How digital wallets open new possibilities for business and customers

With our lives getting more and more digital, it comes as no surprise that technology is affecting every aspect of it - be it at home or work, for business or leisure.

Even our payments are now digital, and the pandemic has accelerated them significantly.

Easy, convenient, and secured mode of payment has become the norm and new digital payment techniques continue to surface.

No wonder the global mobile market size is predicted to grow at a CAGR of 22.5 percent for the forecast period 2021 -2026 with Asia-Pacific being expected to witness the fastest growth.

The transaction volume of the digital payment industry in Southeast Asia is expected to grow from $ 600 billion in 2019 to $ 1.1 trillion by 2025 with the e-wallets share increasing from $ 22 billion in 2019 to $ 114 billion in 2025.

Global vendors are now investing strategically in collaborations to seize the digital payments market share.

Both businesses and consumers are happily leveraging the benefits of digital payments.

TerraPay, the Dutch payments infrastructure company recently announced its collaboration with UAE-based Network International to promote digital payments in the UAE and ensure financial inclusion and independence for customers.

Cash and checks are no longer preferred as 66% of respondents in a survey said they will stop making or accepting payments through cash or paper checks.

In a rapidly evolving B2B landscape, businesses are in dire need of upgrading their legacy payment systems to modern payment platforms to offer flexibility to customers.

So why are digital payments so popular and how are businesses making the most of them? Let’s find out.

The significance

Simply put, a digital wallet is the means through which individuals or businesses make electronic transactions via software or online service.

It needs to be downloaded on your smartphones or other devices to store all your payment information in a compact and secure manner eliminating the need to carry a physical wallet.

Digital wallets have been of huge help to businesses too, not just for facilitating transactions but by giving them a sneak-peek into the purchasing habits of consumers.

This helps them improve the effectiveness of their marketing campaigns.

Digital wallets have been bridging the gap between people residing in different countries or even those living in rural areas.

There are three types of wallets in the digital space today - digital wallets, e-wallets, and mobile wallets.

While all of them are intended to facilitate payments and business transactions, they do differ in scope and capabilities.

PayPal and Amazon Pay for instance enable personal purchases while facilitating businesses and eCommerce.

1. Digital wallets
2. Mobile wallets
3. e-wallets

Digital wallets 

They are used online and store purchase information to help customers make payments quickly for online purchases.

They work online, though some of them work well on device apps too such as Google that works on phones, tablets, and online.

Mobile wallets

These are strictly app-based wallets to be used on phones, tablets, and other mobile devices.

Apple Pay and Android Pay are classic examples where customers are provided e-wallets that are created specifically for their devices.

e-wallets

While it does a bit of everything like its counterparts, it also stores balance and works like a prepaid wallet.

Funds can be deposited from a bank account to maintain credit while ensuring safety during payments.

It’s all in numbers

As per Finaria data, mobile wallets are growing at a pace of 24% year-on-year all set to become a $ 2.4 trillion worth industry this year with the unified market being predicted to touch $ 3.5 trillion by 2023.

A survey by Statistica confirms the global mobile wallets market was worth $ 755.6 billion in 2018 which rose by a whopping 90% to almost $ 1.2 trillion in just 12 months.

People are happily choosing mobile wallets to manage their payments taking the average transaction value per user in the mobile point of sale payments segment to $ 1,670 in 2021.

The number of users continues to surge too and is expected to reach 1.7 billion globally by 2023.

While the US market is predicted to grow by 49%, transaction value in the Chinese market is expected to touch $ 1.3 trillion in 2021.

What consumers want

Given the times we live in, customers have clear priorities when it comes to payments.

Their physical wallets anyway didn’t carry much cash as card payments had become more rampant.

With the advent of digital payments, customers are more than happy to use a single mobile solution to pay for everything they need.

They need the portability to be able to seamlessly switch between devices for all their transactions.

One-click check-outs are becoming increasingly popular among millennials.

However, security is a big concern for all. Given their constant digital presence, there is always the possibility of getting hacked in a high-risk environment.

Businesses are therefore doing everything they can to ensure a high level of security through measures like multi-factor authentication, biometric checkpoints, and OTPs.

Data, thus remains secure even in case of theft of devices due to biometric identification.

Sophisticated encryption techniques are also being used to keep hackers at bay.

What businesses want

Digital payments are helping businesses respond quickly to changing industry trends while scaling their business.

They help them address some of the most critical business needs:

1. Faster growth
2. Customized payments
3. Data transparency

Faster growth

Writing checks is not scalable anymore and payment challenges should not be allowed to stand in the way of success.

Digital payments offer the competitive edge required to process payments and increase transaction volume.

Customized payments

The modern customer is craving flexibility. A payment option that allows them to send and receive money in real-time through their preferred channels therefore is a boon, especially in time-sensitive situations.

Data transparency

Digital payments help ensure greater transparency by allowing businesses to add contextual business information as required.

For instance, invoice details can be attached instantly to a transaction rather than storing it separately.

If an error occurs in payment, a suitable message is sent back to the sender automatically thus saving time and manual effort.

Some of the top businesses are using wallets to strengthen their relationship with customers. The most common use cases are cited below.

Enhancing customer experience through engagement and personalization

From sending welcome messages upon store entry to offering them loyalty programs, businesses are increasing their level of engagement with customers.

For instance, a customer can be notified when their order is ready for in-store pickup while sales associates can also be alerted when they step in for pickup.

Ecommerce businesses and retailers often send a wallet item to customers along with the order confirmation number and other details to maximize convenience.

They sync their apps so that customers get to download discount coupons, passes, and loyalty cards easily to avail their myriad offers.

Push notifications can be sent to remind them about offers and their expiry period.

What's more, location data can be used to serve customers with relevant coupons and offers.

Ensuring frictionless payments

The best thing about digital wallets is that they give you total control over your payment system thereby facilitating frictionless payments.

So, if you want to accept cryptocurrency, you can set the payment terms accordingly.

Mobile wallets allow users to store their card details or bank details for future transactions allowing quick and smooth payments.

Digital wallets are now helping customers in every area right from buying groceries to paying for electricity and other requirements.

In restaurants, customers are leveraging the split-bill functionality while sharing group restaurant bills.

Access to financial tools and guidance

‘Contactless’ has undoubtedly become the new normal and encourages just about every domain to go digital.

From gaming and entertainment to banking and insurance, digital wallets have secured their place across domains.

Financial companies can now offer their customers as well as employees access to financial tools and services to help manage their investment portfolios and safeguard their future.

Services provided include loan facilities, salary deposits, currency transfers, access to retirement plans, insurance, and investment plans. Inbuilt budgeting and financial planning tools are also being offered to help users keep a tab on their spending behavior.

Summing up

Contactless payments are now an absolute necessity and businesses must use due diligence to focus on the right wallets.

As Alexandria Sadler, co-author of Juniper Research explains, "Merchants must base their payment strategies around wallet acceptance in order to support a digitally-engaged addressable market, but must also judge the right wallets to target, or they will be lumbered with increased costs and limited benefits."

When leveraged effectively, digital wallets will open a whole new world of possibilities for both businesses and customers.