The digital payment landscape is developing fast. Your customers want to do the shopping where, how, and when they wish. They look to buy from merchants they trust and with a modicum of effort. They expect a seamless and quick checkout experience.
In this context, digital wallets answer all the requirements, and their vigorous growth in popularity is yet another proof. Currently, around 2.3 billion people globally use digital wallet software, and this number is projected to reach 4 billion by 2024. However, taking into account the coronavirus outbreak and its impact on the economy, those figures may be even higher. The impetus is obvious. Buyers' behavior is aimed at more connected lives, increasing by the millions from year to year. Businesses should be well-positioned to quickly and smoothly adjust, as new channels arise.
No matter if your team has already set its mind on offering payments via popular digital wallets, or just discussing the idea, establishing a proper digital payment ecosystem comprises a whole lot of critical decision points that directly impact your project success. Meanwhile, such nuances as understanding how it all works, knowing card compatibility, and choosing the right payment processing provider are among them.
What Is a Digital Wallet? What Is the Difference Between Digital Wallet and Mobile Wallet?
A digital wallet app is an umbrella term for software that enables users to store credit and debit cards, loyalty cards, and other passes in the cloud and access them through a tablet, phone, or laptop. A digital card wallet is considered not only easier in use but also safer as compared to a physical one.
When it comes to a mobile wallet app, it actually comprises similar functionality, but the term is more specific and refers to software that is accessible on mobiles and wearables. It’s mainly used in stores to ‘tap and pay’ as a contactless alternative to cash or a bunch of physical cards. Additionally, except for loyalty and credit cards, mobile wallets allow you to store transportation and boarding passes, tickets to various entertainment events, and even a driver’s license. It’s worth noting that not all cards are compatible with e-wallets, and we’ll cover this question in more detail later.
As the adoption of digital wallets by consumers is constantly growing, the number of offerings is increasing in direct ratio. Whether device-specific or -agnostic, each new solution suggests various security measures, payment methods, interaction modes, and, most importantly, transaction fees. Among the most common types of online digital wallets are:
- Open wallets that are mainly offered by banks. They allow users to not only pay for purchases but also withdraw cash at ATMs;
- Semi-open solutions like Visa Checkout and Mastercard Masterpass work at selected online retailers and don’t provide access to ATMs;
- Semi-closed apps like Apple Pay, PayPal, or Google Pay empower individuals to make purchases at particular merchants that are authorized by the wallet providers;
- Closed software applications — offered by Walmart and Amazon — enable purchases and refunds from qualified retailers that support the wallet.
How Does Digital Wallet Work and Where to Begin?
From a user perspective, apps may have slight variations in design or authorization options depending on different types of digital wallets_,_ but in general contactless payments seem to be rather straightforward: download, add cards, and hold your phone to the terminal. Meanwhile, the back-office handles dozens of operations that go unnoticed for customers.
To make the magic happen, digital wallet companies utilize Near Field Communication (NFC) wireless technology that enables the exchange of data between two devices, namely the mobile and NFC-enabled point-of-sale (POS) terminal. Broadly speaking, a typical wallet consists of:
- A collective UI component that maintains the online payment services portfolio available on the device;
- A user interface that enables a payer to control particular payment services via a handy front-end;
- A payment part itself that ensures secure transactions. It’s relatively roomy and commonly comprises a cloud-based infrastructure, external SDK providers, payment processors, and digital directories.
To guarantee flawless operations and maximum data security, top digital wallet companies oblige merchants and financial institutions to follow their corporate set of standards and requirements and thus maintain a win-win partnership.
Deciding between different digital wallet types_,_ functional aspects, and payment processing provider requires thorough knowledge of your existing and potential customers, since it may drive the adoption and increase purchase frequency. The need to address various payment methods and mobile operating systems often makes businesses use more than one wallet to meet customers' ever-growing demands.
Consumer Preferences: The Breakdown of the Best Digital Wallets Globally
When it comes to digital wallet usage statistics, the Asia Pacific region can hardly be surpassed since it accounts for more than two-thirds of users worldwide. Asia-Pacific’s customers are not only open for innovations but also active shoppers who endow the lion’s share to the total mobile wallet market value. This phenomenon may be explained by high mobile penetration and a great number of under- or unbanked in the region. The adoption of digital wallets in the USA and Europe trails far behind due to either lack of support from merchants, high processing fees, or unbeatable speed of contactless cards.
