The Pros and Cons of Digital Wallets

June 9, 2014
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Photo Credit: Miki Yoshihito Flickr
Photo Credit: Miki Yoshihito Flickr

, As more people adopt a digital wallet purchasing method, you might wonder if it’s something you should do too. Is it safe to store your personal information digitally? Is it any more convenient to use near field communication to make purchases?

Take a look at these advantages and disadvantages to decide for yourself if you should use a digital wallet.

Pros

It Slims Your Wallet

If you don’t like carrying around stacks of credit cards and other documents, a digital wallet is a great way to slim down while still having your important information on hand. Instead, you can carry your smartphone or you can opt for a one credit card digital wallet option that allows you to make purchases with any of your accounts from the same card.

Purchases are More Convenient

While it’s certainly convenient to save space in your pocket, digital wallets offer more convenience than that. In addition to credit card information, they can also store loyalty cards and coupons. For example, Urban Airship helps companies convert these options into digital versions to help customers go paperless. With other apps, digital wallet users can take advantage of their devices’ location capabilities and receive digital coupons based on where they’re shopping.

Budgeting Has Never Been Easier

With the rise of digital wallets comes the incredible concept of digitizing your budget, too. No more recording transactions by hand, saving receipts, or manually entering your expenses and income into computer programs. Now you can link your wallet directly to a budgeting app that does all the work for you.

While there are numerous options available, OnBudget is a great model of what digital wallets are capable of. The app works alongside a prepaid card. Simply transfer money onto the card and make purchases with it. The mobile app will automatically do all the calculations for you. It delivers graphs and other reports to help you stay on budget. Other similar apps sync with your bank, credit card, PayPal, and other accounts to help you stay on budget by keeping track of your income and expenses.

Cons

If You Run Out of Battery, You Can’t Make Purchases

Having a smartphone-based digital wallet is convenient in many ways, and if you lose or forgot your phone, it’s no different from losing or forgetting your wallet. But here’s the problem: A traditional wallet doesn’t run out of battery. If you have your cards on you, you can make a purchase. However, using your smartphone as a digital wallet can prove problematic when the battery is dead.

You Can Only Purchase From Compatible Retailers

If your idea of a digital wallet is using your mobile device’s near field communication (NFC), then you can only make purchases from a retailer with a POS terminal. Since these aren’t widely used yet, you might still have to carry around your traditional wallet for a few years before you can completely toss it out. Not only that, but your phone has to have NFC capabilities, and not all smartphones have that yet.

There are Still Safety Concerns

While certain digital wallet companies like Google Wallet have security measures in place, it’s still not clear how safe digital wallets are for making purchases in brick-and-mortar stores. Some digital wallet programs will leave you responsible for all losses even if they encrypt data, making traditional credit cards with fraud protection a more appealing option.

At the same time, there are concerns about how hackers might get a hold of your information with NFC since you’re transmitting your data wirelessly. However, these concerns are no different from those surrounding the use of credit and debit cards that store your information online, so it’s up to users what they feel comfortable with.

Digital wallets are still growing in popularity, but in the near future we’ll likely see more retailers switching to a digital wallet concept so much that the digital wallet makes the traditional wallet something of the ancient past. Weighing the pros and cons is up to the user, but as popularity grows, the disadvantages will soon become of little concern.

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