27 December 2017
Digital wallets as alternative payment methods.
Does your business offer digital wallets as a way to engage more meaningfully with your customers?
Digital wallets are an alternative payment option major player. And there’s more to these wallets than just ‘tap and go’. It’s a “powerful marketing and loyalty platform,” according to research group Forrester in a 2017 report.
“Digital wallet adoption is coming, but the road is slow and bumpy,” says the report. “While merchants see the need to modernise their payment technology … [they] face a host of challenges in doing so, but should do it for the right reasons,” it further states.
While Australian figures are in short supply, just over a third of US merchants accept digital wallets, says Forrester, as merchants “see the opportunity for both operational efficiency and customer engagement”. The small and large businesses surveyed said they were meeting their customers’ demands for a better shopping experience, too. Digital wallets also allowed them to market to their customers beyond the payment itself.
Digital Wallets Demystified
A digital wallet is software that lets customers store credit or debit card info and money digitally - usually on a smartphone - to make cashless transactions.
In a store, they wave their smartphone or other device near a physical reader, which transfers the credit card info using radio-frequency identification (RFID) tags. That sends off a one-time token to the merchant. It’s very secure because that token can’t be used for other payments or amounts. Importantly, the credit card details aren’t going into the ether each time and customers usually have to authorise the payment using fingerprint recognition or a passcode. Online, they can make an in-app purchase, often with a single click.
Wouldn’t you agree that having a one-click checkout is good for your business?
Digital wallets save your customers having to key in their details every time they make a purchase. While autofilling an online form is helpful, the customer still needs to spend time on their phone at the checkout. As well, digital wallets offer customers cash-back rewards, allow them to split the bill at restaurants, pay bills and ditch transaction fees for travels.
Tap and Go Takes Off
‘Tap and go’ contactless payment using a credit card accounts for 75% of all transactions over $10, according to a survey by the Reserve Bank of Australia as cited in an Australian Payments Network study. In fact, Australia has the most point-of-sale terminals per capita of all the Bank of International Settlement member countries, the report said. That’s 40,130 POS for every one million residents.
The push for faster sales online and through apps is gaining traction and we’ll soon see a boost on a national level. Early in 2018, the Reserve Bank of Australia (RBA) will launch a better way to speed up payments for merchants and consumers alike. Its New Payments Platform (NPP) is an open access infrastructure allowing the funds to be available to the recipient in near-real time, 24/7. Each payment message will be able to carry much more info than the current 18 characters available now for direct entry payments.
“The NPP infrastructure will support multiple ‘overlay’ services that can be independently developed to offer innovative payment services to end-users,” says the RBA.
Less Risk for Your Business
You may not know that the liability of authenticating a purchaser will rest with the card issuer or digital wallet provider when you use 3D Secure authentication protocol. So, if someone buys via your website using Android Pay, the responsibility for authentication shifts to Android, not your business. Looking at the main three digital wallets, MasterPass and VISA Checkout use 3D Secure, while PayPal’s OneTouch uses an IPN protocol.
Digital wallets may reduce theft in next-generation bricks-and-mortar stores. Smart stores, which link a customer’s biometrics – such as palm or fingerprint – to their account information via a digital wallet, are emerging in Australia.
Amazon Go and quiXmart are the trailblazers in cashier-free shopping. Artificial intelligence and a whole host of scanning devices allow the shopper’s items to be tabbed while they’re in transit in the store. The transaction is authorised as they exit the business.
Fingerprint scanners are already available on smartphones - one-third of Australians have them and 70% use it regularly, says the Australian Payments’ Network.
Stellar Insights into Shopping Trends
Digital wallets are a key part of the “digital ecosystem leveraging improved data analytics. They help capture growth streams and are, by nature, innovative", says PwC in its report, The Future of transaction banking and payments in 2020.
