As the owner of an online store, you’re constantly searching for fresh approaches to enhance the purchasing experience for your clients and boost conversion rates. Using digital wallets is one of the newest trends in digital payments that you shouldn’t ignore.
These wallets, which are basically digital copies of real wallets, keep track of a user’s credit card, debit card, and reward card information, streamlining and simplifying the online payment process.
Customers can now finish their online purchases with a few taps on their mobile devices without having to manually enter their payment credentials every time thanks to well-known choices like PayPal, Google Pay, Apple Pay, and Venmo.
But digital wallets offer eCommerce stores a lot more advantages than just ease. We’ll go into more detail in this piece on the advantages of adding digital wallet functionality to your eCommerce storefront and how it can increase sales.
- What Is a Digital Wallet?
- How Digital Wallets Work
- Benefits of Using Digital Wallets
- Cons of Using Digital Wallets
- Examples of Digital Wallets
What Is a Digital Wallet?
An application for easy financial transactions that can be accessed from any connected device is a digital wallet. It is a digital wallet that safely saves your passwords and credit card details on the cloud.
This implies that you won’t have to constantly enter your credit card number or other payment information when making purchases online because you can simply access your payment information.
Digital wallets can hold more than just credit card details. They can hold identification cards, gift cards, membership cards, loyalty cards, coupons, event tickets, airline and travel tickets, hotel bookings, driver’s licenses, and even car keys.
Users who wish to have easy access to all of their vital information on digital devices can find this feature extremely useful. Digital and mobile wallets financed over half of all online transactions globally, according to an estimate for 2021.
Additionally, according to the research, this figure will rise to 53% by 2024. The Asia-Pacific region holds the largest market share for online wallets, accounting for almost 69% of all e-commerce payments made through digital and mobile wallets.
The kinds of digital wallets listed below can boost sales in your online store:
1. Pass-Through Digital Wallet
A pass-through digital wallet acts as a go-between for the merchant and the user’s bank account. It creates a distinct token for every transaction and keeps the user’s card information and security credentials in the wallet. Sensitive information is not given to the merchant because this token acts as a stand-in for the actual card details.
A pass-through wallet connects to the merchant’s payment system to authorize transactions when a user starts a transaction with it. The wallet sends the unique token rather than the user’s actual card information. This token is used by the merchant’s payment system to request money from the user’s bank account.
Pass-through wallets give customers an extra degree of protection by utilizing tokens. Tokens cannot be used fraudulently because they are generated for every transaction and are only meant to be used once. Moreover, the wallet is less susceptible to security lapses because it does not retain the user’s credit card information.
2. Stored Wallets
Before they can complete a transaction, users can load funds into these wallets manually or automatically. Users can utilize the money in their wallet to make payments or purchases after it has been loaded.
Among the benefits of stored value wallets is their ability to streamline the payment process by removing the requirement for users to input their payment details for every transaction. This can save time and reduce the possibility of errors or fraud.
By preserving customers’ payment information in one location rather than sharing it with several merchants, digital wallets can also give users a sense of security. This may lessen the chance of sensitive data theft or illegal access.
3. Closed Digital Wallet
Assume you have a set of keys that can only be used to unlock one particular door. Closed digital wallets function similarly to keys that are limited to opening the virtual doors of a single retailer’s establishment.
Closed wallets are only available from specific businesses, much like loyalty cards are only available from specific establishments. Customers can only use a closed wallet to make purchases from the merchant’s shop or website because the wallet is completely controlled by the retailer in terms of credit lines and spending limitations.
Closed digital wallets resemble customized shopping experiences catered to your preferred retailer in certain aspects. They give consumers a safe and practical way to make payments while enabling the merchant to give special discounts and incentives to patrons.
How Digital Wallets Work
Digital wallets use a number of technologies to make payments easier, such as:
QR code: Picture From NBC News
Barcodes are used to encode transaction information in QR codes, a widely used payment mechanism. To begin the payment process, the user only needs to scan the QR code using the camera or digital wallet app on their smartphone. Using this technology, retailers may create QR codes that customers can scan to pay for products using their digital wallet accounts. This technology is widely used in-store.
