Digital wallets have gained a lot of popularity over the past years. Thanks to the expansion of online business and e-commerce, customers now have a wider range of options to securely and conveniently pay for their purchases.
According to a report by Square, the COVID-19 pandemic has also led to a dramatic increase in digital payment adoption “all in the name of a safety-first approach to business” with the number of cashless businesses in the U.S. that utilize Square’s service going from 8 percent on March 1 to 31 percent on April 23 in 2020.
More than 100 million Americans are expected to use proximity mobile payments (i.e., digital wallets like Google Pay, Venmo, Apple Pay, Cash App, etc.) in 2021.
“Contactless payment is not just taking the form of traditional credit and debit cards waved in front of a payment terminal, but more so from mobile wallets … and retailers’ mobile apps,” said Oscar Orozco, eMarketer director of forecasting at Insider Intelligence.
To take full advantage of this shift in consumer behavior, small businesses need to expand their payment methods to provide a frictionless shopping experience.
What is a digital wallet?
A digital wallet is an electronic method to securely store sensitive payment information, including credit cards, debit cards, gift cards, electronic cash, etc. Terms such as digital wallet, mobile wallet, and e-wallet are often used interchangeably, and technically include slightly different services.
Digital wallets use advanced technology to make payments from your mobile phone. Instead of carrying cash or debit and credit cards, digital wallets allow you to access various payment options via a digital account.
For businesses, a digital wallet is another payment method you can offer customers. Digital wallets have become a top choice for customers who need to make payments. The digital payments segment is projected to reach US$6,685,102m in 2021 as a result of more shoppers opting for this convenient and secure payment method.
How do digital wallets work?
Customers can access digital wallets from their smartphones. These payment applications can be conveniently downloaded from the App Store and Google Play Store.
Once a user creates and verifies an account they can add their credit or debit card to their digital wallet—as most work with top card issuers and payment providers—and the device will use NFC technology to allow for contactless payment at a retailer that accepts specific digital wallets.
Benefits of digital wallets for small businesses
Most customers are now using digital wallets to purchase goods and services. Here’s a look at key benefits of offering mobile wallet payment options to customers.
1. Improve customer experience
Customer experience is everything. It defines the success of your product or service and is crucial to retain customers. Offering a wide array of payment options allows customers to choose familiar payment methods. In this case, digital wallets are more convenient.
Shoppers can pay for goods or services without swiping a card, entering a PIN, or signing for a transaction—essentially, allowing the transaction to take place without touching anything. To improve adoption rates, you can incorporate rewards or points for customers who pay with digital wallets.
2. Increase brand credibility and trust
Offering digital payment options can improve brand credibility and choice. Early adopters “love the futuristic sexiness of buying stuff with their phone,” and often have previous experience using the apps like PayPal, Square, etc.
Well-known digital wallets already imbue a holistic impression of trustworthiness in the app experience. By offering this type of contactless payment, some of that trust inherently transfers to you as customers feel more in control of a few areas:
- The security of their bank account information
- Use of personally identifiable information
- Control of when and how payments can be made
Expanding payment methods to include digital wallets can also improve your company’s ability to compete with established brands who have readily adopted contactless payments. Moreover, digital payments can speed up checkout and save on credit card processing fees.
3. Offer secure digital payment methods
Security is the biggest concern when it comes to digital payments. However, digital wallets are often more secure than physical wallets that hold credit cards and cash.
Consumers are now more wary of their financial privacy than ever before. Industry security standards for digital wallets dictate the most effective preventative measures with the use of a consumer authentication factor. Asking a user to enter a password or PIN is more often a welcome task than an annoyance.
For digital payments, users can incorporate two-steps verification on mobile devices. Businesses that offer secure digital payment options can more readily avoid fraud since mobile wallets can process payments directly from a coupled banking institution. Furthermore, Apple Pay and Google Pay don’t share data beyond what’s required to make transactions, and don’t use what they collect internally for marketing.
4. Access real-time data
One of the greatest benefits of accepting digital wallets is the capture of real-time data during the checkout process. Accepting digital wallets can provide access to a customer’s shopping history and preferences. As a result, data-driven companies can segment customer data to personalize the shopping experience.
Customer data is becoming useful in more and more tools—analytics, sending personalized emails, running A/B tests, etc. This kind of data is helpful for understanding your customers and their experience with your product or service. There are so many things you can do with real-time customer data and so many actionable insights you can gain (if you know how to use it).
Digital wallets are the future of payments
Digital wallets are the future of payments. For businesses with POS systems, digital wallets like Apple Pay and Google Pay provide hassle-free options to accept contactless payments without major changes for the customer or business.
For companies without a POS, PayPal, Cash App, and Venmo provide options to accept cashless, contactless transactions in a way that is easy for the customer, but may require some training for employees.
In either case, the rise of contactless payments means that most businesses that accept in-store and online transactions should consider digital wallets. It means that your small business should adopt mobile wallets to satisfy customer preferences.
Moreover, implementing digital wallets isn’t as complicated as it might seem. Start by deciding which digital wallets to accept and register your small business with each provider. As a result, your business will appear more trustworthy, and you can attract more customers with convenient and trusted payment methods.
Andre Oentoro is the founder of Breadnbeyond, an award-winning explainer video company. He helps businesses increase conversion rates, close more sales, and get positive ROI from explainer videos (in that order).
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