Due in part to the influence of the pandemic and the move away from cash-dependent payment solutions, digital wallets, where payment details are stored and accessed via a single application, are finally gaining significant traction amongst consumers.
Indeed, since coronavirus has been shown in studies to survive on banknotes for up to 28 days, many nations across the world have declared a war on cash, as it is potentially a high-risk vehicle for spreading coronavirus, with its widespread use and inherent person-to-person qualities. As a result, contactless payments have witnessed a dramatic upsurge even within inherently cash-based economies, such as Japan and Germany, and amongst new user groups, such as older shoppers. Furthermore, more than two dozen countries around the world have increased their contactless transaction limits to urge the uptake of contactless payments, including the UK.
However, on top limiting the spread of COVID-19, digital wallets offer several other benefits, which will make them a convenient payment method even post-pandemic; along with making in-store payments quicker and easier, digital wallets dramatically increase convenience, as users do not need to remember PINs and password when purchasing in store, or fill in security credential when buying online. They can also store loyalty card information and digital coupons, as well as serving as a primary interface for cryptocurrencies such as Bitcoin. They also provide unbanked populations in developing nations the opportunity to participate more fully in the global financial system. Finally, they help reduce fraud to both customers and merchants.
Initially centred on providing easy eCommerce payments and P2P (person-to-person) transactions, digital wallets have been enjoying increasing success, with companies like Apple, Google and Samsung launching wallets over the past few years. However, nowhere are digital wallets as popular as in the Asian markets, thanks to the widespread adoption of wallets such as Rakuten Pay and services like Alipay and WeChat Pay in China.
As the popularity of digital wallets grows, a wide variety of developments paths have arisen. From wallets aimed specifically at simplifying eCommerce payments, to those facilitating P2P payments in emerging markets, digital wallets also encompass point-of-sale options, aimed specifically at in-store payments, social media and messaging platforms, as part of ‘super apps’ like WeChat Pay. When examining digital wallets and their paths of development, then, it is important to note that, although they have had diverse entries into the payments ecosystem, capabilities and business models are becoming more universal. eCommerce, P2P and in-store are all becoming crucial elements of digital wallets’ offerings. As the number of wallets offering these capabilities grows, the question then becomes which wallets merchants choose to support and how payments companies can facilitate the greater use of digital wallets throughout payments ecosystems.
Merchants are also faced with important questions surrounding the choice between closed wallets – wallets that are specific to individual merchants – and open wallets – which, despite gaining more popularity, will take years to achieve a high level of acceptance.
What we know for sure is that COVID-19 is certainly promoting the building of muscle memory around reaching for a card or digital wallet at checkout, instead of physical currency. It is also pushing consumers back online, which has caused eCommerce to rapidly increase. Digital wallet providers and their marketing teams should therefore look to coronavirus as a uniquely simple and effective messaging opportunity that can be harnessed to encourage contactless payment take-up by promoting the sanitary benefits of tap to pay and online wallet usage.
Our latest whitepaper, Digital Wallets ~ Transforming the Way We Pay?, analyses the rise of digital wallets, highlighting current trends and possible implementation challenges.
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