Near Field Communication (NFC)
With the use of this technology, consumers can pay by just tapping an NFC-enabled payment terminal with their mobile device or digital wallet. NFC payments can be quicker than conventional payment methods and are frequently utilized for in-store transactions. Here’s an example of NFC in action.
Magnetic Secure Transmission (MST)
With its ground-breaking mobile payment technology, Magnetic Secure Transmission (MST), smartphones are completely redefining wireless transaction capabilities. By mimicking the magnetic signal generated by swiping a conventional magnetic stripe card, it enables users to make payments with ease. Both outdated magnetic stripe systems and contemporary no-swipe credit card terminals can process these wireless transactions with ease thanks to MST.
Without requiring new equipment, MST provides safe and easy payment options. Because this affordable solution is compatible with the users’ existing infrastructure, they may transact with confidence, saving money and hassle.
Benefits of Using Digital Wallets
Using digital wallets for eCommerce site sales has a number of advantages, such as:
1. Increases the Number of Payment Options
Customers nowadays have access to a wide range of payment alternatives, and they anticipate that online merchants will provide a variety of payment options to provide a simple and safe payment procedure.
Based on their past experiences, convenience, and security concerns, customers may have different preferences when it comes to payment methods. Offering more payment options, such as digital wallet purchases, will enable you as an eCommerce store owner to cater to a broader spectrum of customer preferences and increase the chance of a sale.
Using payment options that they are familiar with and have used in the past increases the likelihood that customers will feel trusted and at peace. Additionally, the reason digital wallets have been increasingly popular recently is that they offer an additional layer of security by encrypting payment information and hiding it from shops, which reduces the possibility of theft and fraud.
Consumers appreciate the added security, and businesses that take payments using digital wallets are viewed as more stable and respectable. By making customers feel at ease, businesses may establish a strong reputation and draw in loyal customers who are more likely to make repeat purchases from the store.
2. Helps Clients Receive Rewards
Digital wallets allow customers to make payments quickly and securely, and enhancing the offer with bonuses and incentives makes it even more alluring. Customers can receive rewards or payback when they use digital wallets to pay for their goods, which expedites the checkout process.
When they feel they are getting a better deal, they are more likely to come back and make more purchases. As a result of feeling valued for their loyalty, customers will associate your brand positively. Furthermore, you may be able to attract new customers who are eager to utilize your service and are interested in earning benefits by offering incentives for utilizing a digital wallet.
3. Tighter Security Increases Authorization Rates
Customers and merchants alike are very concerned about security in the rapidly changing world of online commerce. It gets harder for retailers to take credit card payments and keep high authorization rates as governments and payment processors tighten security regulations.
Digital wallet payments, however, provide an answer to this problem. The digital wallet businesses bear the majority of the security risk when clients use them to make payments. This is due to the fact that digital wallets improve transaction and personal information safety by utilizing mobile device security features like passcodes and fingerprint recognition.
Moreover, digital wallet suppliers incorporate strong security protocols into their software, facilitating quicker and more effective payment authorization and authentication. Enhanced security measures may result in elevated authorization rates for retailers accepting payments using digital wallets.
All of this may lead to a decrease in chargebacks and payment rejects for retailers, ultimately saving them money and effort.
4. Encourages Younger Demographics
Numerous Gen Z and younger Millennials are buying things with mobile wallets, according to recent surveys. According to one survey, 65% of younger Millennials used mobile wallets more frequently in 2021, compared to 57% of Gen Z owners.
This trend indicates that these groups are paying more and more with digital wallets. As the purchasing power of these generations increases, businesses need to take note of their preferences. Digital wallets give a way to accomplish that by providing a rapid, secure, and engaging payment option.
The ease of usage of digital wallets has made them popular among younger generations. Consumers can expedite and streamline the checkout process by safely storing their credit card information in a digital wallet. Younger customers can find this more alluring as they’re used to speedy, seamless digital transactions.
5. Ensures Mobile Device Checkout is Optimized
Merchants need to make sure that their checkout process is mobile device optimized as mobile commerce keeps growing. Nevertheless, the desktop checkout experience is frequently outperformed by the mobile one, which raises the cart abandonment rates. Digital wallets are useful in this situation.
