Digital wallets: an introduction
In this article, we’ll gather all the information you need to make sure you’re fully aware of everything concerning digital wallets.
A quick overview: How do they work?
Without going too far down memory lane, digital wallets originated around 2011-2012, when Google and Apple started experimenting with various NFC-based technologies. These first programs were either used for payments or for storing tickets and boarding passes. Ever since, the payment technology has been further developed, leading to it becoming a trending payment method that offers customers a highly user-friendly experience.
Digital wallets use software to link necessary payment details from your bank or payment method to the vendor you’re shopping with. These digital wallets now allow fully encrypted payments across the internet through tokenization. When offering a digital wallet in your online store, you create a more straightforward checkout process for the customer. By autofilling name and payment details, you take away checkout steps that take time, thus leading to a faster and more user-friendly checkout.
Who are the leading players?
The previous paragraph might have hinted that Google and Apple are big fish in the digital wallet pond. Their digital wallets, Google Pay and Apple Pay, are considered the most innovative and prominent wallets on the market.
Other key wallet providers originate from China; these wallets are highly attractive to the Chinese shopping audience, who use the wallet everywhere in the world. If you’re looking for a comprehensive overview of the major digital wallets, AliPay and WeChat Pay can’t be left off that list.
Next up, we’ll outline some of the critical advantages for every major player.
Perhaps the most well-known, Apple Pay has become one of the fastest-growing digital wallets in the market. Apple is renowned for the user experience they create, which they didn’t skimp out on in their wallet offering. Apple Pay payments are the definition of frictionless and can even be integrated directly into the product page (for certain webshops); this allows customers to skip the checkout page altogether. Besides that, Apple Pay brings the Apple demographic, generally known to be among the more affluent customers, and not afraid to be an early adopter.
One of the greatest competitions in the mobile market, Apple vs. Android, also rings true for the digital wallet market. Google Pay offers its services to a vast audience, present in every country around the globe. With Android's large market share in the mobile market, offering Google Pay is an intelligent approach for every business looking to accommodate a large audience. The direct integration method for Apple Pay also applies to Google Pay, which means a shortened payment procedure is also available through the Google variant.
Servicing the Chinese market alone is enough to be highly profitable. With Alipay, you’re looking at a payment method with over 1 billion active users that handles more than 100 million daily transactions. From in-store purchases to online transactions, Alipay is the definition of an established, successful digital wallet. If you’re looking to sell your products to Chinese consumers, it cannot be left out of your payment mix.
Like the competition between Apple and Google Pay, the Chinese market hosts its own competition between WeChat and AliPay. With around 800 million users, WeChat Pay gives your business access to a large number of Chinese customers. The number of Chinese shoppers in Europe is increasing steadily, with the wallet adding more currencies and languages by the year. WeChat Pay is easily integrated, offers a handy customs clearance tool for its users, and even allows you to split payments. Everything you need in a digital wallet.
What advantages do they offer?
Looking at the details of every digital wallet variation, you’ll find many small differences, yet overall they are quite similar. We’ll take a brief look at the major advantages the payment method digital wallet itself has to offer without diving too deep into one specific wallet.
The main ingredient that allows digital wallets to thrive in the current online payment landscape is that they’re highly safe. As with most new technologies, security can concern new adopters. Tokenization plays a vital role in the payment process for digital wallets. By encrypting the payment data entered into them, they ensure that it’s almost impossible for third parties to intercept critical payment data. Besides the safe storage of data, accessing a digital wallet is usually unlocked through a biometrics feature, one of the optimal authentication methods.
While digital wallets in physical stores remove the need to carry cash or a wallet itself, they offer an even more extensive range of advantages for online stores. You’ll find that your checkout conversion will increase by simplifying the checkout process, which is precisely what digital wallets do.
A study by Baymard shows that up to 21% of online shoppers abandon their cart due to a long or confusing payment process, and 6% of shoppers leave their cart due to not having the right payment method offered to them.
Besides the ease of use they offer, the fact that you’re offering Apple Pay, for example, can be an influential factor for some shoppers. Statista estimates that globally, over 65 million people activated Apple Pay in 2020, with the number of iPhone users growing steadily alongside that. Offering the payment method the majority of those users are looking for is an excellent tool for your webshop and will pay dividends in due time.
If you’re looking to dive deeper into the benefits a digital wallet has for your business, read this article.