What is a Mobile Wallet?: Understanding the Basics and Benefits

What are mobile wallets? These days, most people have at least heard about digital wallets if they have not used them for transactions. The technology is designed for quickly sending and receiving money using digital devices, but there are many nuances you should know about.

Here, you will find out about the types of mobile wallets, their key features, benefits, and security measures. We cover all this and even more in this article. Let’s delve into this topic now!

How Mobile Wallets Work

Let's first answer the question, what is a mobile wallet, and how does it work? These are dedicated applications that allow users to store, manage, and send money using a compatible device. Among other key advantages of such apps that will be reviewed further in the article, the most prominent one is their wide support of popular payment methods:

• Payments with Credit and Debit Cards. After you have added your bank credentials to your mobile wallet account, you can use it to make online or in-store payments with the help of a bank card.
• Bank Transfers. Users can transfer money between bank accounts and mobile wallets.
• Contactless Payments. Contactless payments are another popular feature of mobile wallets, which utilize Near Field Communication (NFC) technology. With its help, two devices close to each other can exchange financial information for quick offline payments.
• Peer-to-Peer (P2P) Transfers. Some mobile wallets, like PayPal and Venmo, simplify sending money to your friends and family, offering lower fees for such transactions.
• In-App Purchases. You can also make in-app purchases, like accessing premium content or buying in-game items.

So, the next logical question is, what is a mobile wallet account, and how to create one? This is a kind of financial profile where you need to add your personal and financial data. Also, you need to enter your card details in the app, so it will be possible to make payments and purchases. Now, you may wonder what a mobile wallet purchase is, and the answer is simple. This is an ordinary transaction when you buy something online or offline using your mobile money app. There are different options for how you can do it regarding the certain type of wallet.

WHAT ARE THE TYPES OF MOBILE WALLETS?

So, as we've described what mobile wallets are, let's see what types exist. There are several main types that you need to know about:

Open wallets

This type of wallet isn't tied to any bank or particular platform and can be used for various purposes. When a customer installs such an app, they can make purchases, send money on any platform, and even withdraw cash. A well-known example of a mobile wallet of this type is PayPal.

Closed wallets

The essence of such wallets is that users can make transactions only within a specific brand or platform. In this case, using third-party withdrawal services or even paying for goods on other sites is impossible. A clear example of this type is the Starbucks mobile app, where all the transactions are limited to Starbucks stores.

Semi-closed wallets

Unlike the previous type, semi-closed wallets allow users to pay for services on several platforms. However, there should be an agreement between the merchant and the company that provides the mobile wallet service. One of the most popular examples of semi-closed wallets is Amazon Pay, which extends its transaction services beyond just the Amazon Marketplace.

So, now you know the main types of mobile wallets. Let’s check out the most popular ones among modern users:

Apple Pay

Apple Pay is designed for Apple users. This is a safe and convenient solution that allows users to make both online and offline purchases.

Pros:

• Apple Pay is pre-installed on almost every Apple device. You just need to add a card to start making purchases;
• Only an authorized user can make purchases (Touch ID/Face ID). Also, information about the user's bank cards is confidential and unavailable to third parties;
• Merchants worldwide accept a wallet, allowing users to make purchases without any restrictions.

Cons:

• Apple Pay is only available for users who own Apple devices;
• The use of such a wallet may be restricted in some regions of the world.

Google Pay

This mobile payment system from Google allows users to send, receive money, and make purchases securely.

Pros:

• You can quickly start using this wallet thanks to the user-friendly interface;
• When making purchases, there are additional verification methods to secure payments (fingerprint, PIN code);
• Users can shop both online and offline in many stores;
• Users receive additional benefits in the form of cashback and discounts.

Cons:

• The use of such a wallet may be restricted in some countries around the world;
• Some features may not be available in some regions;
• The wallet is not available for all banks.

Samsung Pay

Samsung Pay is a mobile wallet for Android users. Its users can make purchases and manage their cards and coupons in one place.

Pros:

• The app is available on Google Play, so there is no problem in creating an account;
• Data protection protocols are used to secure payments and protect information (biometric authentication and encryption technology);
• Users can take advantage of additional offers and bonuses.

Cons:

• Limited features access for some countries;
• This wallet does not support all types of cards;
• Synchronization issues may occur for some non-Samsung devices.

MOBILE WALLET BENEFITS

So, what are the main benefits of a mobile wallet? Here are the main advantages that open to the users of digital wallets:

Ease of use

Mobile wallets allow users to add and manage their funds without the need for physical cards or bank accounts. This applies to online transactions as well as offline purchases.

Security of information and payments

Among the key benefits of having a mobile wallet is that all transactions are secure because of the additional verification methods based on modern security technology. Most mobile wallets use encryption and tokenization to protect users' payment information. Also, extra security procedures are implemented each time a user makes a transaction, such as biometric authentication or the use of PIN codes that vary depending on the method of payment.

Rewards and loyalty systems

Most mobile wallets support loyalty and reward programs. For example, you can receive cashback, coupons, and additional discounts on various platforms.

Contactless payments

Thanks to NFC technology, users can easily and quickly make payments by tapping their smartphone or other device. So, it is easy to make in-store payments without using credit or debit cards.

Effective cost management

Most wallets offer additional features such as cost control. For example, you can set a monthly or daily limit on purchases and receive reports on your income and expenses in just a few clicks.

Integration with other apps

Almost all mobile wallets offer the ability to integrate with other apps you use all the time. You can make purchases or pay for in-app services with one click.

Multi-currency support

Another benefit is that most modern mobile wallets have multi-currency support. With this feature, users can seamlessly transact in different currencies, making it convenient for global payments and cross-border transfers.

IS A MOBILE WALLET SYSTEM SAFE?

When you choose a well-known mobile wallet, such as those mentioned above, you can be sure they use modern security measures. This includes encryption, tokenization, fraud monitoring systems, and more. They also offer biometric authentication for a higher level of safety.

Still, you need to take precautions to ensure the security of transactions. This includes always using a strong password and PIN, not sharing your details with others, and opting for two-factor authentication.

CONCLUSION

Considering the wide range of mobile wallet benefits, it is not surprising that they are so widely used nowadays. With their help, you can easily manage your funds, look up transaction details, manage rewards, and even integrate them with other apps for more convenience. Mobile wallet technology will only continue to evolve, so we can expect more interesting features shortly.