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:
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.
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
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.