25 Jun Digital Wallets: Payments always at hand
2022 saw marked consolidation in consumer contactless payments usage with €17.9 billion spent using contactless payments – a 31% rise on 2021, according to the Banking and Payments Federation in Ireland.
This established consumer familiarity with contactless payments has set the scene for continued growth in digital wallet usage as this payment option becomes increasingly more mainstream with physical wallets remaining more out of sight than ever before.
Here’s how digital wallets work and how they benefit businesses.
How digital wallets work
Digital wallets are a virtual version of your customers’ physical wallet, securely storing debit and credit card details that can then be accessed easily and quickly through their smartphone or wearable device to make a payment in-store and online. Popular digital wallets include Google Pay, Apple Pay and Samsung Pay.
Customers store their payment information securely in their digital wallet and simply tap and go as they would do with a physical card to seamlessly complete a transaction. It also eliminates the need to repeatedly enter credit card details for each online purchase. If required, customers provide a passcode or finger scan on their device to authorise the transaction.
Making it happen: Payment rails and NFC technology
Digital wallets utilise the same payment infrastructure – the payment rails – that already operates with credit and debit cards. This allows the same networks and processors to operate with a digital wallet as it would with a physical card. This guarantees consistency and reliability without any unexpected difficulties at the point of sale by following the same process.
Near Field Communication (NFC) technology allows digital wallets communicate with card terminals for in-person transactions.
When shoppers move their digital wallet close to a card terminal at checkout, the terminal receives the signal from the customer’s digital device and validates the purchases. For both customer and seller, the interaction takes less than a few seconds.
Businesses Benefit: Accepting digital wallets
Payment without limits
Another key driver in the increase in digital wallet transactions is the growing awareness that there is no contactless limit when making a payment, unlike physical card transactions which has a contactless limit set at €50.
In our Business Insights survey for this year, a surprising number of businesses were unaware of the no contactless limit with 42% nationally believing there was a contactless limit on digital wallet payments.
The number of businesses unaware of the absence of a contactless limit on phones and watches may seem high but, given that businesses claimed less than 10% of transactions were made through digital wallets just two years ago, the potential of this new payment trend is still being realised. Now, the majority of respondents say up to 25% of customers complete card transactions through phones or wearable devices.
The absence of a transaction limit heightens the opportunity for customers to make larger purchases through their phone or wearable device and increase their satisfaction in the final stages of their purchasing journey.
Secure payment experiences
The reason digital wallet transactions don’t require a tap and go limit is to do with the built-in security features on these devices, as well as the steps taken by digital wallet apps to ensure it’s a safe way to pay.
Digital wallets utilize advanced security measures, such as tokenization and encryption, to protect customer payment information. This replaces sensitive data with unique identification symbols.
This mitigates the risk of fraud and unauthorized access to sensitive data, instilling trust in customers at point of sale.
Payment always at hand
Recent statistics reveal that about 9 in 10 Irish people own a smartphone, with most people checking their phone over 50 times a day. Digital wallets integration into smartphones leaves customers with the ability to make purchases through an item they are rarely without, while more and more people are choosing to leave their physical wallet at home.
Digital wallets: Supporting payments as a valued service
This payment option extends the opportunity for businesses to better analyse transaction data to gain a deeper understanding of customer preferences, shopping habits, and demographics. This information can be leveraged to tailor marketing strategies, personalize offers, and improve overall business operations, which supports cost saving efforts and more streamlined administrative processes.
Customers anticipate convenient and frictionless payment experiences. Accepting a variety of electronic payments – including digital wallets – has become the expectation of all business owners, many of whom now recognise the benefits of doing so too, with increased card transactions helping them run their business more efficiently and boost their bottom line.
Heightened customer satisfaction, increased sales opportunities, enhanced security, cost saving benefits and access to customer insights supports both businesses and their customers tap into the value added benefits coming from increased digital wallet usage.