Over the last several years, the world has witnessed changes in the global economy, especially due to the Covid-19 pandemic. Merchants and consumers have helped to propel the popularity of contactless payments. Digital wallets, also known as electronic wallets or E-wallets, offer the convenience of making purchases in-store, online, or through apps. For contactless in-store payments, purchases are made with the tap of a card, or through the easy scan of a smartphone or smart watch. Digital wallets are a safe option for consumers looking to exercise ease or who are excited to move away from the bulk of physical wallets.
Launching an E-wallet service in today’s business landscape is not only smart, but essential. For businesses, changing customer demands and the need to stay competitive are only two reasons why these services are critical.
Digital Wallets Explained
A digital wallet is cloud-based software, that runs on mobile devices like computers and smartphones. Digital wallets allow customers to store funds, make financial transactions, and track their payment histories. Customers can use digital wallets through a bank’s mobile app or alternative solutions including PayPal, Apple Pay, Venmo, and Google Wallet. What makes digital wallets increasingly attractive for consumers is that physical cards become an unnecessary part of the purchase equation.
A new digital wallet specifically for online shopping was recently announced. The team behind the launch is comprised of seven industry heavy hitters including Wells Fargo, Bank of America, and JPMorgan Chase. Early Warning Services (EWS), recognized for running the money-transfer service Zelle, will manage this digital wallet. The new platform is expected to launch later in 2023.
It’s clear that innovation continues to infiltrate the digital wallets space. And as E-wallets continue to become more sophisticated, businesses will realize many benefits including better purchase transactions, resulting in better sales and fewer missed purchases.
Recognized Business Benefits
Digital wallets have proven to be fast, reliable, and secure. For businesses choosing to implement digital wallets, there are many benefits they can realize internally and externally. By utilizing digital wallets, businesses are poised to enhance the customer experience, offering a seamless way to complete transactions. Because digital wallets reduce fraud through encryption, enhanced security allows customers to feel more secure making their purchases. This not only accelerates processing speeds but also eliminates the risk of losing customers due to a loss of trust.
ECommerce businesses can manage products and online sales with greater efficiency with digital wallets. A lack of data is a real challenge for organizations as 41% of merchants lack actionable analytics from their payments data. Digital wallets give businesses access to real-time customer data, which can lead to cross and upsells. Access to customer data gives businesses the ability to launch products quickly, allowing them to scale faster and introduce new revenue streams. Further, by streamlining payments, businesses improve the customer journey, helping to set themselves apart from the competition.
Internally, businesses can exercise better control over their own finances and potentially save money. The ease of using digital wallets reduces the need for manual work, decreasing human errors and pressures on AR and AP departments. Business leaders can also use digital wallets to pay employees more efficiently.
Ways Digital Wallets Aid Businesses
Digital wallets enable businesses to strengthen relationships with their customers by instituting customer loyalty programs. Through wallets, businesses can introduce discounts, coupons, and add-ons, like complimentary services, that benefit their customers. These incentives help to heighten customer loyalty and improve retention.
Using digital wallets as an all-in-one payment terminal solution, businesses have less dependence on traditional pay sources, specifically cash registers and scanners. They can better manage their finances and potentially increase conversion rates. Additionally, wallets give businesses a boost by allowing for customization. Based on individual business needs, digital wallet apps can be customized to increase support, security, and integration.
With a better understanding of the benefits related to implementing digital wallets and having explored how they aid businesses, it’s important to recognize the technologies driving digital wallets and different types of wallets that exist.
Technology Behind Digital Wallets
- Near-field communication (NFC) – Devices connect through radio fields allowing for contactless payments through digital wallets. Transactions are rapid and are completed quicker than chip or magstripe payments
- Magnetic secure transmission (MST) – Uses magnetic signals, enables smartphones to connect to a payment device
- Soundwave-based payment – NFC-based payment using sound to complete transaction
- Beacon – Point-of-sale (POS) technology that finalizes online and offline payments
- Quick response (QR) code – Merchants generate QR codes for payment; Customers can scan and make payments
Digital Wallets for Financial Management in Business
- IoT wallets – Payments are enabled through wearable devices, appliances, and other ways that connect wirelessly
- Open wallets – Open wallets are created through partnerships between financial institutions and digital banking platforms with other banks. Users are permitted to transfer funds and use ATMs with this semi-closed model
- Closed wallets – Users are permitted to store funds/make payments only to the issuer of the wallet
- Semi-closed wallets – Online and off-line transactions can be made by users at certain locations/merchants where the issuer has ties
- Crypto wallets – Users can send, accept, and store cryptocurrencies
Finding Value in Digital Wallets
The increased interest in utilizing digital wallets and modernizing payment systems is global as 4.4 billion customers are forecast to use digital wallets in 2023. The changing face of the digital and global landscapes, along with increased consumer demands, has heightened the need for businesses to adopt digital wallet technology. As businesses implement these technologies, they can expect to see increased benefits, including higher customer retention rates, better sales, and greater revenues.
Apexon brings leading solutions to the financial services industry. Working across the financial services spectrum, Apexon helps market leaders and emerging startups leverage digital to deliver new products and services, tailor customer experiences, add new revenue channels, and enhance customer loyalty. Check out Apexon’s contributions to help a mobile wallet company and how its fueled technology innovation for a global payments company or get in touch with us directly using the form below.
Also Read: Streamlining Cross-Border Payments with ISO 20022 Standards
