In today’s market, traditional methods of carrying cash or plastic cards have almost entirely been replaced by digital wallets. With this rise in prominence, it’s important for your business to understand how digital wallets work, including the features and benefits they bring for you and your customers.
This page will explain not only how digital wallets are making transactions safer and more convenient, but also how your business can leverage this technology to drive growth.
A digital wallet is a virtual counterpart to your physical wallet, storing your money digitally on your smart device or computer. They essentially remove the need for carrying physical cash.
By uploading your credit card information into a digital wallet, you can use it to make purchases both online and offline. Even when shopping in physical stores, Near-Field Communication (NFC) technology enables you to complete transactions at the point of sale by using your digital wallet.
On top of facilitating transactions, a digital wallet also enables you to store various items typically found in a physical wallet, like gift cards, loyalty cards, ID documents, boarding passes, and tickets.
Digital wallets can also authenticate a user's identity for different purposes, i.e. verifying someone’s age when they’re buying alcohol.
Currently, the leading digital wallets in the market include:
For customers, paying with a digital wallet feels just like using a regular credit card payment. However, underneath it all, digital wallets actually work differently depending on the technology behind it, either using NFC, MST or QR codes:
Learn more: Mobile payment processing guide
There are different types of digital wallets that your business may want to consider accepting…
Pass-Through Digital Wallets are commonly mobile device-oriented solutions that enable customers to make payments both in physical stores, using tap-to-pay functionality, and online. These wallets typically use tokenization to create a secure, digital representation of the customer's physical Visa card.
Also, Pass-Through Digital Wallets can be integrated into "wearables" like smartwatches or browser-based "card on file" solutions, mainly designed for secure online and ecommerce transactions.
Stored Value Digital Wallets are similar to prepaid cards, as they allocate a separate "account" to each customer. Users can load funds onto this account using their Visa payment credentials, then, once the account is funded, customers can engage in transactions with sellers who are part of the digital wallet's platform.
Customers can also carry out peer-to-peer transfers to other users within the same wallet platform, such as Venmo. Typically, transactions happen either within the main network of the Stored Value Digital Wallet, connecting users and sellers, or within the wider Visa ecosystem – if the wallet is linked to a Visa product – such as a prepaid credential. In the latter case, the wallet employs Visa to facilitate purchases, cash withdrawals, and other related transactions.
A staged digital wallet operates by using multiple "stages" to complete a transaction, consisting of a "funding" stage and a "payment" stage. It doesn't necessarily transmit card information to the card brand or issuer, because the first stage is the funding stage, where the wallet collects funds from the buyer.
The second stage is the payment stage, where the wallet provider pays out the funds to the business. Essentially, the wallet acts like an intermediary in the transaction process. With a staged wallet, the card issuer or card network may not have access to specific card details or other pertinent information. Some popular examples of staged wallets include PayPal and Google Wallet.
Learn more: Evolution of mobile wallets
Digital wallets and E-wallets are designed to help users make online transactions. An E-wallet falls under the category of digital wallets, but it specifically refers to wallet technology that’s accessible through a mobile app. You can use a digital wallet on various devices, but you can only use an E-wallet specifically on mobile devices.
Digital wallets offer a range of functionalities, including:
On the other hand, E-wallets have a narrower focus. They’re a type of digital wallet dedicated to facilitating contactless payments as a substitute for credit cards or cash.
Examples of E-wallets include Apple Pay and Samsung Pay, which can be accessed through dedicated apps on smartphones or wearable devices. These E-wallets not only enable one-tap payments but also support the storage of concert tickets, travel passes, loyalty cards, and various other items typically found in a physical wallet.
Learn more: Digital wallet fraud
When it comes to digital wallets, the best options prioritize user-friendly experiences without unnecessary complications. The key features include robust data encryption and comprehensive transaction records for effortless spending tracking.
These are the leading digital wallets based on their security, versatility, and ease of use:
Exclusive to Apple devices like iPhones, iPads, Apple Watches, and Mac computers, Apple Pay facilitates seamless online and in-store transactions. Using NFC technology, users can unlock their devices and complete transactions by simply holding them near the point of sale.
Google Wallet (Google Pay) is like an android version of Apple Pay, securely storing cards, tickets, digital keys, and IDs on Android devices.
PayPal facilitates money transfers in over 25 global currencies, and it’s accessible via web browsers or mobile apps. PayPal also offers a centralized platform for managing bills, subscriptions, and transactions efficiently.
With a user base of over 80 million, Venmo is highly popular for its swift transaction approvals, enabling instant money transfers between digital wallets. Users can easily send and receive funds without long waiting periods, making it one of the most popular peer-to-peer platforms on the market.
Zells is exclusive to the United States, allowing users to send and receive funds directly from their checking accounts or debit cards. Its integration with banks sets Zelle apart as the only digital wallet with direct bank connectivity.
Walmart Pay is a closed wallet solution that enables customers to make payments by simply scanning their phones over QR codes displayed on the PIN pad at checkout. Multiple layers of security safeguard payment information against potential threats.
There are many reasons why your business should consider accepting digital wallets, including:
By embracing digital wallets, you can cater to their preferences and align with their purchasing behaviors, leveraging their significant buying power.
We’ve broken down the process for accepting digital wallets into eight simple steps:
Start by researching different digital wallet providers to pick out the ones that align with your business goals and customer preferences. Consider factors such as their supported platforms, security features, transaction fees, and customer reviews.
Once you've chosen a digital wallet provider, you can then set up an account. This typically involves creating a merchant account or business profile, providing necessary information, and agreeing to the terms and conditions.
There are normally many different integrations to consider that can help your business bolster its payment accepting capabilities. For example, Checkout.com offers things like software development kits (SDKs), application programming interfaces (APIs), or plugins for popular ecommerce platforms.
Follow the integration guidelines provided by the digital wallet provider to integrate their solution into your payment system. This may involve incorporating their SDK or API into your website, mobile app, or point-of-sale (POS) system.
Once the integration is done, you should prominently display the accepted digital wallet badges or logos on your website, app, or physical store. This helps customers identify the payment methods available and instills confidence in your company’s security and convenience.
Provide training to your staff members, particularly those involved in the payment process, to ensure they’re familiar with accepting digital wallet payments. Educate customers about the benefits of using digital wallets, explaining how they can make purchases using their preferred digital wallet option, which can be particularly beneficial for older customers who may be unaware of modern payment methods.
Regularly monitor your digital wallet transactions and review analytics provided by the digital wallet provider. This allows you to track sales, identify trends, and gain insights into customer preferences, helping you optimize your business strategies.
Follow recommended security practices to protect customer data and comply with relevant regulations. Keep your systems and software updated, using strong passwords, and implement additional security measures such as two-factor authentication.
With Checkout.com, you can start accepting new payment methods (including digital wallets) and reap the benefits they bring, including better fraud protection, stronger security measures and enhanced customer experiences.
All you have to do is integrate our payment solution once, then start expanding your business across the globe by accessing new markets, while driving revenue and building stronger customer relationships.
Contact our sales team to find out more.