The digital transformation started with the introduction of the internet and technologies, but it hasn’t stopped since. These digital advances gave way to smartphones, and now everyone has access to smartphones.
A study by Statista suggests that by 2022, the number of smartphone users will have already surpassed 6 billion. This stat suggests that the number of smartphone users is increasing exponentially.
With the increased use of smartphones, mobile payments are seeing a massive rise. Let’s say it’s Sunday, and you are meeting your friends for dinner. On the way to lunch, you stopped at a fuel station, got your car tank full, and made payment through your mobile phone. Then, when you reached your destination, you made an order for beers and made payment through an NFC machine on the counter and had a fun Sunday night.
In the above situation, you were to make payments without having to think about your cash in your wallet, credit or debit cards, and banks. All you did was use your smartphone and a digital wallet installed in it. This shows the power of digital wallets in the payments world.
To justify the power of digital wallets, a study by Juniper Research says that the global population using digital wallets will exceed 5.2 billion by 2026. This means that around 60% of the global population will use digital wallets in 2026. So, it won’t be wrong to say that digital wallets are becoming a favorite choice of consumers.
Reading this blog will help you get an insight into digital wallet functions and the key factors that drive consumers to adopt digital wallets for mobile payments.
Functions of digital wallets for mobile payments
Digital wallets, also known as e-wallets, are mobile payments solution that allows users to store, manage, and access their payment information, such as credit and debit cards, in one place. Digital wallets can be used to make and receive payments in both, online and in-person modes by using a mobile device or computer.
Some of the key functions of digital wallets include:
Storing payment information: Digital wallets allow users to store digital versions of their payment cards, such as credit and debit cards, in one place. This can be more convenient than carrying physical cards and can help users easily access their payment information when needed.
Making and receiving payments: Digital wallets work in making and receiving payments, both online and in-person. This can be useful for purchasing goods and services, sending money to friends and family, or making other types of payments.
Managing finances: Digital wallets can be used to manage and track users’ spending and financial transactions. This can help users to keep track of their finances and make informed decisions about their spending.
Offering security and protection: Digital wallet solutions typically use advanced security measures, such as encryption and biometric authentication, to protect users’ personal and financial information. This can help to reduce the risk of fraud and protect users from identity theft and other forms of financial crime.
Digital wallets are useful, yes. They are popular among customers, yes. But what are the factors that drive consumers to adopt digital wallets? There are siome key factors drive consumer adoption of digital wallets.
Key factors driving customers to adopt digital wallets
Widespread contactless payments
The COVID-19 pandemic compelled users to make contactless payments to avoid its spread. But, by the time the pandemic slowed down entire world had become contactless, and contactless payments were prevalent among everyone.
According to a study by markets and markets, the contactless payment market is expected to reach 17.9 billion US Dollars by the end of 2025. Also, a study by Globe NewsWire says that the global market for contactless payments will surpass US Dollars 20,340.3 million by 2026.
Contactless payments make digital wallets extra convenient for users. It allows users to make payments by simply tapping on their mobile devices. This way, it helps to improve the user experience. And hence contactless payments have led to the adoption of digital wallets.
Convenience in making payments
With digital wallets, payments can be made from close proximity as well as a long distance. Not just that, the users can make payments just with a few taps on their mobile phones. All this makes the payment process quick and smooth for the customers.
And when customers can make payments at the convenience of their time and place and just by using their mobile phones, they feel comfortable and confident in using digital wallets. Hence, convenience in making digital payments is another factor that drives consumer adoption of digital wallets.
Wallet options in eCommerce sites and marketplaces
E-commerce sites and marketplaces like Amazon and Alibaba offer a variety of digital wallet options to their customers, including payment apps like Amazon Pay, third-party digital wallets like Apple Pay, and credit and debit cards.
The availability of various wallet options allows users to choose the option that best meets their needs and preferences and conveniently make online purchases. Due to these features of digital wallets, consumers are easily attracted to using digital wallets.
Super apps are creating buzz
Super app is a digital wallet app that can fulfill many payment needs like train, movie & event ticket booking, bill payments, sending and receiving payments, top-ups, and many more, through one single app.
Consumers don’t want to use multiple wallets for their payment needs. There has been an advent of wallets called super apps that can fulfill the functions of multiple wallets in a single environment. This makes it easy for consumers to save time and effort. Thus, there has been widespread adoption of digital wallets.
App purchases and digital content
Today, consumers want to purchase everything online at their fingertips. So, in most apps, there is an option for in-app purchases. Digital wallets can facilitate these in-app purchases as the apps now give an option for digital wallet payments.
Apart from that, people now prefer digital content like games, ebooks, and music over the internet. They can purchase this digital content digitally through digital wallets. Thus, now consumers can purchase from the convenience of their homes, making it a preferred choice of consumers.
Safe and secure transactions
Digital wallets are virtual wallets through which the users can make payments just by adding money to the wallet. These wallets are secured through multiple layers of security such as tokenization, biometric authentication, passwords, two-factor authentication, and much more to prevent unauthorized access to the wallet and the funds it contains.
Overall, these multiple layers of security make consumers feel safe and secure while making transactions through digital wallets. That’s the reason why they prefer digital wallets over cash.
Rewards and incentives
Digital wallets often offer rewards and incentives to users to encourage them to use the wallet and to promote the use of their wallets. These rewards are generally in the form of cashback, referral bonuses, discounts and coupons, and loyalty programs. Overall, the use of rewards and incentives can be a great way for digital wallet providers to attract and retain users.
With the ever-changing technological and economical scenario, there will be widespread adoption of digital wallets in the coming years. This will lead to the development of new and more advanced digital wallets (like super apps) with improved security, user-friendly interfaces, rewards and incentives, and so on.
Thus, the future of digital banking is digital wallets. And it can be said that e-wallets and their key features are driving widespread consumer adoption of digital wallets and mobile payments all across the world.