Key Points:
- Statistics show that more than 6.1 billion people will use digital payments by 2023
- A digital wallet is an app or cloud-based software that securely stores a user's payment details to enable them to make online purchases across different websites or physical stores without giving away payment details
- To set up your digital wallet, you need to install the software on your device or access it through an online platform
Online shopping is about convenience. We’re able to find just about any product we want and have it delivered to us in a relatively short time period. One of the major hurdles that eCommerce merchants still sometimes struggle with is cart abandonment at the checkout process. Repeatedly entering in credit card and address information can get cumbersome, which is one reason why we’ve seen the rise of digital wallets. Today, it is possible to order anything from the comfort of your home or office without the need to enter your credit card details.
For eCommerce merchants, optimizing for a frictionless checkout experience is critical for increasing your conversion rate. After customers have paid with their digital wallet, the last step is often choosing their shipping. Easyship helps merchants by offering real-time shipping rates at checkout so their customers have a fully transparent view of their final costs.
In this article, we will help you understand the fundamentals of digital wallets, how coronavirus led to the rise of digital payment methods in eCommerce, and some best practices you should follow when integrating digital wallets, including how Easyship helps merchants by offering dynamic shipping rates at checkout.
Table of Contents
Fundamentals of Digital Wallets
The world is quickly switching to a cashless economy. Credit cards and debit cards contributed immensely to this transition. But something else has come up, and the eCommerce space is now being ushered to the next-level method of processing online transactions - digital wallets!
What's a Digital Wallet?
A digital wallet is an app or cloud-based software that securely stores a user's payment details to enable them to make online purchases across different websites or physical stores without the need to give away their payment details.
With a digital wallet, you only need to enter and confirm your payment and shipping details once. You can then use it to complete online payments or transfer money without the need to carry your cards around when you go shopping.
How Does It Work?
A digital wallet works in a pretty simple way. First, you need to install the software on your device or access it through an online platform. Then, create an account where you add your personal information, payment details, and any other verification information needed.
After that, all you need is to have your bank confirm your payment details, and start using your wallet app to make payments online wherever you want with a single click or tap.
When shopping at physical stores, mobile wallets use near field communication (NFC) to complete payments. If the merchant's payment terminal has a contactless payment symbol, simply point your smartphone close to it, and confirm the purchase by scanning a QR code, entering a password, or tapping the required button.
Related: eCommerce Security: Is Your Business Site Cybersecure?
Digital Wallet vs. a Mobile Wallet vs. eWallet
Digital wallets, mobile wallets, and e-wallets are closely related. While the three terms are mostly used interchangeably, they technically refer to three different things. You need to understand the difference between them so that you choose the one that is more convenient for you. Let us get up close with each one of them.
- Digital wallet
A digital wallet is a cloud-based software that electronically stores customers' payment details online so that they can access them from anywhere when making online transactions. Your money remains in your bank or credit card account. Visa Checkout and Google Pay are good examples of digital payment technologies in this category.
Use a digital wallet if you want to go cashless and cardless, and shop from anywhere with any of your devices.
- E-wallet
An e-wallet is a prepaid electronic wallet that must be loaded with money before any transactions can be made. It is also used to store credit and debit card information, store funds, make purchases, keeping loyalty credits, among other uses. You then access your e-money via the e-wallet's website or mobile app to make purchases directly from the e-wallet balance.
It is an excellent option if you want to carry some e-money that you can use anywhere instead of carrying your cards.
- Mobile wallets
Just as the name suggests, this is a wallet that is housed in your mobile device via an app that you download and install. Most of them are device or operating-system-dependent, except PayPal (PYPL) that works across all major devices. Good examples of mobile wallets are Samsung Pay, Apple Pay, and Android Pay.
Other mobile wallets are brand or retailer-specific. Think Walmart Pay and Capital One Mobile. It is a good option for you when shopping at physical stores because you can just "tap and pay" instead of swiping your cards all the time.
Pros & Cons of Digital Wallets
Everything comes with its share of pros and cons. While digital wallets present several benefits to customers and businesses alike, they have their disadvantages too. Here is a list of the Pros and Cons of digital payment methods.
Pros
- They are easy to use and manage
- No need to carry physical cards around
- Time-saving due to a quick checkout process
- Customers can easily track their expenses by analyzing their transaction history
- Enhanced security since merchants never see your payment details
- Users can easily store promotion codes, special offers, and loyalty rewards
- Low costs for business owners since they don't have to hire workers to complete sales and collect money from customers
Cons
- It takes time and money to install the requisite software and hardware to facilitate digital payments.
- Not all merchants accept digital payments
- Some mobile wallets are dependent on a specific device, brand, or operating system
- Spending money through a digital wallet may lead to overspending
- A small security lapse on the part of the customer can be costly
- If your device runs out of power, you may be forced to postpone your purchase
The Rise of Digital Wallets in eCommerce
The global digital payments market was valued at $3.1 trillion in 2017. Fast forward to 2020, and this value has increased by more than 50% to reach $4.7 trillion in three years only!
