If I were to ask you whether you use any digital wallets in your day to day life, would you know the answer? What if I were to ask you what you use digital wallets for?
The fact is digital wallets have stealthily crept in to most peoples daily lives without them really know it.
If you have used Apple Pay, Alipay, Samsung Pay, PayPal app or Venmo, then the answer to that question is ‘yes’. But did you know that digital wallets are also becoming ubiquitous in the cryptocurrency space and making it super easy to invest in, access and transact cryptocurrency? Digital wallets for both fiat and crypto are the future of money, making it easier, faster and cheaper to move money and value around the globe. This also means it’s becoming easier to make money from your money!
If you want to know how all of this has come about and will impact you and your money, read on!
What is a digital wallet?
If you search Google for ‘digital wallet’ a whole bunch of sites will come up with definitions that say digital wallets are software payment systems. They store your credit card and debit card information….. They’re a convenient way to pay by phone… Blah, blah, blah. But…we think this is just a small part of the story about digital wallets and how they will impact our money future.
Digital wallets are much bigger than just payment systems. They are financial ecosystems on your phone that allow you to access different financial services and to transfer value via the internet – without the friction of current banking services. Cathie Wood of Ark invest cleverly calls digital wallets ‘money over IP’. The reference is a nod back to when Voice over IP technology revolutionised once expensive phone communications.
Digital wallets are expected to do the same for banking and financial services – which is exactly why you need to know about them!
What can you do with digital wallets?
Payments with digital wallets
Today, you can use digital wallets to directly purchase and pay for items – like with Apple Pay or Samsung Pay. You can also use them to send money seamlessly and instantly to friends and peers, like with Venmo. In fact, recent research from the US found that 42% of millennials have a Venmo account. Millennials seem to prefer mobile payments and will drive a lot of the upcoming growth in digital wallets. China’s mobile payments jumped from $1 trillion in 2014 to $26 trillion in 2018 – driven largely by the coming of age of millennials. Here’s some recent data from Australia’s biggest bank about mobile payments with digital wallets:
Peer to peer transactions & other financial services
While people are mostly using digital wallets for payment services, digital wallets are more than just transferring fiat currency around.
You can use them to split payments over dinner, earn rewards on purchases, order ahead at your favourite coffee shop or buy and send gift cards.
They are also used widely now in the cryptocurrency space to access, transact, store and invest cryptocurrency. You can access, store, buy, sell, transfer and invest your cryptocurrency right now, with a few taps of your mobile phone screen, using a range of digital wallets.They’re also used to integrate with cryptocurrency exchanges and trade crypto, as well as to enter into smart contracts to lend and borrow cryptocurrency and earn interest.
We expect digital wallets to expand rapidly in coming years to these additional areas:
- storing value
- earning interest – Goldman Sachs is already offering higher interest on digital wallet accounts because their cost to serve the customer is lower with these products
- integrating with and accessing personal financial planning and money management providers
- accessing tailored insurance
- accessing stock exchanges and trading platforms
- tax planning.
Who are the main digital wallet providers in cryptocurrency?
We’ve already talked about Apple Pay, Samsung Pay, PayPal, Venmo. Along with these providers is Google Pay and V.me by Visa. If you’re dealing in fiat currency, these are the most popular digital wallets that you’re likely to come across.
But the cryptocurrency space is where digital apps are exploding because the entire ecosystem is already online – crypto doesn’t suffer from the legacy infrastructure issues of traditional finance when it comes to going digital.
Cryptocurrency digital wallets
Some of the most popular digital wallets for cryptocurrency include
- Binance app
- MetaMask wallet
- Exodus wallet
- Celsius app
- Blockfi
- Trust Wallet
You can read about each of these apps – what they do, how secure they are and what you can use them for – here.
How digital wallets are making it easier than ever to invest in crypto
The intersection between fiat and crypto digital wallets is where it gets really interesting if you’re looking at investing in cryptocurrency and making your money make money. Who doesn’t want more money!
There are already some cutting edge digital wallet providers that provide fiat currency on-ramps to invest easily and directly in cryptocurrency.
You can now buy, sell and store large cap cryptocurrencies in the PayPal app.
If you’re in the US, Coinbase wallet now has a direct integration with PayPal to buy crypto directly from your PayPal account.
eToro combines both crypto trading and fiat trading, along with on ramps between the two, in their eToro app. (On-ramps are just a way to exchange fiat into crypto – the more convenient this is, the more crypto is expected to become a mainstream part of the global money system).
Here are some other fiat on-ramps to crypto that you can use to buy crypto directly in to your digital wallet (some in mobile and some in web browser form):
The thing to know about these digital wallet on-ramps between fiat and crypto is that their service fees are different. You need to do your own research to find the best fees for your transaction. If you want to see a comparison of some of these services to transfer fiat into crypto in your digital wallet, check out this page.
How does this all impact your finances?
Digital wallets will become a big part of your financial future so its probably time we all get used to interacting with them!
If you invest your money, send money to family and friends, use your mobile to make purchases at the store, do mobile banking, like to earn rewards with your purchases, want to manage your budget, or even your entire personal financial portfolio – chances are in the next few years you’ll be doing it all through digital wallets kept right on your phone.
You’ll also have multiple wallets on your phone that allow you to cheaply and seamlessly exchange fiat currency for crypto in seconds, and then add that crypto into a smart contract allowing you to earn money on your money by lending it out to others.
Your money won’t all be stored in the one bank app in the future. It’ll be moved about to where the best value is. Using digital wallets! And that’s why digital wallets – if you get your head around them now – can help you make money on your money in the future.
Many of these things you can do today if you know your way around the cryptocurrency and decentralised finance space. If you don’t, perhaps look into it. You might be surprised about the financial benefits that digital wallets for cryptocurrency can bring.
If you want to read more about which digital wallets to use with your crypto it’s all laid out for you here.