Harness digital wallets as one of the many payment options for your business and you’ll be able to drill down into the data for greater insights about payment transactions. You’ll also have the power to personalise offers and experiences that consumers want – loyalty programs are a drawcard. As well, digital wallets speed up the payment process making them ideal for restaurants and bricks-and-mortar stores, for example.
Crystal ball gazing, Australia is moving to a more sophisticated digital ecosystem, one that seamlessly links mobile payments, personal financial management and smart POS, says PwC. “When payment-chain participants manage to create an ecosystem encompassing these platforms and information, new opportunities will emerge.”
As a merchant, you would be able to aggregate and swiftly analyse customer purchasing information in new ways. You’ll be able to target, for example, customers aged under 30 using their smartphones compared with other offers for the 50+ demographic using their laptops, says PwC.
Do the deep dive into this data and you’ll learn insights into purchasing trends. Your value-added services such as loyalty programs, coupons, redeeming points will be better timed to increase your conversion rate on sales. Mobile Payments Today estimates in the US alone, $US 160 billion of reward currency “lies dormant” because it’s too complex for customers to activate. Digital wallets are a way for merchants to simplify the process and get ahead of their competitors.
This speed and ease of use works both ways. Yes, as a merchant you’ll receive those funds almost instantaneously because there are no third parties. Offering a digital wallet means you’re not bound by a POS. But why stop at offering one wallet?
The Best Wallets on the Table
These are the digital wallets apps for smartphones and cards that we recommend. We’ve done the due diligence and can vouch for their seamless integration into payment systems for small businesses up to large enterprises:
- Apple Pay: This allows purchasers to use their iPhone, Apple Watch, iPad or Mac to buy with extra security using Visa, MasterCard or American Express debit and credit cards. It’s been around in Australia since 2015 originally for AMEX credit cards, but Apple Pay now enjoys support from ANZ and about 50 financial institutions.
- Android Pay: Users just need to download the app on their phone and then hold their phone to the POS terminal to pay. No need to open the Android Pay app or unlock the phone. Google has signed on ANZ and Westpac as well as more financial institutions signed on than Apple Pay.
- One Touch - PayPal: By linking their PayPal account to a transaction account or credit card, customers can securely pay for purchases. To make a payment from an enabled phone, customers use Near Field Communication (NFC) enabled stickers. Customers can checkout from a merchant’s website and don’t have to enter their user ID and password again. According to Let’s Talk Payments, more than half of the top 500 internet retailers and more than a million merchants globally accept PayPal.
- Visa Checkout: Visa has simplified the sign-up process for customers and has opened the platform to its partners who issue the cards so they can integrate their own digital wallets into Visa Checkouts. Customers can add Visa, MasterCard or American Express credit or debit cards. Offers one-click checkout and is accepted by 225,000 merchants.
- MasterPass: Lets customers check out online and in store swiftly with one click and has loyalty program functionality. More than 250,000 eCommerce businesses around the world accept MasterPass.
- Diner’s Club: Allows its Consumer Card holders to add that card to their digital wallet. They can pay using their mobile phone using Apple Pay, Android Pay, Samsung Pay and BMO Harris Bank Masterpass.
Consider that your customers probably aren’t going to bother to sign onto 50 digital wallets. Just a few is all they need and that’s why we’re highlighting the major ones.
Time to Get on the Boat
In a major breakthrough for the system, in Australia, Sydney’s Manly Ferries started accepting payments via digital wallets from July 2017. Now that’s a solid endorsement of digital wallets. Perhaps it might be the only way to pay in the future, suggests In The Black, but that will take time.
As a merchant, you can help steer customers towards considering digital wallets as a way to enhance their shopping experience. You’ll benefit through a healthier bottom line. It’s all about customer choice.
For the on-trend advice about alternative payment solutions to suit your customers, contact Bambora.
About the author
Victoria Galloway is Bambora APAC's Technical Copywriter, and has been writing and producing in the payments and eCommerce space for a number of years, both in the UK and Australia.