What are digital wallets and how are they transforming eCommerce
As a business owner you need to be vigilant to be able to respond to changes in customer behaviour – particularly when it comes to payments. Advances in technology affect the banking and payments industry as much as any other sector so keeping up with developments enables your business to stay responsive to changing market forces.
One of the areas experiencing rapid development is digital payments, and most particularly, digital wallets.
According to Roy Morgan, 72% of Australians are using digital payment solutions with most preferring platforms other than their domestic bank.
It is estimated that by 2022, the value of mobile payment apps will reach $14 trillion.
These statistics show that any SME should offer e-wallets as a payment method, particularly any business engaged in e-commerce as any part of their operations.
What is a Digital Wallet?
The definition of a digital wallet according to Investopedia is “a system that securely stores users’ payment information and passwords for numerous payment methods and websites.” It is also known as an e-wallet.
Essentially, the wallet stores a user’s payment information such as bank account details and debit and credit card details. Some wallets (such as PayPal) may also hold balances.
Wallets facilitate easy, secure payments and eliminate the need for the user to carry a wallet with cash or cards., instead being able to make payments via their smartphones.
Who Uses Digital Wallets?
A study undertaken by Forester Consulting, commissioned by KMPG, identifies the most active group of wallet users as “Power Users”.
Power users are younger and affluent, love technology, own an above average number of devices, and are quick to try and embrace new technology applications. Their preferred payment method is digital wallets.
The next user group is the Light User. Although comfortable with technology, light users adapt more slowly and adopt new systems more slowly primarily because they lack the level of technical knowledge of the Power User. This lack of technical prowess tends to make them more concerned about security and stability of online systems.
These fears are even greater for the non-user. They are probably convinced of the benefits of digital wallets but are fearful of their perceived risks of the technology.
As a business owner you need to provide robust digital wallet payment methods to retain the power users, to enhance the take up of light users, and convince and convert the non-users.
The Security Issue
It is understandable that consumers have concerns however, thanks to the use of encryption and tokenisation, it is a much more secure payment method than providing card details into an online form or using a physical card offline. There is a much lower risk of duplication of details or identity theft.
With the payments industry recognising the benefits, convenience and security of digital wallets as a secure payment method, investment in increasing the availability and improving the technology continues. They not only offer these benefits to the consumer, but also to businesses and merchants. Payments by e-wallet are faster, efficient, and more cost effective than other methods.
The infrastructure will continue to expand making this method more accessible to greater segments of the consumer population on a global scale.
Ongoing education is the key to enhancing the take up of e-wallets as a preferred method of payment.
Technology will enable the increase the capability of digital wallets themselves, such as being able to include coupons and offers, which will make them even more attractive.
As a business, to benefit from the advantages that seem obvious, it is vital you keep updating your digital wallet payment options as technology allows and continue to educate your customers on the benefits to them.
About the Author
Pay Advantage is Australia’s leading payment solutions provider, offering a number of convenient and flexible payment options to small and large organisations. Whether you’re looking for a reliable direct debit company, custom virtual terminal, upgrade your billing with BPAY or ability to accept credit card payments, they can provide it all backed by their PCI compliant technology and award winning service.