Digital wallets will take off when they add more value to consumers
Gallup suggests that just 13% of smartphone owners in the US have a digital wallet app (that’s things like PayPal, Google Wallet and Apple Pay) and those who have one rarely use it (76% fall into this category). In the UK, around 5% were using mobile wallets in 2016 (with just 32% of eMarketer survey respondents saying they would trust a mobile wallet from their bank).
As we discussed recently, the industry is suffering from the ‘added value’ issue – paying via digital wallet does not really, yet, enhance convenience for customers who can use a contactless card, for example, just as swiftly. (When we say ‘digital wallet’, we mean the technology that lets you store credit and debit cards, money, loyalty cards and coupons, so you can make purchases using a digital device, usually a smartphone.)
The trend will take off – and it is predicted to do so – when the relevant tech becomes standard on devices and within payment terminals, and when these apps add value to the customer.
The cool thing about digital wallets is that they are so much more than just digital versions of wallets – they tokenize any form of data, and can therefore be used to collect loyalty points, save tickets and passes, and confirm identity. Where retailers and providers can tie more benefits to the apps they offer – and where providers can encourage online retailers to get involved, as PayPal has pretty successfully done – digital/mobile wallets will be the next cool thing we can’t get enough of.
The most common form, the mobile wallet, uses NFC to help customers pay with their device at point of sale (think Apple Pay), or as a quicker way of paying online (think PayPal), or as an easy way to pay friends and split bills (think Venmo). Mobile can also be USED as the point of sale, as Square and others have demonstrated.
The Starbucks Mobile Order & Pay app is an interesting example. Users are encouraged to download the app not only as a way to pre-order and pay (quickly) for hot drinks at their nearest branch, including a new mobile ordering-only store in Seattle, but also to receive customized offers and perks from the retailer’s rewards program. Recently launched in India, Starbucks’ fastest-growing market, the app has 13 million active members worldwide.
However, where branded apps like this fall down is on convenience. As more PFM and account aggregator tools hit the app stores, shoppers are starting to see value in having all their payment information in one place, giving them digital spending analysis. If the Starbucks payment app is only used in Starbucks, it doesn’t help build an overall picture of financial health.
The point is, until a better option comes along, apps like those from Starbucks will be favoured by customers – data around in-store traffic and conversion rates would support this. Why would I use a regular wallet like Apple Pay when my Starbucks payment app gives me free coffee every so often, and helps me skip the queue? Until my general mobile wallet gives me enhanced transaction data, personalised marketing and rewards, I will put up with the ‘inconvenience’ of using a different app in different stores – in the same way as, currently, I will carry a limited number of different loyalty cards, until a more convenient solution appears.
Despite a supposed lack of trust from customers, a proprietary wallet from my bank surely has the potential to give me more value than one from a retailer or café – as long as it is developed correctly. Again, it hinges on added value from rewards and perks, from being supported by a wide range of retailers and merchants à la Apple Pay and PayPal, and from bringing lots of data together to give me useful insights on my spending habits.