How Covid-19 Intensified The Growth of Digital Payments
Coronavirus has had a huge impact on how consumers shop and make payments. This has resulted in a significant rise in digital wallets in eCommerce.
Social distancing rules and lockdowns have made it difficult for people to pay physically with cash or cards. This has left many people with no option but to figure out online shopping and embrace contactless payments through digital wallets as the only safer way to shop and manage their money.
Going forward, digital wallets will only continue to rise because they have presented many people with some level of shopping convenience and security they had never known before. Statistics show that more than 6.1 billion people will use digital payments by 2023, and the digital payment industry will continue to grow by CAGR of 12% to reach $6.7 trillion by the same year.
What Does It Mean for SMBs?
So what does this increased use of digital wallets mean for SMBs? It means that businesses that will not integrate them into their payment options will lose big. Think of losing a sale because your customer can't see the PayPal or Amazon Pay button. Instead, what they see is a conservative and lengthy checkout process where they have to enter all details
In fact, 21% of buyers will abandon a shopping cart due to a lengthy checkout process. eCommerce retailers need to embrace digital wallets and offer different payment options during the checkout process to increase conversions.
Since digital wallets store customers' payment and shipping details, it means that buyers can complete a purchase in your store with a single click or tap of the button. That is how you increase conversions. That is how you win over the competition!
6 Benefits of Digital Wallets for Online Merchants
Mobile payment methods have a whole lot of benefits for online merchants. Here is a rundown of the most common benefits of integrating digital wallets in your business.
- Increased conversions: A lengthy checkout process is a big turnoff to most customers and a leading reason for cart abandonment. Digital wallets reduce this process to a single click or tap, resulting in increased conversions at checkout.
- Cardless payment for your shoppers: Shoppers don't have to postpone their purchase because they haven't carried their card with them, or because they have to rush to the next room to find the right card. That means more business for you.
- More payment options: If you give your shoppers different payment options through digital wallets, they will reward you with more purchases and customer loyalty.
- Accept payment across devices: With digital wallets and wallet apps, it doesn't matter the device your users are using to browse your store. They can make payments directly from their laptop, desktop, tablet, or smartphone.
- An extra layer of security: Data security is a top concern for online shoppers. Digital wallets add an extra layer of security to your customers' data. Since they don't have to give away their payment details anytime they shop in your store, they can slide through the checkout process with confidence knowing that their information is secure.
- Save time and money: When buyers shop in your physical store, they won't have to waste time queuing because digital wallets make it easy to complete payment in less than a minute. You also don't have to employ money salespeople to collect money from customers.
Setting Up Digital Wallets for Your eCommerce Store
With so much choice out there, it may be daunting to find the best digital wallets to add to your store. Here are the top three you should consider adding to your eCommerce store.
- PayPal: It is the most popular digital wallet, and it is independent of the brand, device, or operating system that customers use to shop in your store.
- Apple Pay: Its market share is greater than Android. It may be your go-to wallet app for your Apple device users.
- Amazon Pay: 93% of mobile shoppers have an Amazon account, making it one of the most popular digital wallets to have in your store.
How to Add Digital Wallets to Your Website
Several factors come to play when integrating different digital payment options into your store. Here are some best practices that you should keep at the back of your mind:
- Devices: You need to know the devices most of your buyers are using to shop in your store. If most of your customers are android users, you are better off offering Android Pay. If most of your buyers are iOS users, then go with Apple Pay.
- Checkout process: Make sure that your wallet app reduces the checkout frictions as much as possible.
- Popularity: You need to make sure that you offer the most popular digital payment options. PayPal and Amazon pay carry the day here.
- Don't mask your main Checkout button: Let the digital wallet's call-to-action appear below your main Checkout button so that it doesn't deter your main CAT button.
- Monitor conversions: Monitor the conversion rates for each digital payment option in your store and make changes accordingly.
Digital Wallet Examples
There are so many digital wallets out there that you can experiment with in your store to see what works best for you. Here are examples of the most commonly used digital payment methods.
- PayPal One Touch
- Apple Pay
- Samsung Pay
- Amazon Pay
- Google Pay
- Alipay
Optimize for a Frictionless Checkout Experience
As you can see, digital wallets are giving consumers the much-needed convenience and security when it comes to eCommerce shopping. Stats underscore the fact that wallet apps will soon become the next big thing in the eCommerce industry. Now is the time to take the plunge and integrate a few digital wallets in your e-store and increase conversion rates at checkout.
The goal for eCommerce merchants is to make the purchasing process as seamless and enjoyable as possible. That means when it comes to checkout, removing friction is the key. With Easyship, merchants can offer their customers real-time rates checkout so they can see the fastest, cheapest, and best value shipping options. Offering these choices leads to higher conversions and happier customers.
Sign up for a free Easyship account today to take advantage of dynamic rates at checkout and save up to 89% on your shipping costs!
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