Will digital wallets one day be the only way to pay?
This is the title of an article in In The Black and the question on all retailers lips.
Cryptocurrency is now a seriously hot topic. (Did you know that there’s a post every 3 seconds on social media about Bitcoin?)
Initiative Q is one of the latest digital currencies to get talked about. But while the majority of us aren’t yet paying for things using digital currencies, we are using digital wallets.
Though not as often as you might think.
In Australia, a nation of early adopters, only 1 in 50 in-person payments were made by mobile devices. This is in contrast to 52% that were made by credit or debit card.
So how temporary is this break in progress? Are digital wallets really the future of payments? What is the main barrier to digital wallet adoption and how can it be overcome?
3 digital wallet adoption facts
1. Asia Pacific is leading the way
Asia Pacific is spearheading the charge when it comes to digital wallet adoption.
The 2017 Mastercard Digital Payments study revealed that 83% of APAC conversations were about ewallet payments. This is compared to 75% of global conversations.
“Technology is making the promise and the potential of a less-cash life a reality for more people every day,” said Marcy Cohen, vice president of digital communications at Mastercard.
“This year’s study notes a change in the level of interest for new ways to shop and pay that only a few years ago would have seemed farfetched.” Marcy Cohen, via Australian FinTech
2. The majority of consumers aren’t using digital wallets
The Royal Bank of Australia’s data shows that digital wallets aren’t being used half as much as they seem to be talked about.
“Cards were the most frequently used means of payment in the 2016 survey, overtaking cash for the first time. Contactless ‘tap and go’ cards are an increasingly popular way of making payments, displacing cash for many lower-value transactions. …
“Payments using a mobile phone at a card terminal are a relatively new feature of the payments system and this technology was not widely used at the time of the survey.” RBA
US data tells a similar story.
(Source: Forrester Consulting for JPMorgan Chase)
Despite the fact that 37% of merchants surveyed accepts digital wallets, only 14% of consumers prefer to pay that way.
3. There is a digital wallet adoption issue
The data shows that merchants offering the technology is on the rise — albeit slowly. So is consumer appetite to make ewallet payments.
However, there is evidently a disconnect between appetite and usage. We have an adoption issue. In other words, consumers need help adopting and accepting digital wallet technology.
“Consumers, in varying stages, are exploring digital wallets. Moving all consumers to active use of digital wallets will be an evolutionary process of satisfying the demand for features and experiences in addition to transacting safe, flawless payments.
Some consumers (Power Users) are further ahead than others; the key will be to help Light Users and Non-Users find their way.” JPMorgan Chase
The customer experience is really important here. Consumers won’t change their habits, unless they can be assured they will benefit from being able to make easier payments with optimum safety.
“Merchants are busy getting ready for digital wallets. They are making technology and infrastructure investments in preparation for emerging digital payments opportunities and exploring features to improve the customer experience.” JPMorgan Chase
So, in this temporary pause in proceedings, both merchants and customers are going to need guidance towards total digital wallet adoption.
David Sica, a fintech venture capital expert, has a few words of advice for merchants.
“Before you worry about integration, you’ve got to have a business strategy that appreciates innovation and makes it a priority.
“Once you have a plan for what you’re going to do at X retailer, then the integration is certainly doable, but you’ve got to put resources and people behind it, and it’s going to cost money.” David Sica, via Digiday
The future of payments, or another Minidisc fiasco?
The million dollar question is: will this break in progress be terminal, or is it exactly the temporary breather needed to get digital wallet adoption on track for payment domination?
Everyone remembers the short-lived success of Minidiscs. Journalist Joey Faulkner describes it well:
“…it took a decade [for Minidiscs] to make any impression on the mainstream…and almost as soon as it did, it was killed by the MP3 player.” The Guardian
Will digital wallet adoption take too long and be killed by the next innovation in payment technology?
Unlike 20 years ago, the digital revolution is now well underway. And one tool we now have, to ensure digital wallets don’t die like Minidiscs did, is the Digital Adoption Platform (DAP).
The DAP is an algorithmic guidance layer that can be applied to existing systems like digital wallet applications. It uses machine learning, insights, and automation to accelerate adoption and digital integration, while improving user experience.
Merchants looking to fast-track their digital integration should consider using a DAP. If digital wallets are the future of payments — and data commentary seems to indicate this is the case — they’ll be thankful they did.