Digital wallets are one of the fastest-growing industries in the world. According to the tech research firm CB Insights, the current global value of $1 trillion is expected to grow to over $7T by 2027. So what exactly are digital wallets and what do ecommerce businesses need to know about them?
What are digital wallets?
At the moment, digital wallets are used to store digital versions of physical bank cards and credit cards (Apple Pay) or work as dedicated apps that connect directly to your bank or credit cards (PayPal).
They also can be used to store things like boarding passes, concert tickets, loyalty cards, coupons, and gift cards.
In Europe, there are big plans to introduce government-approved digital versions of identity documents and health information but, at the moment, digital wallets are mostly about payments.
How do digital wallets work?
If you use your digital wallet in person, the payment is initiated via magnetic secure transmission (MST) or near field communication (NFC). Apple and Android use NFC. Samsung devices use both. Scanning a QR code to initiate a payment is also possible, though far less common than NFC. For purchases made online, the process is more or less the same as it would be if you paid using a credit card, except it’s much faster because all the details are already saved. Usually, all the customer has to do is provide biometric information such as a fingerprint or face scan via their mobile phone to authorise the transaction.
This reduction in checkout friction can be a huge conversion boost for ecommerce businesses.
Are digital wallets safe?
Yes, digital wallets are very safe. Most purchases made with a digital wallet use tokenization, meaning each transaction generates a random token to validate the transaction. Tokens are typical 15-16 digit numbers that are transmitted instead of your actual card details. To confirm a transaction, usually you need a piece of biometric information, such as a fingerprint, face scan, iris scan, or voice match.
Fraud doesn’t happen in a vacuum – there’s always a human element. Examples of this would be sharing passwords, buying from fraudulent sites, or not being careful with actual card details.
Which digital wallets are popular in Europe?
There are two main types of digital wallets in Europe: those that are device-based (Apple Pay, and PayPal OneTouch) and third-party wallets tied to the customer’s country of residence (iDEAL, Klarna, Bancontact, PostePay, Payconiq, Paylib, paydirekt). Apple Pay is used by shoppers all over Europe, for example, but only those with a Dutch bank account or credit card can use iDEAL.
What are super wallets?
The extreme fragmentation of the digital wallet market, government interest in creating digital forms of identification, and exploding customer interest in mobile payments all mean the digital wallet market is ripe for new solutions. A super wallet can combine payments, insurance, health, identity, loans, investments and cryptocurrency in one place. According to CB Insights, this development is already underway in Asia, where payment apps offer food delivery, taxi-hailing, hotel booking, investment management, insurance, and gaming all in one app. The big players at the moment are AliPay and WeChat. Super wallets are coming to the market in Europe, as well. Long established players and newer disruptors are offering products that handle savings accounts, Buy now, pay later (BNPL), short-term credit access, crypto trading, and bill management tools all in one place. Some are even applying for their own bank charters.
What you need to know about digital wallets and ecommerce
If you are running an ecommerce store, there’s not much you need to know about digital wallets.
A payment platform can integrate commonly used vendors such as Apple Pay, Mastercard, and Visa, as well as any country-specific platforms for countries you’re selling in.
By offering different payment methods, you will not incur any extra costs. You only need a little time to set everything up, which is why it will be worthwhile for you to choose as much as possible.
Grow your business with Mollie
With Mollie, you can provide your customers with a wide range of payment options. Providing customers across Europe with payment methods they are familiar with could mean the difference between making a sale or being overlooked. Discover what kinds of digital wallets and payment methods Mollie supports on our website.