With the advent of smartphones came the invention of digital wallets. We are close to saying goodbye to carrying cash and credit cards. What are digital wallets? How are they used? How safe is their use? You will get answers to these and other questions.

1) The Dawn of Digital Wallets

The idea of digital wallets was born in the 1990s, but it only developed much later. When smartphones hit the market, bank mobile apps were first introduced. With these applications, there was a revolution in the economic sense. People could access their money much more easily. After that, they created digital wallets that are much easier to use than mobile banking apps.

2) Defining Digital Wallets

A digital wallet is more commonly known as a mobile or e-wallet. It contains your personal data, but also financial data from your cards and accounts. It is very easy to use for payment and transactions and has sensitive financial data of every user. You can use it for both in-store and online payments, but also for a wide variety of financial transactions between other digital wallet users. When you have a digital wallet, there is no need to carry credit and debit cards, because the data from your cards and bank accounts are stored in the digital wallet.

If you are worried about whether your data is safe on your digital wallet, you should know that all data related to your personal and financial data is encrypted and that only you can access that data.

Digital wallets are very convenient, and efficient and have improved security for different types of payments.

3) The Convenience Factor

Digital wallets have benefits, some of which are:

1. Simplified transactions
   No need to write a check or pay in cash. Simply open the digital wallet app and complete the payment with a tap or scan. With digital wallets, payments are made quickly and efficiently, and with this approach you don’t have to carry a checkbook, cash or even credit/debit cards with you.
    
2. Simplified online shopping
   When you have a digital wallet, paying online becomes faster and simpler, because it does not require entering the card number and your data when you want to buy something in an online store. You only need to choose your favorite digital wallet as a payment method. You need to complete your online shopping very quickly with a few clicks or biometric verification.
    
3. Simple Peer to Peer transactions
   If you want to send money to friends, or family or pay a loan installment, you can do it all with the help of a digital wallet, without the need to physically send or perform such types of transactions. You can complete all this with a few clicks in your digital wallet.
    
4. Reduced Clutter
   Sometimes you have a cluttered wallet with different types of cards such as credit cards, debit cards, loyalty cards, and gift cards. You can transfer all cards to a digital wallet, or rather enter their data into a digital wallet and use them as needed. That way, you won't have an overcrowded wallet with cards.
    
5. Easy international transactions
   If you shop or travel abroad, you will no longer need to convert from one currency to another to pay for something. With digital wallets, you can pay without converting from one currency to another. This makes it much easier to pay while you spend time abroad either for business or pleasure.

4) Security Measures

When using applications such as a digital wallet, certain security measures must be in place, namely:

1. Tokenization: a shield for sensitive data
   Tokenization is a technique that replaces sensitive data with tokens. This means that when you add your card details to a digital wallet, the wallet generates a token that represents that card. This token is used for specific transactions, so even if a hacker intercepts the token, he will not be able to use it, because the token has value only for a specific transaction, and outside of that transaction the hacker will not be able to use it. 
    
2. Biometric authentication: your unique key
   Biometric authentication is unique for each person because each person has a unique fingerprint, facial features, or pupil of the eye, which represents the perfect protection of your data. And if someone happens to get your hands on your phone, they can't use your digital wallet to pay, because that person doesn't have the same fingerprints, facial features, or eyeballs as you.
    
3. Multi-factor authentication: strengthening the fortress
   Many sites and companies use multi-factor authentication to protect their data, but also to ensure that the right person has access to certain data. This authentication is also used by the digital wallet. It works by linking your digital wallet to a phone number and sending a code that only you know to your smartphone or a two-factor authentication app, and only you can access the digital wallet that way.
    
4. Encryption: data protection from prying eyes
   Many applications have encryption as a way to protect personal data. It is no exception with digital wallets. Even if the data reaches another person, he cannot use that data, because he needs to have encrypted keys to be able to access that data. Only the owner of the digital wallet has those encrypted keys.
    
5. Device authentication: an extra layer of security
   In today's technology world, many devices require authentication and can only be used by their owners. This means that authentication can only be done from a device owned by a specific person. If someone tries to access your digital wallet from another device, he will not be able to do so, because he is working from an unknown device.

5) Types of Digital Wallets

The types of digital wallets can be different, and it is up to you to choose which type of digital wallet suits you best.

1. Closed wallets - keep them safe
   Closed wallets, as the name suggests, are used by one company that provides certain services. For example, when you buy cosmetics or some other products, you have a card that works by collecting points so that you can later buy something with a discount.
    
2. Open wallets: versatile and widely accepted
   These wallets can be used for different types of payments both online and offline in different types of stores.
    
3. Semi-closed wallets: flexibility within limits
   This type of wallet is balanced because it can be used on the one hand in a certain network of merchants, and on the other hand, it can do different types of transactions. Such is PayPal, for example.
    
4. Wallets of mobile network operators: cellular turnover
   These wallets are offered by mobile network operators and they help their users to pay bills for your phone in an easier way, but you can also pay for top-up for your phone if you have a prepaid number.
    

6) Challenges and Considerations

1. Security issues: Protecting the virtual vault
   Ever since technology has advanced, there has been a great danger of hackers. To prevent this with digital wallets, you should create unique passwords and usernames. In addition, you should regularly update the digital wallet software.
    
2. Fragmented ecosystem: compatibility and interoperability
   Digital wallets, like any other type of technology, are advancing rapidly, so different types of wallets are being developed more and more. Some stores may not support payment though the digital wallet you are using. That's why there is a possibility that you can't get the digital wallet you want because it's not compatible and interoperable with your phone. Firms that create digital wallets strive to create digital wallets that are compatible with users' mobile phones.
    
3. Limited adoption in some places: technological infrastructure and cost
   Smaller merchants are slow to adopt the use of digital wallets due to the unavailability of the Internet and technology to process the digital payments.
    
4. Consumer education: Bridging the knowledge gap
   Many consumers are not familiar with the technology used in the world today. That is why people must become familiar with the use of digital wallets so that they can use them and keep up with the times.

7) The Future of Digital Wallets

What is the future of digital wallets? I think it will be more and more advanced and will eventually be activated with the voice print, iris scan, DNA or other biometric data unique to you. Artificial intelligence will also be built into it, which will act as guides for people to use digital wallets.

Conclusion: We used to use regular wallets, but today we have a wide variety of digital wallets. It is up to you to choose the one that best suits you and your needs.