Digital wallets are a great way to pay for mobile checkout because they can be accessed and stored on mobile devices. Merchants may reduce friction and increase the possibility of a completed sale by providing a smoother and more fluid checkout experience on mobile devices by introducing digital wallet payment choices.
Customers no longer need to manually enter payment information each time they make a transaction thanks to digital wallets, which allow users to conveniently store and retrieve their payment information via mobile devices. Customers are more likely to follow through on their purchase when a transaction is completed on a mobile device thanks to this optimized checkout procedure, which can greatly minimize the time and effort needed.
Furthermore, a lot of digital wallets come with integrated security features like biometric authentication, which streamlines the checkout procedure and gives consumers who might be hesitant to buy mobile devices more confidence.
Cons of Using Digital Wallets
Digital wallets are becoming more and more popular due to their ease of use and convenience, however, there are also significant disadvantages to using them.
1. Security Concerns
Digital wallet users’ financial and personal information might be compromised by hackers and fraudulent activity. Selecting a trustworthy digital wallet provider and securing your account with two-factor verification and strong passwords are crucial.
2. Technical Issues
Because the wallets are dependent on technology, users might not be able to access their money or finish transactions if there is a technical issue or outage. Furthermore, a user might not be able to access their wallet without their backup code if they misplace or steal their smartphone.
3. Limited acceptance
Even though they are getting more and more popular, not all retailers and companies accept digital wallets as payment. For users who would rather conduct all of their transactions using their digital wallet, this can be annoying.
There are digital wallets that impose fees on specific transactions, including currency conversions or withdrawals. Consumers should be informed about these costs and take them into consideration before choosing a certain digital wallet.
5. Privacy Concerns
Users of digital wallets must link their bank accounts, which might cause privacy issues. Before using a digital wallet, users should read the privacy rules of the providers and weigh the dangers of disclosing financial information.
Examples of Digital Wallets
There are numerous providers of digital wallets, each with special features and functionalities. Examples of digital wallets are as follows:
One of the most well-known digital wallets is PayPal, which enables users to send and receive money, shop online, and save several payment options. PayPal provides buyer protection, fraud monitoring, and support for more than 25 currencies.
2. Apple Pay
Using their iPad, Apple Watch, or iPhone, customers can make payments with Apple Pay, a digital wallet. Customers can make purchases online, in-store, and through apps by adding several debit or credit cards.
Tokenization and biometric authentication are used by Apple Pay to increase security. Here’s an illustration of how to use Apple Pay to make a payment.
3. Google Pay
Another well-liked digital wallet that enables customers to pay with their desktop browser or Android mobile is Google Pay. Several payment options are supported by Google Pay, including bank accounts, PayPal, and debit and credit cards. In addition, it provides reward points for qualified purchases and contactless payment options.
4. Samsung Pay
Users of Samsung smartphones can use Samsung Pay, a digital wallet, to make payments with their phones. Credit and debit cards are among the many payment methods that Samsung Pay accepts. It also provides contactless payment options through the use of NFC and MST (magnetic secure transfer) technology.
Venmo is a digital wallet and payment gateway that enables users to transfer funds to and from relatives and friends. Though users can also divide bills with their contacts and make online purchases, Venmo is mostly utilized for peer-to-peer transfers. Users of Venmo can exchange payments and remarks with their contacts thanks to the social capabilities available.
6. Coinbase Wallet
A mobile digital wallet specifically made for bitcoins is called Coinbase Wallet. Users are able to handle and store their digital assets, such as Ethereum, Bitcoin, and other well-known cryptocurrencies. In addition to facilitating cryptocurrency transfers, Coinbase Wallet provides biometric authentication and additional security measures to safeguard users’ holdings.
Digital wallets increase convenience, security, and checkout times, among other benefits for eCommerce store sales. Customers may pay easily and without having to manually enter their payment information every time they make a transaction with digital wallets.
Digital wallets come in a variety of forms. eCommerce companies must select the type that best suits their requirements and target market because each has distinct benefits and characteristics.
However, if you are looking for an ecommerce development company that can help you create a custom wallet for your ecommerce store, then you should check out Appic Softwares.
We have an experienced team of developers that can help you with the wallet installation. Appic Softwares can also assist you in creating a mobile app for your store. You can even hire dedicated developers from us and let them manage your store.
So, what are you waiting for?