Digital wallets: adoption & trends

Will digital wallets supplant cash and credit cards?

Digital wallet

Digital wallets: adoption & trends. Source: shutterstock.com

Salespeople have always needed to evolve to meet the fast-changing demands of their clients. This is particularly true for e-commerce, and it is for good reason, because what can be more important nowadays than staying ahead of your competitors, especially if we are talking about serving your customers and accepting payments? The online payments market is broad today, and competition is rather fierce. There are a huge number of online stores, as well as multiple ways to pay for goods and services.

Every client will appreciate a smooth and swift purchasing experience. The first thing that pops to mind is a responsive web design of a merchant’s site. It is truly amazing if a website is intuitive and user-friendly. Moreover, it is a big plus for a salesman if a site is mobile-friendly as well, since substantial numbers of shoppers buy stuff using their smart devices. However, it is not what we want to discuss today. Let’s consider the other side of shopping — payment methods, and their convenience. We have decided to find out what has made digital wallets so popular nowadays, what is the future of rivalry “digital wallets vs cash&cards”.

What is a digital wallet?

A digital wallet is a service that allows a customer to save their personal information, including their shipping address, credit or debit card numbers, and other payment data in a single place, which they can then use to complete transactions — provided their chosen retailer accepts their digital wallet as a form of payment.

Now it is a perfect time to give you an example, and the first thing that comes to mind is PayPal. This digital wallet is among the most popular ones, and it is accepted by a huge (enormous) number of online stores worldwide. The nearest serious competitor is Amazon Pay, which allows clients to use the payment and shipping data they already have stored in their Amazon account.

Those who have Apple devices (iPhones, iPads, or the Apple Watch) can use Apple Pay. This feature has all their data stored safely in the cloud. It helps to prevent their information from being stolen (for example, if a user lost their device, or has had it stolen), and guarantees the integrity of sensitive data. Android users also have the option to pay contactless, and this feature is called Google Pay. Actually, there are a lot of other digital wallets. For instance, you can choose Masterpass or Visa Checkout (MasterCard and Visa subsidiaries respectively). There are plenty of options to choose from, and most of the solutions are reliable and competitive.

Why digital wallets?

Digital wallets

There are plenty of options to choose from, and most of the solutions are reliable and competitive. Source: shutterstock.com

The best thing about digital wallets is that, for both online and offline transactions, they afford the opportunity for the consumer to make secure, quick transactions, averting the need for a bank card or (for online payments) the need to enter card or bank details for every purchase. However, they offer even more perks for unbanked consumers. It provides a means of financial inclusion, both as an alternative to cash payments and as a way of accessing services such as loans and savings accounts

Digital wallet adoption in 2018

Let’s start from in-store payments. According to a Juniper Research study, digital wallet usage for in-store payments is most prevalent in the Far East & China, where it accounted for 29% of all spends. Other regions pay for purchases primarily with cards and cash.

Moreover, statistics say that consumers worldwide spent no less than $2T using digital wallets (related to in-store payments), while only 9,4% of the in-store payments were carried out through digital wallets.

And as for e-retail, bank cards still take precedence. Nevertheless, digital wallets account for nearly 73% of e-retail spend across Far East & China, and for a good reason (let’s not forget about popularity of Alipay in China and Rakuten Edy in Japan). In North America, this rate is no more than 30%, and the most preferred option here is open wallets (such as PayPal).

In this case, statistics say that purchasers worldwide spent $1,1T using digital wallets (related to e-retail payments, respectively), while only 47% of e-retail payments were carried out through digital wallets.

Digital wallet

Digital wallets account for nearly 73% of e-retail spend across Far East & China. Source: alizila.com

But statistics also show that e-retail and in-store purchases are not the only sectors where digital wallets have gained popularity. For example, let’s consider gaming. On the gaming platform Steam (which, by the way, has more than 90M users worldwide) purchases are funded through a closed wallet.

QR vs NFC

Most markets use NFC for in-store mobile payments, while QR code-base payments are not so popular.

However, the situation is tending to change now, as more and more QR code-based payments are being carried out in China, where they have already surpassed cash and cards in both in-store transaction volume and values.

The major advantage of QR codes is that a consumer doesn’t need NFC capabilities to use it. Nowadays, QR code-based payments are used by merchants to substitute a smartphone for POS infrastructure.

Digital wallet

Most markets use NFC for in-store mobile payments. Source: shutterstock.com

In India, consumers spent about $22.3B in 2018, using QR code-based wallet payments. In South Africa and Kenya, this rate was $4.5B and $4.3B respectively, not to mention the growing popularity of Singtel Dash, Alipay, and WeChat Pay.

It’s hard to say whether QR is a threat for NFC or not, but the fact is, QR code-based wallet payments are gaining ground.

Forecasts

Today, more than 2.3B people use digital wallets. However, it is expected that by 2024 this number will increase to 4B. In this case, wallet transaction volume will be no less than $9T a year.

It is only a forecast, but growing smartphone penetration rate hints at the bright future of digital wallets.

SEE ALSO: Digital business banking: how to choose the best option

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