Mobile wallets and peer to peer payment refers to digital payment systems that permit users to transfer money to each other and to keep money in a “digital wallet” that is generally connected to their own bank account.
In recent times the concept of a mobile wallet has become more popular as countries try to digitize their economies to provide an inclusive monetary system outside of the traditional banking methods. As they are also easier to use and have less of a hassle to them than traditional methods of payment such as debit or credit cards has resulted in an easy alternative method to transfer funds.
In poorer and developing countries they have become incredibly popular with a significant portion of the previously unbanked having access to them. Furthermore, to increase access to mobile wallets many providers are including a bank backed bank account which is adding to the financial stability of these mobile wallet ecosystems. The ease of integration into the banking environment has resulted in a mass adoption from the senior businessmen and women to the street vendor day trader.
In wealthier and more developed countries mobile wallets are also often integrated into all alternative payment methods allow a user to utilize their mobile wallet for cash withdrawals, online payments, tap and go and public services. In addition to this, the startup costs to accept mobile payments is traditionally lower than existing bank methods which has resulted in the rapid adoption by small and medium enterprises.
A digital wallet, also known as an e-wallet, is a virtual storage space that securely holds a user’s payment information, such as credit card details, bank account numbers, or cryptocurrency addresses. It acts as a bridge between the user and the payment system. To use a digital wallet, users typically need to install a mobile app or create an online account with a wallet provider.
When a user makes a payment using a digital wallet, the wallet securely stores and encrypts the payment information, transmits the payment details to the recipient or payment gateway completing the transaction. Digital wallets may also offer additional features such as loyalty card storage, ticketing, or identification documents for enhanced functionality.
Peer to Peer (P2P) payment systems enable individuals to send and receive funds from their digital wallets without involving intermediaries reducing the complexity, speed and cost of making these payments.
To use a P2P payment system, users link their digital wallet or bank account to the payment platforms ecosystem and payments are conducted by entering or scanning the recipients payment information (such as a mobile number, email address or username).
P2P payment systems often provide real-time transaction notifications and additional value added services not seen in a traditional bank environment such as:
