Sounds not new but purely changing the traditional mode of payment. If we look at 20 years back, people used to carry hard cash in their wallet to make a payment and still in rural places, where technology, infrastructure is not occupying one’s mind, people prefer traditional wallet to carry cash over Digital wallet. In rural places where people are not accommodating the digitization where in urban regions, organizations are fighting with themselves to provide the best solutions to the ultimate users.
Digital wallets are becoming the most popular payment mode in the world in the next few years, overtaking credit and debit cards. A digital wallet consists of both software and information component. The software component provides security and encryption for the private information of an individual and for the actual transaction. The information component is mainly a database of user-input details. This information comprises user’s shipping address, billing address, payment methods and other information. Digital wallet systems facilitate the use of digital wallet transactions among various retail merchants in the form of mobile payment systems.
According to Citi Retail Services, Digital wallet usage amplified by 20 percent from 2014 to 2015 and it shows how the digitization is impacting on our lives. Digital wallets are rapidly becoming mainstream. Tech-savvy shoppers are gradually demanding continuous, Omni-channel retail experiences and demanding for solutions that deliver this. Customers use digital wallets (Sometimes we call it as Digital cash or Mobile wallet) to store payment data, excluding the need to re-enter information each time they make a purchase. Nowadays people consuming the digital wallet already have a debit/credit card and some involvements of the online system and Digital wallet is transforming the online transactions like recharges or pay for everything from online. As smartphone market and online purchases are growing very rapidly in Urban, semi-urban cities, the demand of digital wallet is growing speedily.
According to a survey of Euromonitor, connectivity has grown explosively from 2005 to 2015. From 2005 to 2015, The Internet, 3G and Smartphone users have grown at the CAGR of 15%, 40% and 45% and another factor like rising the demand of debit/credit card users, increasing the need for Digital wallet/payment system. Gradually, digital wallets are being prepared not just for basic financial transactions, but to also verify the holder's credentials. An individual’s bank account can also be allied to the digital wallet and the identifications can be passed to a merchant’s terminal wirelessly via near field communication (NFC). NFC-based digital payment ecosystem aiding digital wallet system with better technology. The NFC technology permits radio communication between two NFC-enabled devices and the tag is a small sticker type chip that works on the NFC technology and this tag is linked to the company’s digital wallet account to facilitate quick payment.
As Digital India initiative started by the Government of India, global players like Apple (Apple Pay), Google (Google wallet), PayPal, Amazon and Alipay are providing the best solution to Indian consumers and retailers in a more accurate way. Payment companies in India like PayTm, Freecharge, Oxigen getting pushed by the Government of India and because of this, the awareness of digital payment is increasing constantly in both urban & rural areas. Consulting firm McKinsey evaluates involving every Indian household to a digital payment system and digitizing government payments could save the government $22 billion per year, so it is not only the side of ease of payment, saving time but also could gather additional funds for our country.