Digital Wallet: Identification of risks in using e-wallets in purchasing online by

Business Administration students of University of Baguio

Digital wallets are rapidly becoming a widespread means of online payment.

More and more shoppers are adopting digital wallets at a very rapid pace. It is being
done due to convenience and ease of use. Majority of individuals nowadays, especially
the younger age, prefer to purchase necessities via smartphone or laptop. As a result, a
number of companies/firms are emerging day by day at a fast pace. There are
companies that generate huge profits from internet purchasing. The gap of the work is
restricted to the consumer’s experience and what they think about the main purpose of
genuine utility of E-wallets. The researchers aim to examine and study customers’
satisfaction level and the risk factors in use of E-wallet. 

Financial Risk

Financial risk refers to the potential for financial loss caused by the use of a
payment system (Yang et al., 2015b). Possible causes include: system malfunctions,
financial fraud, and additional transaction costs (Ryu, 2018). In terms of the E-wallet
market, cases of frauds and monetary loss on the user accounts are also commonly
found, which have become a concern for the users. Some previous studies also found
that financial risk is the main factor which the users pay attention to in a mobile payment
and can affect the perceived risk of the users in regard to the use of the service
(Pauchard, 2019; Ryu, 2018; Yang et al., 2015). In the research work of Upadhyaya
Abhay (2012), he looked into electronic commerce and e-wallets and came to the
conclusion that e-wallets allow us to send and receive payments from anywhere in the
world while also allowing us to manage our accounts from our mobile phones. Without
sharing personal account numbers, money can be moved from one E-wallet to another.
He has also highlighted the disadvantages of E-wallets, namely the need for
authentication in electronic payment systems.

Security Risk

Security risk refers to the potential loss caused by the illegal activity of hackers in
the payment service system such as the loss of control of data privacy and monetary
loss. Security risk is vulnerable to invasion of privacy such as the misuse of transaction
history, hack of credit card which integrated on the user account, that ultimately create
concern and hesitation of the users related to the use of the service. Chauhan Pinal
(2013) has studied E-Wallet: The Trusted Partner in our Pocket. According to him, the
key to the success of this payment method are anonymity of transactions, the cost of
transactions, as well as the plurality of functions (payment, travel card, e-key for building
access, etc.) but, still he feels that E-wallet has some disadvantages in terms of
interoperability and standardization of security and formats.

It is also a manipulation of E-wallet services through disguising to launder

money. Since E-wallet accounts can be accessed from another mobile, it is easier for
the money launderers to conceal the identity of a user and attempt to make a money
transaction. Launderers are able to move illegal funds without the user's knowledge.
Mobiles have personal and corporate information  of  customers  which  may carry  out
sophisticated  attacks.  This  attacks users  by  phishing emails.  It is  an attempt  to
trap  a user  to disclose the information. 

Perceived Risk

Perceived risk is defined as the concern over the transaction security in using
mobile payment (Zhao et al., 2019). According to Bailey et al. (2017), perceived risk
refers to consumers' perceptions of the negative consequences of using new
technology. The perceived risk reflects the users' perception of the disadvantage they
will face if their personal data are disclosed and financial loss happens (Shao et al.,
2018). Ryu (2018) stated that the use of fintech such as GCash and PayPal is always
accompanied with a high level of risk and uncertainty, but fintech also has the
advantage of making users' transactions easier than traditional financial services.

Performance Risk

Performance risk refers to the loss caused by the service which does not operate
as advertised and expected (Giovanis et al., 2019). Performance risk which is possible
to happen, for example, slow system performance, unexpected system error, and
wireless networks (Namahoot & Laohavichien, 2018; Yang et al., 2015b). The E-wallet
service is vulnerable to errors which ultimately results in the dissatisfaction of the users.
The adverse impacts of cyber-attacks on the mobile payment service providers and the
users, as well as the risks associated with the use of information systems, performing
risk management becomes imperative for business organizations.

Psychological Risk

Psychological risk refers to the loss of peace of mind or self-perception caused

by frustration, pressure, or psychological anxiety due to unfulfilled hope (Ariffin et al.,
2018; Choo et al., 2016). When it comes to payment services, one of the things that can
put anyone at risk psychologically is if the system isn't working properly or if a
transaction fails. As a result, businesses must pay more attention to such issues in
order to minimize or eliminate the psychological danger that users face (Namahoot &
Laohavichien, 2018; Yang et al., 2015b). Additionally, some people struggle with their
spending habits when money is dependent on an electronic device rather than a
physical item. Because the money doesn't feel real, proper budgeting does not take
place. If somebody is already struggling to maintain a budget with a traditional wallet, an
electronic wallet might make the issue even worse.

