of Having an Online Wallet
Although there are many perks to having an online wallet, there are some downsides. These disadvantages shouldn’t turn you off of signing up for one, but should educate you on potential downfalls and risks.
Few Merchants Take Online Wallets
For some reason, even though online wallets eliminate much stress from both merchants and customers, plus they encourage spending due to the ease of access to funds, many merchants are still hesitant to allow payments to be make with online wallets. Because of this, even if you have an online wallet set up and ready to go, you may be hard pressed to find a merchant that will actually take it for payment. Even big name merchants haven’t started allowing online wallets to be used. In fact, Amazon didn’t allow that option up until as recently as 2015.
High Reliance on Electronics
If you wish to use your online wallet while on the go, you must have ready access to your phone, tablet, or laptop. However, with such common heavy use of these electronics nowadays, they are prone to dying in the middle of the day. If you don’t have any opportunity to charge your device, then you have no way of paying with your online wallet.
Easy Access When Device is Stolen
It’s true that using an online wallet is more secure than just carrying around cash or credit cards, but once your electronic device gets stolen, the thief has complete access to your money since all the information is stored in there, ready for a quick transaction to be made. Because of this, you should always be aware of your surroundings and keep your phone in a secure place to deter theft.
The Best Online Wallet
If you feel like an online wallet would highly benefit your life, there are a few big names in the online wallet world that you can explore. The best wallet online you can sign up for is under PayPal, Apple Pay, Android Pay, or Samsung Pay. If you own multiple devices across Apple and Android platforms, you should probably avoid online wallets specific to those platforms and go with PayPal since it can work on almost every phone.
What qualifies as the best ewallet for your really depends on the types of purchases you make, how often you make them, and how you like the user interface for the online wallet. Some are targeted towards helping you keep all your loyalty cards organized in one place, while others are focused on holding your ID cards and passwords. The best thing you can do is to look around, do your research, and download the online wallets that interest you. There is no harm in downloading interesting online wallet apps to try them out to see if they suit you since most of them do not cost anything to use. You are also allowed to have multiple online wallets for different purposes, so as long as your devices have enough memory on them, you can download and utilize all of the relevant ewallet apps to your life.