How are Digital Payments better compared to Cards
Throughout history, the methods we've used to exchange money for goods and services have evolved, along with our societal advancements. In ancient times, the ways we paid for things were simple and reflected the uncomplicated nature of those societies. Fast forward to the present day, and our payment methods have become sophisticated, thanks to our technological progress.
In recent years, a noticeable shift has occurred towards favoring cashless transactions as the primary mode of financial exchange. Despite the continued existence of physical currency, the widespread adoption of digital payment methods underscores the prevalent reliance on advanced technology in our day-to-day financial transactions.
Many of us nowadays like using digital wallets because we find it more convenient and we don't need to carry a lot of cash around. At the same time, there are millions of people who use credit cards instead of digital wallets. It's like a personal choice. But here's the thing: digital wallets and credit cards are not the same. They're two different ways to pay for stuff, and they come with different offers and deals.
In 1969, the credit card emerged, changing how we handle money transactions forever. Now, there's a new revolution in currency that might make credit cards not so popular soon. Digital cash is a type of money you can't touch but you get it by downloading an app and linking it to your bank account. Every time you use your phone to pay for a cab or handle bills with an e-wallet, you're part of this digital cash revolution.
What is a Digital Wallet ?
Digital wallets are like virtual accounts on the internet where you can keep your money, make transactions, and see a record of all your payments. Everything related to your payments like your name, credit or debit card details, where you want things shipped, and where you get your bills is stored in one place. This way, you can use it easily whenever you want to buy something.
Digital wallets operate in two main ways. First, users can store money on their smartphones for future purchases. Second, the service securely stores a user's banking or credit card details and deducts funds directly from the linked account when a purchase is initiated.
Why are Digital Payments better than Card Payments ?
Convenience
Imagine trying to remember a long string of numbers from your credit card every time you shop including 16 digits, an expiration date, and a CVV code (those last 3 numbers). It's not something many people can easily recall. On the other hand, almost everyone remembers their email address and password, right?
With digital wallets, shopping becomes much simpler. You don't need to dig through your wallet for those lengthy credit card details. Instead, you can quickly enter your email and password (which is already in your memory) or use a PIN sent to your phone for verification. And if you have one of the latest smartphones, you might even just scan your fingerprint or face to authorize a purchase and no need to type in anything complex.
Faster Transactions
Digital payments, especially those involving contactless methods like NFC (Near Field Communication) or QR code scanning, significantly reduce transaction times. Compared to the process of swiping or inserting a physical card and entering a PIN, the speed of completing digital transactions is a notable advantage.
Security Features
As more people shop online using their mobile devices, the concern for security has grown. Nobody wants to risk entering their credit card details in public places like the subway or a restaurant, where the information could be vulnerable to theft.
Digital wallets address this security challenge effectively. When you use a digital wallet, your credit card information isn't directly sent to the online store. Instead, a secure process called tokenization completes the purchase within the digital wallet. This means that even if you're in a crowded place, like the subway, the person in front of you can't sneak a peek at your bank account details.
If you lose your credit card, someone could use it for transactions in your name. However, the risk is lower with a phone for two main reasons. Firstly, phones are easier to track with various apps available to help you locate them. Secondly, breaking into your phone and accessing your e-wallets is more challenging due to robust encryption. Most e-wallets and phones require your fingerprint to unlock, adding an extra layer of security.
Reduced Fraud Risk
Digital payments, with their advanced security measures, can be more resistant to certain types of fraud. Tokenization, in particular, ensures that even if a transaction is intercepted, the thief obtains only a useless token rather than sensitive financial information.
Integration with Mobile Devices:
Digital payments are tightly integrated with mobile devices, offering users a centralized platform for managing their financial activities. This integration extends beyond transactions to include features such as real-time alerts, expenditure tracking, and budget management.
Accessibility
Digital payments provide a more inclusive financial solution, especially in areas where traditional banking infrastructure is limited. As long as individuals have access to the internet or mobile networks, they can engage in digital transactions, reducing the reliance on physical banking locations.
Contactless Options
The contactless nature of digital payments is particularly advantageous in situations where hygiene and safety are prioritized. Users can make purchases without physically interacting with payment terminals, reducing the risk of spreading germs.
Rewards and Incentives:
Many digital payment platforms offer rewards programs, cashback, or loyalty incentives. These perks provide users with additional value for their transactions, encouraging loyalty to specific digital payment services.
Easier Tracking and Budgeting:
Digital payment platforms often come equipped with tools for tracking expenditures and managing budgets. Users can easily review their transaction history, categorize spending, and gain insights into their financial habits, contributing to better financial management.
Global Accessibility
Digital payments facilitate international transactions more efficiently than traditional card payments. Cross-border transactions are streamlined, often with lower fees and faster processing times, contributing to a more connected and accessible global financial landscape.