Payment Service Providers Risk

Payment  Service  Providers  (PSPs)  provide Point of Sale (POS) contactless

terminals for mobile payments e.g. for Near Field Communication (NFC) enabled POS
terminals as well as aggregated payment services  for  consumers  by  processing 
data  from different channels including face to face (card present) payments, online
payments  and  mobile/contactless payments. (Bosamia, 2018).
 Accepting payments from territories that are known to have a higher risk of fraud
also presents issues for Payment Service Providers. Finding payment infrastructure that
is able to support smooth and secure transactions is crucial. Choosing to operate in
these areas, therefore presents security challenges, which could jeopardise the entire
network. (Banking Circle, 2021). As a result, Payment Service Providers  payment
gateways  represent  an interesting  target  for attackers that  seek  to compromise  the 
payment data  in  transit from the consumers to the different acquiring channels of
hackers. Attackers  might  seek  to  compromise  to  attack  on payment  gateway  and 
break  the  security  of  POS contactless terminals that PSPs provide to the consumers
to host on their premise/network that may lead to system shutdown of the digital wallet
application.

Convenience

It is more convenient for many consumers. Users are able to get through a
purchase in mere seconds, all you need to do is tap your device to the payment
receptacle, or have your mobile device scanned, to pay for the items you are
purchasing. so, the experience of purchasing items becomes quicker and easier –
leading to a greater sense of satisfaction. Furthermore, with faster transactions,
checkout lines within stores become much shorter (Vapulus, 2018).

Users do not need to fill-up many forms to get access in using e-wallets unlike
banks. It is more convenient for consumers to transact without many forms. 

The Internet has changed the way we do marketing. Gone are the old days
where traditional marketing ruled most businesses, and new players had a hard time
getting in the market.( Apex Global, 2021) Since online marketing is popular nowadays,
e-wallets are the easiest way to pay. The use of technology is more profitable for online
users; in other words, easier application of a technology will make it the payment
method of the choice for consumers to perform transactions. With a mobile wallet, you
can pay quickly by holding your phone over the payment terminal and verifying the
purchase. Most transactions can be completed in just a few seconds.

Allows you to use Digital cash in a number of places such as train tickets, bus
tickets, gas, water, electricity, etc. PayPal also has partners such an s-eBay, best buy,
southwest and many more. Thus, E-wallets offer a variety of options and save your
time.

Authorization

Electronic wallet  functions like a debit card when initiating a transaction. They
require you to use security protocols like inputting your two-factor authentication and
one time use PIN numbers to authorize payment. They also use advanced encryption
and virtualization techniques to ensure customer’s financial information is kept secure.
For devices with biometrics, a payment would require your fingerprint to authorize it.
That gives you another layer of security against unauthorized purchases or the financial
risks associated with identity theft (Gaille, 2018). 

After a transaction in an e-wallet, a message will be received by the receiver that

the transaction is already done. The biggest concern is that SMS messages transmitting
an OTP in plain text can be intercepted by fraudsters in what's known as a man-in-the-
middle attack. According to  Na. Vijayashankar (2019) There are many apps residing in
smartphones that routinely take permissions for reading and sending SMSs. Any one of
these apps can have a vulnerability, and a fraudster's app can ride over such an
application and read and write SMS without having to install a separate app.

Personal Authentication

E-wallet services implement a customer identity verification which measures the

customer’s authenticity. Some firms also screen their customers before admitting them
to ensure that they are not subject to international sanctions or involved in adverse
media stories that could elevate their risk of money laundering. They also screen if
customers have an issue regarding discrepancies and inconsistencies in customer
identity  verification.

Consumer Incentives

Many electronic wallets offer incentives to encourage consumers to use them

instead of traditional payment methods. You may find discounts apply to certain
purchases, such as fuel, food, or travel. Some businesses may work with your e-wallet
provider to offer specific discounts as well. That means you have the potential to save
money without changing your spending habits. You’re just changing how you pay for
those items (Gaille, 2018). In addition to credit and debit cards, certain mobile wallets
also can store loyalty cards and gift cards, allowing you to have them on hand at all
times without putting a bulge in your wallet.

Seamless Transaction 

Forget about typing in card numbers when shopping online from your phone –
you can pay for some purchases with your mobile wallet. Using a mobile wallet instead
of a card on file when you shop online means you can reduce the number of places
where your card numbers are stored, without sacrificing a speedy checkout. Digital
wallets give the owner of online stores the possibility to speed up the customer
checkout process. By using electronic wallets, retailers enable shoppers to purchase
more quickly and easily and take advantage of impulse purchases and the
psychological advantage of not using cash or credit cards.
DANA, JAN LYKA B.
AGATON, ANGELICA C.
CALATAN, JENNY P.
CALPITO, NICHOLE JOY C.
GASCON ESTELITA Y.
MANANSALA, KYLA MAE E.
PINMILIW, NICA MAE
BERNALES, ROMMEL C.