The only constant in life is change. – Heraclitus
Heraclitus should have lived nowadays to observe the real meaning of ‘’Change’’. Our lives have been changing swiftly and continuously after the invention of the internet. For millennials, since they have been born into this dazzling technology, it is impossible to imagine a pre-internet world with physical bank queues, hours of waiting for a single transaction and international money transfers that take days and days. But we have been there! We used to limit our expectations of banking systems until the propagation of internet technology knocked our doors. Nothing would be the same again for any services we knew. Financial ecosystems were just one of the solid changes in our daily routine, but definitely a pretty influential one.
Today, our monetary system has converted into something limitless, effective and dynamic. In such a world like ours, no one has time to wait on the line to operate a single money transfer. Yes! Online banking was a milestone in gaining trust for digital platforms holding our assets and investments. But it was just a step in the right direction towards a revolutionary perspective. This new aspect of banking has come in shapes such as e-wallets, money transfer services and payment gateways. Let us make it clear for you stepwise.
What is an e-wallet?
E-wallets (Electronic Wallets) are digital wallets which can come as an online service, electronic device or a software program. These wallets enable users to operate electronic transactions in digital currencies for goods and services. Think of it as an actual bank account or a physical wallet where you can control online. Basically, it is an account in your pocket! You can use your e-wallet on online shopping sites, in streaming services or online betting sites. Furthermore, you can pay your utility bills, annual taxes, student loan or even charity donations. Sky’s the limit! More than this, all these transactions can be easily operated in your living room’s comfort! It is amazing! Isn’t it?
What is a payment gateway?
Although many people think that e-wallets and payment gateways are opponents in this competitive sector, they are actually apples and oranges. A payment gateway is a payments service facilitator authorizing credit card or debit card payments and it transfers information between a payment portal and the FEP (Front End Processor) or acquiring bank. Maybe it would be more accurate to compare a payment gateway to a cashier in a retail outlet or a PoS machine, since this technology is made use of verification of a credit card owner to confirm that the buyer is not a fraud and the transaction is not a fraudulent attempt.
To clear the clouds we want to underline the difference between e-wallets and payment gateways. Basically, via payment gateways, a customer must insert card details initially and then be redirected to another page where they will be asked to write either an OTAC (One-time authorization code) sent to their mobile phones, use a fingerprint or enter a 3D-security password. This process is time consuming and can be really challenging for someone who is not prone to internet skills. On the other hand, an e-wallet holder doesn’t have to waste time writing card details, as they are already kept in a virtual wallet. All they need to do is enter a username and password. It is as simple as that!
Here we come to the puzzling dilemma! Which one merchants must use? E-wallets or payment gateways? Although there is no difference between these two in terms of security, filling in forms requirement of payment gateways creates a negative impression on online shoppers. A recent study indicates that upwards of 25% of online shoppers quit their order processes on the grounds of boredom in entering their card details within forms. Therefore, we can conclude that it would be wiser for merchants to use e-wallets instead of payment gateways.
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