While I am #stayinghome, I have been digging into digital wallets. The adoption of these digital wallets and payments will probably accelerate in the next few years.
PayPal is a "standard" digital wallet and one of the first fintechs- I remember getting a PayPal account in 2000- that gives my age way!
On the other hand, Venmo is a wallet that uses payments as a means of social communication. Makes the awkward work of repaying friends and paying for your split of the tab easy.
The third type of wallet is a payment platform (what Facebook is trying to build). FB is trying to emulate WeChat, where payment is a lubricant to a digital ecosystem where users and merchants transfer value seamlessly. Combine payments with the FB marketplace, and you can see how it will scale with 2BN+ users.
How do these Wallets work? Look at my schematic diagram below. A digital wallet sits atop the banking infrastructure. The information flow on the wallet is instant. The information flow is managed digitally by the wallet co., while the bank performs the money transfer.
One challenge faced by Wallet Fintechs? To ensure that money is retained in the wallet by the customer and not withdrawn immediately. Why? So that they enjoy the interest income of the funds stored in their bank account.
