Research Paper on Digital Wallets

Introduction

Human beings by their nature never stop to build new things that can make their life simpler. Every day, they are coming up with technologies that help the world perform faster and more efficiently. E-commerce (electronic commerce) is one aspect that has continued to grow exponentially impacting the global market significantly. As a result of e-commerce growing expanding globally and billions of dollars being exchanged each year, more and more applications and technologies have continued to be developed. One such technology is digital wallets. A digital card is a kind of electronic card that is used for online transitions through the use of devices that can access the internet such as a smartphone or a computer (Rathore, 2016). This means one can purchase numerous items sold online and even items in the store. Additionally, for the digital wallet to work, one needs to link their individual bank to the provider so as to make payments. Over 712 billion dollars were transacted using the digital wallet in 2017 only clear showing its influence and growth globally ("Engage Customers With Mobile Wallet Marketing", 2018). Nevertheless, to completely understand how digital wallet function and their impact on the national and global market. Some important aspects to consider when analyzing what e-wallets entail include; government regulations, types of digital wallets, its history, cryptocurrency and positives and negatives impacts of e-wallets. Although digital wallets were not widely adopted in the 1990s, the positive values outweigh its detrimental attributes in the modern era.

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The Digital Wallet Revolution

As much as it can be hard to understand E-wallets or digital wallets have actually been there since the 1990s. However, just like some inventions, this technology was adopted by consumers until the 21st century since it is never easy to fully bring payments into the digital world. What is more interesting is that the current digital wallets is the third generation and it is proving to be the most adapted by consumers. During the climax of "the dot-com boom", different entrepreneurial companies developed the first generation of e-wallets. This first generation failed mainly because it was not well marketed and the public could not entirely trust it but technically the technology did not have any problem (Shen & Gillespie, 2018). Additionally, the first generation e-wallets did were offered by software publishers who were relatively small and unknown and hence consumers did not trust them with their financial matters and information. With numerous challenges surrounding this first generation e-wallets, the technology came and went without being unnoticed.

The second generation e-wallets were different and much improved than the first one. Specifically, it had renowned money dealing companies such as Visa, MasterCard and leading lenders and banks. However, this generation too had its limitations majorly being that a Visa digital wallet could only work with Visa only while that of MasterCard could only work with MasterCard only (Team, 2018). Additionally, there other numerous and nagging restrictions that made consumers not to be attracted to their services. Microsoft .NET Passport also ventures during this generation but just like MasterCard and visa, it had many restrictions again failing to attract customers (Team, 2018). However, the third generation e-wallet which we have today is totally different from the previous generations and seems to have done everything in the right way. The third generation digital wallets offer its services using software programs that can be found on the computer or smartphone of the consumer (Team, 2018). Furthermore, this kind of digital wallets can hold information from more than one credit card and are not limited to any kind of websites. This is what most customers prefer to have.

Digital Wallets Technology

An e-wallet is equipped with both information and software component (Von Behren & Wall, 2017). The e-wallet software component offers both encryption and security for actual transition and for the personal information given by the consumer. Digital wallets are totally compatible with all websites involved in electronic commerce and they are also easily maintained since they stored on the side of the customer ("You say you want a revolution? Digital wallets are about to bring one", 2018). An organization that wants to offer digital wallets services, it is supposed to create a thin wallet also known as "a server-side digital wallet" so that it can be able to organize clients information and link with e-wallets providers efficiently (Von Behren & Wall, 2017). These "server-side" e-wallets are currently being preferred by most online retailers because of their added utility, efficiency and security they give to the customers thereby increasing their satisfaction and probability of them coming back (Von Behren & Wall, 2017).

The information component of the digital wallet is more of a database that describes the information of the user. The key information that is contained in this component includes payment methods (security numbers, expiry dates and credit card numbers), billing address, and shipping address (Shen & Gillespie, 2018). Additionally, digital wallets also do contain both digital wallet systems and devices. For instance, Dunhill which provides a biometric wallet which is a dedicated e-wallet device which is capable of holding an individual's card and cash using a mobile connection such as Bluetooth ("You say you want a revolution? Digital wallets are about to bring one", 2018). More and more updates and inventions are being made from day to day to make digital more efficient and secure to all users.

