A digital wallet, also known as an e-wallet or mobile wallet, is an electronic device, online service, or software program that allows one party to make electronic transactions with another party bartering digital currency units for goods and services.
Increasingly, digital wallets are being made not just for basic financial transactions but to also authenticate the holder's credentials.
Typically, digital wallets are stored on the client side and are easily self-maintained and fully compatible with most e-commerce websites.
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 satisfaction of their overall purchase.
The M-PESA mobile payments system and microfinancing service has widespread use in Kenya and Tanzania,[6] while the MasterCard PayPass application has been adopted by a number of vendors in the U.S. and worldwide.
Indian consumers are leading the way with 76.4% using a smartphone to make a purchase, which is a drastic increase of 29.3% from the previous year.
Consumers also benefit when using digital wallets because their information is encrypted or protected by a private software code; merchants benefit by receiving a combination of protection against fraud, faster receipt of payment, decreased transaction costs, and decreased theft loss.
Most, if not all digital wallets offer advanced security features e.g. biometric authentication and encryption, this protects the financial information of the users thus preventing fraud.