What is the digital wallet? explain google wallet as an example of digital wallet

Digital Wallet

Encryption software that works like a physical wallet during electronic commerce transactions. A wallet can hold a user's payment information, a digital certificate to identify the user, and shipping information to speed transactions. The consumer benefits because his or her information is encrypted against piracy and because some wallets will automatically input shipping information at the merchant's site and will give the consumer the option of paying by digital cash or check. Merchants benefit by receiving protection against fraud.

A digital wallet functions much like a physical wallet. The digital wallet was first conceived as a method of storing various forms of electronic money (e-cash), but with little popularity of such e-cash services, the digital wallet has evolved into a service that provides internet users with a convenient way to store and use online shopping information.

(2) The term “digital wallet” is also increasingly being used to describe mobile phones, especially smartphones, that store an individual’s credentials and utilize wireless technologies such asnear field communication (NFC) to carry out financial transactions.^[1][2][3][4]An individual’s bank account is usually linked to the digital wallet. They might also have their driver’s license, health card, loyalty card(s) and other ID documents stored on the phone. The credentials can be passed to a merchant’s terminal wirelessly via NFC. Certain sources are speculating that these smartphone “digital wallets” will eventually replace physical wallets.^[5] The system has already gained popularity in Japan, where digital wallets are known as Osaifu-Keitai or “wallet mobiles”.

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Google Wallet As An Example Of Digital Wallet\

The digital wallet is a new variety of mobile banking technology. It is an alternative to paying merchants with cash (bills and coins), debit cards or credit cards. With the digital wallet, the user pays a merchant electronically by passing a smart phone by a sensor at the cash register or checkout terminal. Current concepts for the digital wallet rely on application of a technology called near field communications, or NFC.

Interest in developing digital wallet technology is spurred by projections that 70% of U.S. residents will own smart phones (such as iPhones and Androids) by 2014, and that 52% of these smart phones will support near field communications applications.

Privacy advocates are concerned about the potential for parties such as merchants, coupon services and market research firms, among others, to gather detailed information about people and their shopping habits. Researchers into the psychology of finance worry that the digital wallet will promote reckless spending, just as credit cards have, since the funds thus spent lack the tangibility of paper money and coins. Other analysts, by contrast, see a benefit to using the digital wallet, since it would facilitate personal budgeting and the tracking of spending. Smart phones used as digital wallets conceivably can be programmed to alert users about reaching personal budget limits, and to dissuade or even block their attempts to patronize certain merchants or to buy certain categories of goods or services.

Another potential positive is that data security promises to be much better with the digital wallet than with the traditional plastic credit or debit card, according to some analysts. The reason for this is that data encryption and user authentication can be more robust with this new technology.

he digital wallet is a specific technology within the broader fields of mobile banking and mobile money. Meanwhile, clearXchange is a new joint venture between several major U.S. banks in the mobile banking field.

Alternate Spellings: While there is no other common spelling for digital wallet, smart phone often appears as a single compound word, smartphone.

Examples:

Google, MasterCard, First Data Corp. and Citigroup are launching Google Wallet in the summer of 2011. It will be compatible with hardware supporting MasterCard PayPass, which allows the user to pay by tapping a credit card with an embedded smart chip on a terminal. PayPass was used in a recent trial at select subway stations and routes in New York City, as an option to pay fares.

Google also is working with 16 leading retailers (including American Eagle Outfitters, Walgreens, Macy's and Subway) to develop a new point of sale service called SingleTap. The system would draw down balances stored on users' smart phones.