Digital Wallet – The Road Ahead
Digital Wallet as a concept has evolved over time since its introduction from 2007. It started getting more traction with big players like Google, Apple and Samsung etc. joining the band wagon. If we go by the predictions of domain experts and industry leaders, it is one of the top trends to reshape the payment space in this decade. However, as per the 2018 world payments report, the market share for digital wallets of total global non-cash payment is still less than 10%. Also, the penetration of digital wallet among its potential customer base has been quite stagnant at close to 26% for last 2 years.
This trend raises a few questions:
- Why is Digital Wallet not growing at the predicted rate?
May be the answer to this lies in another question: “What’s the problem that Digital Wallets are solving for the customers?” If we analyze only the technology, Digital wallet is just another payment instrument for customers. It is convenient and fast compared to any other payment instruments, especially when used for Online payment and In-app purchases. Apart from that Digital wallet technology doesn’t provide any tangible benefits to customers. In fact, the convenience factor in a physical payment scenario is similar to that of using a contactless card. Moreover, it can’t completely replace the Physical wallet, yet.
- Why Digital Wallets are still considered a game changer for business?
Though, digital wallet is not the most preferred payment method for customers now, it has a lot of future potential. In the current form it provides better cart to sell conversion for merchants, makes the payment quicker and frictionless. It also has potential to provide better insight to customer behavior and provide targeted cross-selling options for the merchants. So digital wallet is more beneficial to merchants and service providers. Therefore, there will be a considerable push to encourage customers to use digital wallets instead of other payment instruments
- What can be done to expedite customer adoption rate?
- Improve customer awareness: There is not much of awareness in the market about wallet services. Customers most of the time are either not aware of the wallet services or don’t have full understanding of its capabilities. Therefore, building a good awareness around the services that a wallet can provide will be beneficial to increase penetration.
- Incentivize usage of wallet: Cashbacks and discounts are still the top drivers for influencing customer behavior. Service providers in association with merchants should incentivize the usage of wallet through various offers.
- Improve acceptance of Digital wallet payments: More and more merchants should enable acceptance of payments using Digital wallet. Banks and Technology providers can also play a role here by playing the role of an aggregator and making it easy for merchants to accept payment from any digital wallet without going through a lot of technology changes. With improve in acceptance, the ease of usage will also increase. Thus, giving customers required confidence to move to digital wallets.
- Build customer confidence in technology platform: Data security is one of the prime concerns for most of the customers who are aware of wallet services but have never used it. Though current customers’ data is being stored and transmitted using industry accepted security standards, a few stray incidents of data theft are enough to shake customer confidence. Keeping the platform secure and spreading the safe usage awareness will help service providers improve higher customer participation
- Provide customer more control and insight: The wallet should provide users more insight into their payment and usage patterns. It should provide users to control spends on different accounts, different channels and different period of week/ months. It should also help in automating some mundane tasks as bill payment for utilities, credit cards, etc.
For payment instruments, the last major shift in customer usage pattern was observed when payments through Debit cards surpassed payments through Cash. Banks, Service providers, and Payment Interchanges achieved this through a lot of focus on improving customer convenience, customer awareness, global acceptance, interoperability and payment platform security. Regardless of all this push, it took some time to attain any significant change in customer usage pattern. So, digital wallet also must go through the same cycle. Digital wallet can achieve similar changes in customer usage pattern by focusing on constant improvement of its value proposition i.e. easy, swift and secure.