Thanks to the Digital Age, people around the globe are able to connect, discover, chat, and share opinions with just a few clicks on a computer or mobile device. Additionally, the emergence of ecommerce has expedited the need for faster, more convenient, and safer payment transactions. Examples of the technologies that have helped reduce checkout friction, improve sales conversion, and mitigate fraud include mobile POS, near field communication (NFC), digital currencies, online banking, EMV chips, and this post’s topic—digital wallets.
Simply put, a digital wallet is a software application that stores an individual’s payment information which may include a verified address, debit card, credit card, and/or bank account numbers. The wallet can be device-based and accessed through an app, or internet-based and managed by signing into an account. Digital wallets provide a multi-layered, secure channel in which data is passed to a merchant and verified with payer-entered credentials, biometrics, or optional SMS texts.
The digital wallet space has evolved immensely since PayPal’s emergence as the industry’s first wallet over a decade ago. Technological innovations since then have helped expand the accessibility of mobile devices and increased the ubiquity of smartphones in our everyday lives. Some companies are even expanding their offerings to include loyalty cards, coupons, targeted offers, identification information, and purchase history. Advancements in the digital wallet space can also help consumers compare prices between goods, apply discounts, and discover complementary items. All of this functionality is available to consumers at no cost to them.
It’s no wonder that companies of all sizes are looking at the untapped potential to utilize mobile technology and become a one-stop payment resource for consumers online and in-store. Concurrently, the allures of convenience and security are beginning to spark both merchant and consumer interest in digital wallets.
Major data breaches in the past few years have left consumers concerned about safety within the payments industry. Credit card fraud is particularly rampant in the United States, accounting for nearly 50% of the data breaches in the world. Most digital wallets send a token, rather than the actual card number, in an attempt to minimize exposure in any breach. In addition, digital wallets ask for the payer to take some steps to authenticate for both in-store and online purchases; leveraging the aforementioned means of validation.
In addition to the security benefits, merchants look to digital wallets as a way to decrease cart attrition and maximize sales. Shoppers are more willing to complete a transaction when the number of steps is reduced. Fewer clicks and keyboard stroke options during the checkout process have been proven to improve conversion rates and generate more sales. Consumers prompt their digital wallet in a web experience by clicking on a branded wallet button. After authenticating, their preferred payment information is shared with the merchant and the transaction is completed. For an in-person transaction, the enabled device is prompted by the POS hardware before the payer is asked to authenticate to complete the transaction. Digital wallets protect merchants against fraud while providing a consistent shopping experience across all connected devices.
As the digital wallet ecosystem continues to develop, the intense competition within the space will pressure providers to create an offering that is simple to use and widely available for both consumers and merchants. Major players, including the MasterCard® MasterPass digital payment platform, allow consumers to use any payment card or enabled device to go beyond plastic and discover enhanced shopping experiences that are as simple as a click, tap, or touch. In fact, digital wallets may be coming to a campus near you. Look out for MasterPass in Cashnet, which is included in our CE2016.1 release!