Blog Assignment Part B: Advantages and Disadvantages of E-wallet

Advantages and Disadvantages of E-wallet

Group members: Liting Luo 100963427 

                                    Jack hsieh 100969669

Introduction of e-wallet

E-wallet, which is also called “digital wallet”, refers to an electronic device that allows an individual to make electronic commerce transactions. This can include purchasing items on-line with a computer or using a smartphone to purchase something at a store. Increasingly, digital wallets are being made not just for basic financial transactions but to also authenticate the holder's credentials.

Application of digital wallets

Consumers are not required to fill out order forms on each site when they purchase an item because the information has already been stored and is automatically updated and entered into the order fields across merchant sites when using a digital wallet. Consumers also benefit when using digital wallets because their information is encrypted or protected by a private software code; merchants benefit by receiving protection against fraud.

Digital wallets are available to consumers free of charge, and they're fairly easy to obtain. For example, when a consumer makes a purchase at a merchant site that's set up to handle server-side digital wallets, he types his name and payment and shipping information into the merchant's own form. At the end of the purchase, the consumer is asked to sign up for a wallet of his choice by entering a user name and password for future purchases. Users can also acquire wallets at a wallet vendor's site.

Although a wallet is free for consumers, vendors charge merchants for wallets. Some wallet vendors make arrangements for merchants to pay them a percentage of every successful purchase directed through their wallets. In other cases, digital wallet vendors process the transactions between cardholders and participating merchants and charge merchants a flat fee.

Advantages of e-wallet

·       Lower Costs: Employing the use of digital wallets removes the need for intermediaries, in a variety of forms. Purchases in-store may no longer require a cashier because the purchasing process becomes as simple as a tap or scan of a mobile device. Applications like Square can replace expensive POS (point of sale) systems that will reduce transaction costs for the business.

·  Competitive Advantage: Digital wallet applications provide a more convenient transaction processing method for customers, giving businesses that employ this technology a competitive edge in the market. It redefines the user experience of paying and incorporates a novelty aspect to each purchase.

·  Modern: Traditional cash-only businesses, such as craft fairs and flea markets, can now accept debit and credit cards. This opens up an entirely new aspect to payment methods in large markets, introducing many business opportunities and greater potential revenue.

·   Convenience: Users are able to get through a purchase in mere seconds with a simple tap or scan of their mobile device. The experience of purchasing items becomes quicker and easier - leading to a greater sense of satisfaction. Furthermore, with faster transactions, checkout lines within stores become much shorter.

Disadvantages of e-wallet

·         Investment: The initial monetary investment for building a functional digital wallet application is quite large. It requires the initial development of the software as well as the continual maintenance, updates and fixes associated with it. Upon acquiring software, the business would also need to install the corresponding hardware in their stores, which leads to a further increase in costs.

·         Support Technology: There are few supporting technologies to choose from at the moment, with NFC terminals and phone readers being the most prevalent. In the case of digital wallets, they can only function with a corresponding hardware device for each application. NFC terminals and specialize scanners are the only devices created at the moment that will support the processing of digital wallet payments; thus, it is very limited because the technology is still new.

·         System Outages: Information for digital wallets are stored on the cloud of business servers; therefore, the risk of a system malfunction or shut down is always present. As a result, businesses will not be able to process payments or they will become increasingly slow due to high traffic in the servers.

·         Security: Companies must ensure that their customers' information is encrypted and well protected. One of the biggest concerns of adopting a digital wallet application is "will my information be safe"? This is the hurdle that companies must face and as a result, must develop security systems that are as safe and full proof as possible to avoid potential security issues.