Technology companies like Google and Apple are developing ways to make managing finances easier through options such as digital wallets. This new way to pay has taken off in the US, with digital wallets released by Google, newcomer ISIS, Skrill from Moneybookers and even more payment options from online commerce sites like PayPal.

But regardless of the specific option that you use, digital wallets all work on similar foundations.

Basically you store your credit or debit card details online through a secure cloud-based service, then utilise near-field communication technology (NFC) on your smartphone to make payments.

In theory, all you would need in Australia to start using a digital wallet is the right app and MasterCard PayPass or Visa payWave processing machines in stores.

As well as being as quick and easy as using a contactless payment card, digital wallets mean you do not have to carry all your physical cards as well – so if you forget your actual wallet when you go to the shops but still have your phone, you can still buy everything you need.

A World Of Card Convenience

With more and more people using smartphones for everything from talking to emails and music, it makes sense to be able to pay for purchases via phone as well.

In the US, credit card issuers, processors (including MasterCard and Visa) and phone companies like AT&T, Sprint and Virgin have embraced digital wallets as the way of the future.

As the Google Wallet website puts it, you can “use the same wallet whether buying in store or online”, making it easier to keep track of spending and manage your accounts in one place.

But there could be even more benefits for tech savvy smartphone users, with most digital wallets also offering daily deals and promotions.

That means not only could you find it easier to pay for everything from your phone (or a centralised online account), but also more affordable.

While true digital wallets are yet to be embraced in Australia, the popularity overseas, and the now common sight of PayPass and payWave machines could soon change things here.

Some of the pros and cons of digital wallets

So we already know the digital wallets offer convenience, security and flexibility for your transactions. But like most things, they also have some drawbacks that you’ll need to be aware of when comparing them.

Some of the pros of digital wallets are:

• No need for cash: By reducing the need to carry cash or cards, it’s less likely to be lost or stolen.
• It’s quicker: With their faster and easier payments, it’s especially quicker for contactless or mobile based transactions.
• Versatile: They provide access to a wide variety of payment methods like your credit cards, debit cards or even cryptocurrencies.
• Get rewarded: They can store your rewards cards, earn you discounts or cashback if you use them for certain shops.
• Easy management: Digital wallets have the ability to help users track their spending which in turn can help budget more effectively.

Some of the cons of digital wallets are:

• Rejection: Your digital wallet may not be accepted by all merchants or EFTPOS machines. So if you forgot your wallet you might be left high and dry.
• Hidden fees: You might be charged a fee for some transactions, such as that pesky currency conversion fee.
• Backwards compatibility: You may get hit with compatibility issues, like software updates or 5G network availability, or they might not be supported anymore. Bankwest launched their Halo ring with bravado, but it is now gone from the market

So should you get a digital wallet?

So there you have it. Digital wallets are more than just a convenient way to pay for your goods and services. They’re also a powerful tool to manage your finances, protect your identity, and access a variety of benefits and rewards. In 2023 they’re not a futuristic concept, but a reality that has transformed the way we think about and use money. Whether you choose to use a digital wallet for online shopping, in-store payments, or peer-to-peer transfers, you will enjoy a faster, safer, and smarter way to pay.