When Can Digital Wallets Replace Our Physical Wallets?

As I was going through my Facebook Feed, one friend’s post caught my attention. See, he found himself in a pickle: At the grocery store, he realized that he had left his wallet at home.

However, like most of us, the chance of him forgetting his smart phone is next to nil.

So, with just the cell phone, he had to figure out a way to pay for his grocery items without having to return home and fetch his wallet.

Going through his phone’s pool of apps, he found his virtual wallet issued by a locally based payment processor. The way it goes is that if he had topped up the wallet earlier, he could withdraw the amount through the Automated Teller Machines (ATM) of one Philippine bank. Easy peasy.

But what if the digital wallet is empty? Here is where it gets a bit tedious. To top up the wallet with cash, there is the e-banking facility of one other bank that offers 100% fee rebate (i.e., no fees!). It is a bummer that this is not the same bank that owns the ATM machine. It goes without saying that those who are not account holders of that bank will not be able to load this e-wallet online straightaway.

If there’s one takeaway from this friend’s experience, it is that there is more that can be done to lessen these roadblocks in the way systems of different players in the market — such as intermediaries, payment network, financial institutions and mobile network operators — work. The fewer the friction encountered when transacting online, the lesser we would mind to leave our physical wallets — our fiat currencies, specifically — at home.

Picking the Right Digital Wallet

Virtual wallets come in various (digital) forms and sizes. That is, they differ from each other in features: In the technologies used (NFC, QR codes, bar codes), payment methods allowed (debit cards, credit cards, cryptocurencies), specialty cards added (prepaid cards, gift cards), and device compatibility (phones, tablets, web browsers), among others.

There are virtual wallets that work on operating system-specific devices only. Others do not have the capability to send payments received, to a bank account within a matter of minutes. Or if they do, the choice of account is limited to certain members of a banking network. Still others focus on peer-to-peer payments only. From users’ perspectives, these factors can restrain their ability to transact with anyone “anytime, anywhere”.

So, we at Traxion.Tech have been asking ourselves: What if there is one platform that can seamlessly consolidate all payment transactions coming from all payment channels? After all, for transaction to be truly seamless, digital wallets have to work as a one-stop source for payments.

For consumers and businesses’ perspective, their practical and immediate hope is to find a faster and simpler way of lending to peers, saving, paying and giving at lesser transaction costs.

Most of all, the process must be secure.

Managing Risks through Blockchain

Today, the distributed ledger technology (DLT), which is sometimes used interchangeably with the more popular term, “blockchain”, holds great promise as the technology that can address issues with fraud and theft in mobile financial services such as digital wallets.

The blockchain that many know is the one associated with the cryptocurrency bitcoin, but new forms of blockchain systems now have some features different from bitcoin’s blockchain.

More financial service providers are beginning to appreciate why an open-source, peer-to-peer DLT can make transactions more secure, transparent (to the involved parties) and traceable. A 2018 survey by the Association of Financial Professionals also shows that among the emerging technologies today (artificial intelligence, robotic process automation, etc.), blockchain is perceived by financial professionals as “having the lowest risk” in terms of exposure to new threats in their organizations.

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Ann Cuisia-Lindayag is the CEO of Traxion.Tech, which is creating a bank-in-a-wallet using a blockchain-driven environment. You can contact her at Acuisia@traxionhub.com