In today’s article we will take a look at what Digital wallets are and their benefits. Digital wallets have been trending for years, but adoption of them has increased during the COVID-19 pandemic. Research shows that the average transaction value of a digital wallet transaction in the U.S. is 25% higher than a typical card transaction. Globally, more than half of all e-commerce transactions are expected to be made with a digital wallet by 2023.
With over 2.1 billion smartphone users browsing and shopping online, why do they account for only a third of online sales compared to desktop computers and tablets? A big problem is having to type billing information on that small screen. It’s annoying, inconvenient, easy to make mistakes, and time-consuming. By improving mobile features such as on-site buttons, financial services and unifying stores offline and online, merchants see improvement in conversions.
When it comes to a positive shopping experience, know it’s all about speed, service, security and overall convenience. Mobile users need a secure way to pay without re-entering personal and financial information every time. Digital wallets are the answer to streamlining the customer’s buying process. The technology successfully combines various payment features into one payment platform.
How Do Digital Wallets Work?
One of the many questions that you might be asking yourself is how digital wallets work. Most of us still carry our wallets around full of cash, credit and debit cards, driver’s license, and other personal information. A digital wallet does the same thing only virtually. Users can securely store their personal financial information on the cloud. E-wallets give people various and secure options to pay for purchases all from the convenience of their smartphones.
A digital wallet or mobile wallet, work through the apps on the smartphone. It’s practical because everything is in one place. E-wallets protect data through encryption and passwords. They can process payments and transfer money from mobile phones using one-click or expedited mobile checkout.
Digital wallets use a technology known as Near Field Communication (NFC). NFC is just like an intermediary between the smartphone and a retailer’s compatible payment terminal. When it comes time to check out, it only takes a couple of taps to pay.
What are the advantages of Digital Wallets
- Reduce Transaction Fees – Merchants can lower bank transaction fees by issuing a payment card of their own, usable on an e-wallet. It’s like a store gift card, except the card is digital and there is no cost to issue a plastic version. Plus, it is not a bank card, leaving the bank out of the payment loop, reducing transaction fees.
- Options For More Sales – Merchants can send personalized coupons that customers can download and use. Since 85% of installed offers stay unused on the devices, merchants can remain in constant contact with their customers by updating offers regularly. Customers can access the coupons and pay using the same device increasing opportunities for more sales.
- Increased Security – Another issue is cyber security. It’s no secret that credit card data is a massive target for hackers. An e-wallet transaction is different from a credit or debit card transaction. It uses tokenization technology. Unique, randomly generated identifiers, or “tokens” replace the credit card numbers for each purchase. After the purchase the number is useless. It’s the most secure online transaction method to date.
Streamlined checkout, advanced security protocols and higher acceptance rates are among the top benefits digital wallets offer businesses. As digital wallet adoption and acceptance become more common around the world and consumers realize they can pay with a digital wallet for online transactions of any amount up to their credit limit, the average global transaction amount is expected to surpass that of card-on-file. Additionally, with issuers keeping cards updated in the background, businesses gain efficiency and cost savings they wouldn’t without wallet acceptance.
Digital wallets are relatively new to eCommerce but a rapidly expanding source of revenue by delivering a better customer experience. That being said, at ABPay we make sure we stay informed of any new updates that our clients can benefit from. Our main goal is to guide our clients in the right direction.