But let’s get back to the point and see what digital wallets are in good demand in each region.
- In the Asia Pacific region people mainly opt for Alipay, Paytm, WeChat Pay, GO-PAY, LINE Pay, PhonePe, Rakuten Pay, and some others;
- In India, there are three undisputed leaders, namely Paytm, Mobikwik, and Unified Payment Interfaces (UPI). The latter is regulated by the Reserve Bank of India and has a strong following among both merchants and customers;
- The abundance of mobile wallets in Europe is striking. Except for such universal brands as Google Pay, Apple Pay, and Samsung Pay, there are dozens of domestic initiatives like Pingit (UK), Payback (Germany), Payconiq (Belgium, Germany, Netherlands), Paylib (France), Swish (Sweden), MobilePay (Finland, Denmark), and Vipps (Norway);
- In the United States, PayPal remains the most popular digital wallet for credit cards. But it’s accompanied by Amazon Pay, Walmart Pay, and Starbucks Card;
- In Latin America, among the leaders are Apple Pay and PayPal, as well as Amazon Cash and Visa Checkout.
Though digital wallets in Europe and the US face certain bottlenecks now, they are here to stay, and businesses should be ready for the change.
Not All Cards Are Created Equal for Digital Wallets, So What Should Be Taken into Account
Though being rather straightforward and clear, a card issuing process often turns into a nightmare for most companies. On average, it may take around two months for business owners to connect to a provider, create corporate designs, and print out custom cards. Will your customers wait? — In most scenarios, they’ll approach your competitor.
To prevent that, stakeholders are forced to try out new methods and call on novice card issuing companies. Card design self-service and nearly immediate production are great attractions, right? However, partnering with a card issuing bank (Chase, Bank of America, Wells Fargo, and others), you’re sure that cards will be compatible with the selected digital wallets. Meanwhile, collaboration with a new card issuing platform implies certain risks. So, let’s review the top three non-banks that provide card issuing services and analyze their capabilities and restrictions in the context of digital wallets.
Stripe card issuing feature is currently available for US businesses only, but it has disturbed the card market globally. The company empowers business owners to create corporate designs right in the Dashboard, set spending limits or define merchant categories, and even approve transactions in real-time. Virtual cards can be used immediately, while physical cards are delivered within two-eight business days. Sounds impressive, right? When it comes to compatibility, Stripe cards are announced to support only top digital wallets like Samsung Pay, Apple Pay, and Google Pay. If your customers use other wallets, it’s better to double-check their compatibility with Stripe.
Marqeta card issuing API enables businesses to create single and multi-use credit and debit cards in a few days, control spendings, make Just-in-Time (JIT) Funding, and more. The company offers full access to data insights to adjust your day-to-day operations and offerings and so better user experiences. Additionally, firms can re-issue, suspend, or terminate cards right through the API. However, when it comes to compatibility, the list of digital wallets is relatively short and includes Google Pay and Apple Pay.
Adyen offers white-label card issuing solutions for companies to create fully-configurable virtual and physical cards. It provides comprehensive control over spendings, as business owners can set custom card preferences (amount, location, industry type, merchant ID, and others), approve or decline authorizations, send funds to cards directly, and more. Virtual cards can be either single or multi-use. Meanwhile, with physical cards, firms can create branded designs, personalize the onboarding, and re-issue them when stolen, lost, or just expired. Unfortunately, there is no support for digital wallets, but it’s announced for release soon.
Recently, Samsung has also unveiled its plans to join the ranks of debit card issuers. Will their cards support any digital wallets, except Samsung Pay? — Well, we’ll see.
The transition to digital is inevitable. Meanwhile, under normal circumstances, it could take years for people and businesses worldwide to start using digital wallets, the coronavirus outbreak and social distancing will definitely give this tendency a boost. Consequently, for companies, it’s crucial to become agile, optimize their middle- and back-office operations, and prepare for the shift. Partnership with the right software product development and payment processing companies is mandatory to stay in the game.
At Dashdevs, we’re committed to staying on the cutting edge of technology in financial markets. So no matter where your company is in the enhancement or development of digital payments, we’re sure that you’ll benefit from our knowledge and expertise in this venturous new world of financial digital services.