Digital wallets have been in use for a number of years all around the globe. But the anticipated jump in the number of users never really happened. The numbers are rising but at an exceptionally slow pace. There are a number of factors which can be attributed to this trend, and security issues are considered to be among the deciding factors for a vast majority of individuals.
Are these digital wallets really safe? And what does the future hold for them? Let us take a closer look.
How Do Digital Wallets Work?
It is important to understand how a digital wallet operates before going any further. A number of applications link your bank accounts and banking cards to various smart devices, which allows you to pay with a simple swipe, click, or wave of your hand. Apple has recently put a major focus on its Apple Pay services, which the company suggests will revolutionize how we pay for various benefits and services. PayPal has been a longstanding leader in this department, while Google, MasterCard, and Square have also been actively marketing their digital wallet services.
Major companies like Apple are developing their services in ways where they don’t just offer the benefit of purchasing with debit/credit cards and account funds. Rather, customer loyalty points and bonuses can also be used to purchase tailored deals and discounts.
Major banking institutions in the United States launched a joint venture by the name of clearXchange, which allows instantaneous transfer of funds between the banking accounts in these banks.
The Internet of Things (IOT) is also facilitating the advancing trends where digital watches, wristbands, and various smart devices can be employed to access the digital wallet and carry out a various transaction with ease and comfort.
Reasons Behind Relative Lack of Usage
There are a number of reasons leading to the slow-paced popularity of this technology. A number of popular chains have yet to adopt this technology, and thus don’t accept payments through digital wallets. Internationally, there isn’t a select application accepted everywhere, due to differing policies. PayPal, although popular throughout the world, still doesn’t operate in a number of countries, thus people avoid switching to digital wallets often to avoid confusion.
Other major issues come to data coverage offered by various vendors. Although major vendors for mobile data and internet like Verizon and Comcast Xfinity, they still are unable to cover the entire country. Thus, there are areas where these digital wallet services cannot be operated properly.
Consumer knowledge regarding digital wallets and their use is also limited to a certain extent. People are considerably afraid of using a technology which there are not well-versed in, especially if it includes monetary transactions.
In an online environment, every device is connected to a virtual space, meaning the inherent risk of data streams being interrupted and tapped into exists. Digital wallets often have their credentials stored in a device for easy payments and transactions. So in case of the theft or loss of that device, your personal information and credentials are jeopardized.
A major issue exists where in case of fraudulent activity, the liability is usually for the owner to bear. Banks and institutions offering debit and credit cards provide added security and coverage to the card users in case of related contingencies, but don’t offer the same benefits for the usage of digital wallets. Thus, people feel safer using plastic cards than a digital currency wallet.
The security methods with these digital wallets are improving, with new and additional security features being installed every day. But the problem arises when users aren’t properly aware of these added security features, and improper usage leads to exploitation by hackers.
Advanced applications rely on multi-factor authentication methods, and it is important to opt for these methods in your applications to make your wallet as secure as possible. People often go for comfort over security and set up easy passwords, some of which can easily be extracted from your social media profile. It is important to be vigilant while choosing these passwords to stay out of harm’s way. Logging onto your devices should also require proper multi-factor authentications so that your credentials don’t fall into the hands of an intruder.
Digital wallets transaction are often facilitated by tokenization, where the application generates a random number which is unique to every transaction, instead of asking for your complete card credentials. So in case, a hacker is skimming through data streams in an area, all they get is a random, senseless array of the number which cannot be used against a person. This makes digital wallets safer than plastic cards.
Using secure network environments is a must while operating your digital wallet. Always make sure that the Wi-Fi connection you are logging into is safe and secure. Using a public Wi-Fi connection is absolutely out of the question. Sharing your personal information over social media platforms is also inadvisable since advanced hackers can easily go through weaker encryptions and access your information. A third party VPN can also be employed, which makes hacking into networks even more difficult.
Always monitor your accounts and the transactions you have made through them. This helps for identifying fraudulent activity that may have occurred in your digital account.
There is undeniably a physical level of protection offered by these digital wallets which aren’t available in plastic cards or carrying cash. Major encryptions keep your data secure over multiple layers of security, and you don’t have to worry about someone stealing your wallet from your hand, as is with the case of losing a credit card.
Banks also majorly suffer from credit card fraud. The monetary damage is approximately $8.5 billion per year. As the population and inflation rise, this number is expected to rise even more, and banks will start promoting digital wallets as a safer alternative to safeguard their interests, as well as those of their customers.
As major players such as Apple, Samsung, and Google actively invest efforts to promote the usage of digital wallets, more and more vendors will start accepting payments through them. With proper knowledge and usage, digital wallets definitely offer a lot of potential for the future. There is no doubt that managing them and setting them up might take some effort, but in the long run, they offer much-needed ease and increased safety in comparison to other payment methods.