Businesses have more choices when it comes to payment options for their online and offline customers. According to John Rampton, serial entrepreneur and investor in the payments industry, “We are seeing a real shift in the payments industry based on consumer and business adoption of more cashless payments for online and in-store purchases. It’s opened up more options for consumers and those in business to participate where previously they were unable to while providing merchants and businesses with more ways to attract customers.
One of these new transaction methods is a digital wallet, which can provide some key advantages for small and mid-sized businesses.
Defining the Digital Wallet
“A digital wallet is just like it sounds,” notes Chalmers Brown, CTO of eCash, a mobile wallet and digital currency company. “It’s a place to store money or, in this, case financial information like credit card and debit card numbers, site passwords, loyalty cards, and membership cards. This digital payment device replaces a physical wallet with a computer or smartphone so that transactions can occur in a retail store with a smartphone app or online with a desktop app.”
Despite technology and these advancements, what has happened is that payment options have become more complex and increased in the number of choices. There are checks, paper money and coins, debit or credit cards and PayPal type services. The choice of which to use is often made right at the point of purchase. However, having a digital wallet for this process can now simplify our lives. The decision on what to use is made once and default payment choices are made for different transactions.
After that, we can simply go on and get done with what we need without revisiting this decision, time and time again, at the point of sale. Instead, we scan our finger, swipe or do a PIN pad entry. The digital wallet also keeps track of balances and payments. It’s a system that all types of demographics can learn to love very easily for the convenience and security.
Numerous digital wallet providers are available to help your business, including those that add a module to your online store and checkout process. These are also possible to add for point-of-sale transactions by incorporating hardware that contains technology like near-field communication (NFC) technology so you can accept and read digital wallets used by customers in your store.
Numerous companies have also made digital wallets available to customers, including Google, Samsung, and Apple. In fact, it was the introduction of these digital wallets that researchers believe is now increasing their use. In a white paper from Mobile Payments Today, entitled, Mobile Wallets 101, statistics included from Blackhawk Network that found that “25 percent of respondents had an app incorporating mobile wallet capability on their smart- phones. The survey also found that 14 percent of respondents had made a mobile payment from their smartphone or tablet, and that 18 percent of consumers had used alternative payment methods such as mobile wallets, Apple Pay or Bitcoin. Also, 68 percent of mobile payment users reported that they were using alternative payment methods more in 2015 than last year.
Providing Key Benefits
There are many reasons to consider using digital wallets in your small to mid-size business:
- A digital wallet provides a seamless experience by simplifying the purchase process with stored customer payment data.
- Once the purchase experience is simplified, more customers are likely to continue their shopping and complete their purchases. When the process is long and drawn out, customers often abandon their online shopping carts.
- A digital wallet payment option is a nice addition to the traditional payment choices that may take some time to catch on but that illustrates your willingness to adapt with the times.
- A digital wallet option for any loyalty program a company uses is instantly improved due to the ease of use and never forgetting the physical card when it’s needed the most. With more customers now likely to use their digital version of their loyalty cards, businesses can get the true value from those programs. GPS location data could even be integrated to further add value for the business and customers with special localized offers and other perks that keep them coming back for more.
Despite these benefits and gradual adoption, other surveys show that digital wallets are a low priority for consumers. The same white paper from Mobile Payments Today noted a 2015 Gallup survey that said only 13% of the 17,000 consumers surveyed had a digital wallet on their smartphone.
The primary reason that adoption has remained somewhat low with digital wallets has to do with security concerns. The primary concerns were hackers or what might happen to their digital wallets and the critical data within them if they lost their smartphone or had them stolen. Many respondents also noted that they did not know enough about digital wallets to make a decision on whether or not to have one.
The other main challenge with digital wallets is getting more merchants to accept them. Since it involves a change in equipment, many merchants have hesitated either due to the investment or the same lack of knowledge about the real value of accepting digital wallets from their customers for transactions.
While these challenges remain, they are slowly being addressed by the wave of digital wallet technology and options by recognized brands like Visa and PayPal. These brands are taking the time to provide information on security and benefits to further convince consumers and businesses that this type of cashless future will be more convenient and safer than carrying a pocket full of plastic cards.