Types of Digital Wallets

Digital wallets have gone beyond just the conventional use to being used to validate the credentials of the holder. For instance, a holder who wants to buy some drugs or other sensitive products can have his or her identity verified by using the digital wallet (Chircu, 2015). This among many other factors is making digital wallets to be the customer's choice when it comes to their financial issues. With that being said, digital wallets are however of different kinds. The two major types are;

Device-Based Digital Wallets

Device-based digital wallets allow their customers to pay for various goods or services without availing their debit or credit card by using a technology known as "Near Field Communication" (Chircu, 2015). Rather, users can wave their Near Field Communication-capable smart or device card or their phone in the nearest contactless reader ("You say you want a revolution? Digital wallets are about to bring one", 2018). Some of the great examples of device-based digital wallets are Samsung Pay and Apple Pay since they require a Samsung phone, apple watch or an iPhone depending on the provider. Additionally, PayPal and Google Wallet both have applications that can be used the majority of phones since the two companies do not have phone-related services. This application allows them to give their customers a platform to experience device-based digital wallets (Von Behren & Wall, 2017). Example of such applications is Blockchains.my that can be found on major devices such as smartphones and tablets.

Internet-Based Digital Wallets

Internet-based digital wallets on other hand allow their customers to add debit or credit card details to an individual profile or a personal account. These details or information is then kept well on file and when the users purchase various goods and services online, they sign in in their online accounts using a password and access their funds to make the purchases. This type of e-wallet allows customers to pay for purchases without giving the person or card information to the various retailer websites they are purchasing. The two biggest and best examples of internet-based digital wallets are Google Wallet and PayPal. Other major digital wallets include that offer services offline include Amazon Lockers, AmazonFresh, and Dash, Asda, Sportsgirl, Lloyds Pharmacy where else major online stores and platforms include Samsung Pay, Alipay, Krungsri, Octopus O! ePay and Huawei Pay (Chircu, 2015). Another important type of digital wallet is cryptocurrency wallet

Cryptocurrency Wallet

A cryptocurrency wallet is the type of digital wallet that is mainly used to receive, send and store "digital currency" (Corbet et al., 2018). One great example is Bitcoin which is essentially a universal payment system and this kind of a system works without a single administrator or a central bank (Corbet et al., 2018). Most of the coins in a cryptocurrency usually have a number of recommended third party wallets or an official wallet. For an individual to venture into cryptocurrency, they must learn and master how to use a cryptocurrency wallet.

Crypto-currency wallet does not work in a straightforward manner. The "cryptocurrency" on itself is not really kept in a wallet. Rather, a private key (a secure and unique code that only the user and his or her wallet know) is kept which show the possession of a public key which is a "public digital code" that is connected to a particular currency (Corbet et al., 2018). This means that a cryptocurrency wallet stores both public and private keys and at the same times allows the user to receive and send coins. The major types of Cryptocurrency Wallet and most trusted include Litecoin Core, MyEtherWallet, Ethereum Wallet and Bitcoin Core Wallet. Others which are found universally are Coinomi and HolyTransaction.

The biggest question with Cryptocurrency Wallets is whether they are really secure or not since they have no single administrator or a central bank. Nevertheless, Cryptocurrency Wallets are naturally built to be totally secure (Marian, 2015). However, the level of security will be different across various types of the wallet. Additionally, how one uses the wallet determines how secure it would be and also the selection of the wallet provider.

Cryptocurrency Wallets comes with different types that give its users various ways to access and store their digital currency. Cryptocurrency wallets can be groped onto 3 different groups being paper, hardware, and software. Paper wallets are printed and hence can be secured by the user in places where there is more security. To have a paper cryptocurrency, on must transfer their funds from their personal software wallet to a printed paper wallet indicating a public address (Marian, 2015).

Hardware wallets, on the other hand, store their customer's private keys on a hardware device such as a memory card or a USB. Hardware wallets are considered more secure since as much as they use the online platform to make a transaction, they are stored by the owner offline meaning he or she can maintain it better. To use this kind of wallet, the user just needs to plug in their device or hardware to a computer, enter the chosen pin send or receive currency and confirm. On the other hand, software wallets are entirely online and come I three types that are online, mobile and desktop. Online wallets are reachable from any computer-enabled device in any location since they run on the cloud. However, they are not totally secure as they are controlled by a third party meaning theft as a result of hacking can happen. Desktop wallets are unique in that they are installed only in one personal computer and can only be accessed in that particular computer they were downloaded on (Narayanan et al., 2016). However, if the computer is stolen or somehow an invader manages to log in, there can be a massive loss. Mobile wallets are found in phones and use various applications to operate. They are also controlled by a third party.

Government Regulations and E-Wallets

Most digital wallets like device-based digital wall...