We live in an age where physical cash is no longer king. Most customers and businesses now prefer online payments through credit cards or digital wallets. Although these alternative payment methods have made transactions more convenient for all parties, transferring money between each system, especially between digital wallets can be tricky.
Let’s discuss why transferring money from one digital wallet to another is hard.
What Is a Digital Wallet?
Digital wallets are exactly what their name suggests: non-physical wallets. They typically come in the form of an app that you install on your smartphone, computer, or any other smart device. You can use digital wallets to eliminate the need to carry around a bulky wallet.
PayPal and Venmo are just a few examples of popular digital wallets today. They allow users to send money to friends and retailers with a simple click of a button. Other digital wallet apps that you may have heard about include Samsung Pay, Google Pay, Apple Pay, and Wise.
How Do Digital Wallets Work?
Digital wallets have varying functionalities and features. Some only need a QR code to finalize a transaction while others may require an email address or phone number. Ultimately, digital wallets all serve the same purpose: To send instantaneous payments to friends and merchants, regardless of location.
Digital wallets use a method called tokenization to substitute sensitive card data with surrogate data that protects users from fraud or theft. During a transaction, these tokens are then delivered as payment to the retailer. Thus, sensitive payment information is not saved on the wallet’s device or in the merchant’s systems.
Note: Not all stores accept digital wallet payments. Remember to look for the digital wallet payment symbol on a store’s point-of-sale system or card reader. It should look like a Wi-Fi symbol drawn sideways.
Why Is It Hard to Transfer Money Between Digital Wallets?
Digital wallets make it easier for people to send and receive money. No matter where you are, you can get funds almost instantaneously through a digital wallet. Moving your money from a bank to a digital wallet is a breeze.
You simply register your bank account in your digital wallet and start transferring money. Unfortunately, it’s not the same case when it comes to wallet-to-wallet transfers.
It’s almost impossible to directly transfer money from one digital wallet to another. This is often because each platform has a different configuration that might not be compatible with another wallet. Providers may also have conflicting transaction policies preventing users from making direct transfers when they want.
If you do want to transfer your money from one wallet to another, the best way is to transfer the funds to your bank account, link that bank account to your other digital wallet, and withdraw the amount there. It’s not the most convenient arrangement, but it’s what users have to work with so far.
Fortunately, some digital wallets do have partnerships, allowing users to make free and easy transfers without using a third-party platform. A few examples are Skrill and Neteller which allow users to transfer money to other digital wallets like Yandex, Webmoney, and AstroPay.
Are Digital Wallets the Same as Banks?
Digital wallets resemble an online bank in the sense that it allows you to store virtual money in your account. It also lets you complete purchases and transactions without physical money. However, unlike banks, digital wallets let you pay merchants directly as if you were giving them cash. Approval is also much faster because your money doesn’t have to go through third-party providers.
Pros and Cons of Digital wallets
Although digital wallets have made the retail industry a much more accessible and convenient place, it doesn’t come without their fair share of drawbacks. Let’s take a closer look at the pros and cons of digital wallets:
As mentioned, digital wallets make it faster and easier for people to send and receive funds. It also offers a more secure way for consumers to pay for products and services that they purchase on a daily basis. If you’re someone who struggles with budgeting, using a digital wallet may also provide a practical way to save money.
Digital wallets allow you to see and track your funds on the go. Being able to monitor how much money you have and where it’s going can help you get better control over your finances. You can avoid overspending and easily reach your saving goals for the month or year.
Besides wallet-to-wallet transfer restrictions, there are other disadvantages to using digital wallets that you should know about before you consider using them. For instance, transferring money from one platform to another may require expensive transaction fees. Venmo asks for a 1.75% transfer fee for each transaction that you open. This can be anywhere between $0.25 and $25—depending on the amount you send.
Digital wallets provide users with a quick, efficient, and secure means of making virtual payments. Although it will take a while until it completely replaces physical wallets, you should expect a rise in its usage in the coming years—especially in the US. If you haven’t gotten accustomed to digital wallets yet, now is the time to do that.
Also, read: How Do Crypto Payments Work?
Author: Bash Sarmiento
Bash Sarmiento is a writer and an educator from Manila. He writes in the education, lifestyle, and health realms. His academic background and extensive experience in teaching, textbook evaluation, business management, and travelling are translated into his works