From being the new cool kid on the block to a major industry force, the global FinTech industry has undergone colossal and rapid changes that have changed the way that consumers purchase, consume, and invest.
The time when users had to visit their respective bank branches for menial tasks such as transferring money already sounds a lot like the tedious struggles of the past generations — and innovations in the financial sector are looking to streamline such processes even further.
How? Through digital wallets. They are not a new phenomenon, but they are surging through popularity metrics to steadily take their place as one of the widely preferred payment systems.
Every year, there is a significant increase in the number of people who store their credit cards, debit cards, and loyalty cards, in their smartphones to have access to a quick and flexible payment option.
Factors Behind The Rise Of Digital Wallets
By 2020, in-store mobile payments are expected to surge to USD500 billion. If that doesn’t convince you — we have a list of reasons that analyze the growing global potential of digital and mobile wallets.
Rise In Awareness
Like every disruptive technology, digital wallets have experienced their share of skepticism and critique that has been centered on irrational fears about security and feasibility. However, despite all odds, digital wallets have continued to gather significant attention.
With popular companies, such as Apple, Google, and Alibaba — all launching their digital wallets, the industry has seen a surge in attention afforded to them. According to studies, awareness regarding digital and mobile wallets have risen considerably in recent times, across all demographics.
Unsurprisingly, the younger demographic features the highest amount of interest due to their enhanced capability to handle and customize technological solutions as opposed to the older side of the spectrum. Almost half of all people that fell between 18–34 years of age in the survey reported having a mobile wallet.
Of the remaining half, an overwhelming majority (32%) were interested in the idea of having a digital wallet.
Move a little higher, and the digital wallet adoption remains only slightly affected, with 44% of people that use a smartphone having a digital wallet, whereas an additional 30% of people started to be intrigued and interested in the prospect of having a digital wallet.
However, the most surprising finding of the study pertained to senior citizens. The convenience and ease-of-use afforded by digital and mobile wallets have converted approximately 30% of the people surveyed who fell between the age groups of 55–64.
In addition to the 30%, a further 27% were attracted by the prospect of using one. It’s safe to say that the irresistible benefits levied by the digital wallets transcend age restrictions and the awareness is only going to rise.
The Exponential Rise Of Mobile Commerce
The primary reason behind the rise of mobile wallets is mobile usage — and the resulting commerce that has been afforded by smartphones. In essence, mobile wallets were manufactured as a means to streamline the checkout process after buying something over your smartphone.
So while the fact that more than 50% of all internet traffic is directly coming from smartphones does not appear surprising anymore, the purchasing behavior displayed by mobile device users is what interests marketers.
Consider this: 62% of people who own a smartphone have made an online purchase using their mobile device in the past six months.
When taken in the wider context of the entire e-commerce market, mobile commerce thwarts any potential competition by contributing an overwhelming 67.2% share — which is expected to reach 72.9% by 2021.
As mobile commerce grew into an industry in itself, there was an overwhelming need for a more streamlined, a more feasible mode of payment. Conventional payment techniques were not only slow and cumbersome but also presented several risks.
The demand for a more streamlined payment option was a dominant factor in fueling the research in digital and mobile wallets.
Consumers and experts alike have been critical of the security that is available on mobile payments, with more than 70% of Americans citing it as a concern. These Americans are standing in unison with 47% experts who have voiced their doubts about the security of conventional mobile payments method.
This is where digital and mobile wallets provide unparalleled safety for consumers. Digital wallets are equipped with a list of security checkpoints that make ensure proper authorization before a consumer is allowed to confirm payments.
Most digital wallets are laced with a necessary biometric authentication which provides an enhanced level of security in case a phone is lost or stolen. Some wallet providers even require a selfie for greater safety.
Not only this, the digital wallets can be locked in case of a replaced or stolen smartphone which neatly safeguards the financial assets of the clients. The same cannot be said about conventional payment methods; if a physical wallet is lost, the user is at a risk of losing cash and credit cards which can then be used to inflict more financial harm.
Provides More Value
Value is the holy grail of the corporate world. From consumers to different stakeholders in a business, everybody is focused on value creation and value derivation. One of the reasons that have catapulted digital and mobile wallets to massive popularity is the value that they provide to the clients.
While value can be subjective, in terms of wallets, consumers require a platform where they can securely store their financial resources, such as bank accounts, credit cards, and loyalty cards, and simultaneously keep track of the respective amounts.
Digital wallets are equipped to store all this information, provide updates, and offer products that lead to a rewards program. Value is ultimately the influential factor in consumer decision making, and by providing extraordinary value, digital wallets have ruled the decision in their favor.
Digital and mobile wallets eliminate barriers that prolong the ‘checkout’ process when shopping online, which is not only beneficial for the consumer, but also for the seller.
According to a study, 21% of users surveyed said they had abandoned their shopping cart due to the checkout process being too long. That represented a 5% year-over-year increase in cart abandonment rates.
It is no hidden fact that digital payment checkouts help increase conversions. A May, 2018 study concluded that “Payment checkout converts at 88.7% — 82 % higher than a checkout without it.”
With modern payment methods, not only are the consumers benefiting from quick and streamlined services, but the suppliers are also removing barriers to conversion.
The future is digital, and the same stands true for digital and mobile wallets. As more and more sellers and organizations look to incorporate digital payment solutions, the plethora of advantages levied by digital and mobile wallets mean it is a matter of ‘when’ and not ‘if’ mobile and digital wallets will become the primary mode of payment.