Not too long ago, the idea of stepping into a local store, walking up to the register, and then checking out in seconds with nothing but a phone belonged to the realm of science fiction. But now, thanks to the growing implementation of digital wallets, this scenario is an everyday reality. In fact, the best digital wallets now go beyond the ability to instantly transfer funds with a mobile device.
Now that digital wallets are becoming commonplace, let’s get familiar with how they function, and what users want to see from the best digital wallets.
The Basics: What Are Digital Wallets and How Do They Work?
Digital wallets are an evolution of secure contactless payment, made possible through mobile applications which store users’ payment and identifying information. They allow customers to transfer funds, make purchases, track transactions, and confirm their identities using only their digital devices.
The best digital wallets leverage a combination of mobile technologies to create a seamless payment experience:
- QR codes
- NFC (Near Field Communication), often used in ‘tap and pay’ transactions
- MST (Magnetic Secure Transmission), the same technology magnetic card readers use, though its use is being phased out in some digital wallet applications because NFC is becoming so popular.
The meteoric rise of digital wallets can be attributed to the similarly exponential growth of mobile ecommerce. Google spurred on the race with the launch of its mobile wallet in 2011, becoming the first major company to offer the service. Since then, companies offering digital wallets have proliferated.
Personal Financial Management with Digital Wallets
The best digital wallets do more than enable users to not only pay online or in brick-and-mortar stores using their mobile devices. They also allow customers to maintain a comprehensive grasp of their finances, seeing their broader financial picture at a glance. Centralizing their payment information in digital form builds awareness of spending habits, helping users make wise financial decisions.
Skyrocketing entrepreneurship rates means users also need tools to keep their personal and business finances separated, while seamlessly maintaining a view of both. The best digital wallets have the potential to make this possible.
What Users Want From Their Digital Payment Solutions
Now that contactless digital payment is commonplace, customers are searching for more than just the ability to make payments through their phones and other mobile devices. Users also want to be able to:
- Manage bill payments and disputes.
- Claim rewards and discounts for their most frequented businesses.
- Access 24/7
- Benefit from analytics dashboards to point out trends in their income and spending.
- Consult smart, customized budgeting tools.
- Enjoy even more frictionless purchasing experiences through integrations with the ecommerce and social media platforms they already frequent (like WhatsApp, FaceBook, Amazon, and Instagram).
- Store digital ID cards for use in the ‘real world.’ For example, during the pandemic, some digital wallets offered their customers the ability to store virtual COVID vaccination cards. Users were relieved to never have to worry about losing their card, or not having it with them at a critical moment. Some regions also allow the use of digital driver’s licenses and insurance ID cards.
The Future of Digital Transactions
Though digital wallets have made enormous strides in the decades since their introduction, significant areas of opportunity still remain.
For example, adoption rates for digital wallet payment options at brick-and-mortar businesses lag far behind ecommerce. Many stores refuse digital wallets outright, partially due to mistrust, and partially due to unwillingness to invest in the necessary upgrades to their point of sales equipment.
As authentication measures improve and customers increasingly demand contactless payment options, look to see this resistance softening and brick-and-mortar adoption rates soar.
Ready to try out the best digital wallets? You won’t regret it!