Online shopping is growing exponentially, so are digital payments. Today’s consumers love the ease of finding just about any product online and have it delivered to their doorstep in a relatively short period of time. However, like physical retail businesses, eCommerce doesn’t come without challenges. And the biggest of them is cart abandonment.
Typing credit card and address information on mobile screen can be annoying, inconvenient and time-consuming for online shoppers. Once they find a desired product, people want to complete their purchase as quick as possible, which is why we are seeing a growing interest in digital payments.
For eCommerce merchants, it is important to minimise the friction at checkout in order to increase conversion rates, and digital wallets help you just do that.
WHAT IS A DIGITAL WALLET?
A digital wallet is an in-app or cloud-based payment system that allows consumers to securely store their credit card or other payment details so that they can make online transactions across different websites or physical stores without the need to give away their confidential payment details.
A digital wallet works just like your physical wallet – it allows you to store your credit cards, debit cards, cash and other personal or financial information, only virtually. With all your payment credentials in one place and easily accessible on the cloud or in app, you can conveniently pay for your purchases from your mobile phone or even your laptop or PC. Some of the most popular examples of digital wallets include Amazon Pay, Google Pay, Apple Pay and Samsung Pay.
Most of the eCommerce websites, today, offer a digital wallet feature to ensure quick and hassle-free checkout for their customers. Some eCommerce businesses have their own digital wallet built in their website, others simply collaborate with third-party companies that provide digital or mobile wallet services e.g. Paytm, Paypal, Stripe, Adyen etc.
HOW DOES IT WORK?
Digital wallets have an easy set-up process and function. Digital wallet software is traditionally installed on a smartphone device via an app or but can also be accessed directly through an eCommerce website or online platform.
A digital wallet typically requires the user to download a mobile wallet app on their smartphone. Then you need to create an account adding your personal information, payment information, and any other verification details needed.
Once your bank verifies your payment details, you can start using your digital wallet app to make online payments wherever you want with a single tap or click.
To allow payments at physical stores, mobile wallets use a technology called – near field communication (NFC). POS terminals that support payment via digital wallets, have a contactless payment symbol on them; to make a payment, you need to simply point your smartphone close to that symbol, and scan a QR code, enter a password, or tap the required button to confirm the payment.
BENEFITS OF DIGITAL WALLETS
Fast Payment
A lengthy checkout process where customers have to select a payment mode and enter payment details every time can be a turn off. A digital wallet feature eliminates the hassle of repeatedly providing credentials for each transaction and automatically deducts the amount from the saved card or the wallet credit itself, cutting the cumbersome process short and saving customers’ time.
Increased Convenience
Rather than spending time digging a card out of your chunky wallet crammed full of credit/debit cards, cash, driver’s license and IDs, you can simply hold your smartphone close to a payment terminal in a store and check out in a few seconds. Digital wallets also streamline online transactions, allowing you to complete your purchases at online stores in minimal clicks. Besides, a lot of people would love the convenience of not having to lug around a bulging wallet brimming with cash and cards.
Reduced Cart Abandonment
Payment through a digital wallet hardly takes any time and effort, leading to a smoother and faster checkout. So when customers leave your eCommerce website or physical store with a pleasant, seamless shopping experience, they are more likely to return for more, resulting in customer retention.
Moreover, by simplifying the checkout process, eCommerce merchants make sure that more shoppers can complete their purchase, eventually reducing cart abandonment rates. According to eCommerce statistic data, 21% of shoppers who abandoned their carts thought the checkout process was too long or confusing.
Reduced Transaction Fees
By issuing a credit card of their own which can be used via an e-wallet, merchants can lower bank transaction fees. It is pretty much like a gift card offered in physical stores, only the card works virtually and there is no cost for issuing a plastic version. Since the card is digital, it leaves the bank out of the payment loop, reducing transaction fees.
Enhanced Security
If you have ever lost your physical wallet, you must know the pain of deactivating and replacing all cards; not to forget, the lost cash cannot be recovered. Paying through a digital wallet negates this problem, providing you peace of mind. Even if you lose your phone, the person who steals it will need to first break into your phone password and then further Face IDs or password used to protect your digital wallet app.
The Takeaway
Digital wallets may be relatively new in the eCommerce industry, but are rapidly gaining popularity for the convenience of payment they offer to customers and increased sales & lower cart abandonment benefits to merchants. Especially, the social distancing and lockdown restrictions imposed in the wake of COVID-19 pandemic have made it difficult for shoppers to move out and pay physically with cards or cash for their purchases. This caused more people to switch to online shopping and embrace contactless payments through digital wallets.
Moreover, statistics indicate that digital wallets will continue to grow by CAGR of 12% to reach $6.7 trillion in 2023.
So, if you do not already have a digital wallet feature in your Magento Commerce website, you are missing out on a lot of potential customers and sales. It is advisable to work with a certified Magento agency to integrate a digital wallet system into your eCommerce website or app.
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