Digital wallet

A digital wallet (also known as an e-wallet) allows users to make electronic commerce transactions quickly and securely.

A digital wallet functions much like a physical wallet. The digital wallet was first conceived as a method of storing various forms of electronic money (e-cash), but with little popularity of such e-cash services, the digital wallet has evolved into a service that provides internet users with a convenient way to store and use online shopping information.

The term “digital wallet” is also increasingly being used to describe mobile phones, especially smartphones, that store an individual’s credentials and utilize wireless technologies such as near field communication (NFC) to carry out financial transactions.^[1][2][3][4]

An individual’s bank account is usually linked to the digital wallet. They might also have their driver’s license, health card, loyalty card(s) and other ID documents stored on the phone. The credentials can be passed to a merchant’s terminal wirelessly via NFC. Certain sources are speculating that these smartphone “digital wallets” will eventually replace physical wallets.^[5] The system has already gained popularity in Japan, where digital wallets are known as Osaifu-Keitai or “wallet mobiles”.

Researchers at the University of Toronto's Faculty of Information have put together a "Global Overview of Digital Wallet Technologies".

Technology

A digital wallet has both a software and information component. The software provides security and encryption for the personal information and for the actual transaction. Typically, digital wallets are stored on the client side and are easily self-maintained and fully compatible with most e-commerce Web sites. A server-side digital wallet, also known as a thin wallet, is one that an organization creates for and about you and maintains on its servers. Server-side digital wallets are gaining popularity among major retailers due to the security, efficiency, and added utility it provides to the end-user, which increases their enjoyment of their overall purchase.

The information component is basically a database of user-inputted information. This information consists of your shipping address, billing address, payment methods (including credit card numbers, expiry dates, and security numbers), and other information.

Setup and use

A client side digital wallet requires minimal setup and is relatively easy to use. Once the software is installed, the user begins by entering all the pertinent information. The digital wallet is now setup. At the purchase/check-out page of an e-commerce site, the digital wallet software has the ability to automatically enter the user information in the online form. By default, most digital wallets prompt when the software recognizes a form in which it can fill out, if you chose to fill out the form automatically, you will be prompted for a password. This keeps unauthorized users from viewing personal information stored on a particular computer.

ECML

Digital wallets are designed to be accurate when transferring data to retail checkout forms; however, if a particular e-commerce site has a peculiar checkout system, the digital wallet may fail to properly recognize the forms fields. This problem has been eliminated by sites and wallet software that use ECML technology. Electronic Commerce Modeling Language is a protocol that dictates how online retailers structure and setup their checkout forms. Participating e-commerce vendors who incorporate both digital wallet technology and ECML include: Microsoft, Discover, IBM, Omaha Steaks and Dell Computers.

Advantages for e-commerce sites

Upwards of 25% of online shoppers abandon their order due to frustration in filling in forms. (Graphic Arts Monthly, 1999) The digital wallet combats this problem by giving users the option to transfer their information securely and accurately. This simplified approach to completing transactions results in better usability and ultimately more utility for the customer.

See also

• Billeo
• Bitcoin
• Electronic cash
• Electronic commerce
• Micropayment
• Money
• Moneybookers
• NETELLER
• Paypal

References

• Principles for a free, powerful and stable monetary system for the digital era by S. Poirier
• Haag, Cummings, et al.; (2006). ‘’Management Information Systems for the Information Age’’ (3rd ed.). Mc-Graw-Hill Ryerson. ISBN 0-07-095569-7
• RFC 4112: ECML specification: [1]

References

1. ^ "US Operators Prepare to Launch Isis Digital Wallet Pilot" PC World. Retrieved 25 April, 2011
2. ^ " iPhone 5 can not be the Digital Wallet?" Brand Imposter. Retrieved 25 April, 2011
3. ^ "The Android-powered digital wallet raises security questions" Android Apps. Retrieved 25 April, 2011
4. ^ "The Proportionate ID Digital Wallet" University of Toronto. Retrieved 25 April, 2011
5. ^ "Smart (phone) money" Financial Post. Retrieved May 1, 2011