Did you know that cash only accounted for 18% of point-of-sale transactions globally in 2021? That’s according to Worldpay’s Global Payments Report. Cash is now only the 4th most common method of payment in the world. Digital payments are increasing quickly, and part of the reason for that is the rising popularity of e-wallets.
What is an e-wallet?
A large component of many merchants’ digital customer experience strategy these days is the move toward accepting digital payments. As more customers make the leap to using e-wallets, it’s become a vital step for many retailers to remain relevant. But what actually are e-wallets?
E-wallets – also known as digital wallets – are a one-stop digital payment solution. They are apps you download to your phone or other mobile device that store your banking and payment data. When you want to make a purchase, you present your device to the merchant’s payment terminal to complete the transaction. Simple.
But wait, there’s more! As is often the case with modern tech, many e-wallet apps include additional functionality. For example, it’s often possible to store items like digital gift cards or event tickets in your e-wallet too. Which is excellent, since it means you don’t have to carry them around separately.
You’ve probably heard of some of the big hitters in the e-wallet market. Apple Pay, Google Pay, and Samsung Pay are well known in the US and much of the western world, but there are numerous alternatives globally.
According to Statista's Global Consumer Survey, 84% of internet users in Kenya used a phone to make mobile payments in 2021. The report notes that this is a higher adoption rate than we’ve seen in Europe. Across the African continent, the winner by a mile is the M-Pesa digital wallet, which has over 50 million monthly active users.
So it’s clear to see that a rapid growth in e-wallet use is one of the top retail trends 2022. And the only way is up.
If you’ve not already got on board the e-wallet bandwagon, you might be wondering what’s so great about them. Why have they been so successful worldwide? Let’s take a closer look at some of the big advantages to be gained by using e-wallets.
Advantages of using e-wallets
There are benefits to using e-wallets both for the consumer and the merchant. Here are a few of the most significant.
More convenient than traditional payment methods
When you’re at home and making purchases on an online shopping store, everything’s very straightforward. You add your chosen merchandise to the cart, click through and pay. Job done.
But as soon as you want to set foot outside your front door, things can be more complicated. If you’re juggling credit cards, debit cards, gift cards, tickets, and loyalty cards, that’s one bulky wallet. Being able to replace all of these just by using an app on your phone is liberating.
Whether you prefer to carry a bag with you or not, having just one device to use for everything makes for a much easier day.
Another great advantage of using e-wallets is that they come with a host of security features. Granted, automating business transactions means being hypervigilant about potential cybercrime attacks. Nevertheless, the inbuilt security protocols both in the e-wallet apps themselves and the devices you use them on go a long way toward guaranteeing your safety.
If you’re using credit cards for payments, these can be easily lost or stolen while you’re out and about. Whereas if you input your card details into your e-wallet app as soon as you receive a new card, you can simply leave the card at home. As long as you have appropriate security set up on your device, then even if you lose it, your money will be safe.
This is a big benefit both for the payer and the payee. For the customer, you don’t have to waste time deciding which prepaid card to use, then struggling with getting it out of your wallet or even counting out cash. You just tap your phone against the payment device and go about your day. It takes literally seconds.
And when you scale that up, of course, that’s great news for the merchant too. One individual taking a long time to pay is one thing, but a whole crowd of people doing likewise can cost the merchant business. After all, no-one relishes the prospect of joining a long and slow-moving line.
Increased access to banking services
One of the big factors in M-Pesa’s runaway success across Africa has been that it offered a payment option to many people who were blocked from accessing traditional banking services.
Finding ways to bank the unbanked is a problem everywhere, to a greater or lesser extent. Many individuals working for minimum wage or who don’t have a fixed address often experience difficulties when trying to find affordable banking options.
Digital wallets address this issue, as, although they can be used to store traditional bank card data, they are much more flexible than that and offer more options to those with limited resources.
Disadvantages of e-wallets
The sales cycle process doesn’t always run smoothly, and there are a few caveats you need to be aware of if you’re thinking of using e-wallets for the first time.
Lack of universal acceptance
At the moment, this is probably the biggest stumbling block to the more widespread uptake of e-wallets. Pretty much everyone is happy to take paper money, but as you move up the ladder of payment method sophistication, you narrow your range of possible merchants to shop with.
Depending on where you live or where you’re traveling, you may find e-wallets are simply not used very much. That means you’ll need to have a backup option. Sure, take your e-wallet with you when you travel, but carry cards and cash just in case.
Of course, this negates one of the biggest advantages of e-wallets. The whole purpose of using them is so you don’t have to use anything else. So you might well ask what’s the point if you’re only going to have to use a backup? And you’d be right, of course. But hopefully, over time this will become less of an issue as e-wallet adoption continues to grow.
Potential security risks
While it’s certainly true that e-wallets are very safe and secure, there’s still a risk attached. The weakness in the chain is the security of your device.
It’s vital to create strong passwords, and use multi-factor authentication or biometric security protocols whenever possible. Then, if you lose your phone or are unlucky enough to have it stolen, it’ll only be a minor inconvenience as long as you have your device secured.
But if your phone is unsecured, anyone will be able to access your e-wallet and that’s a serious problem. Your bank may not be quick to refund any stolen money if they think you’ve not taken appropriate steps to secure your device. So resist any temptation to go light on device security.
Depends on having an internet connection
Do you ever think about how we’d cope if the internet suddenly disappeared? That’s the stuff of nightmares. We’re fully dependent on being online for so many aspects of our lifestyle.
While it’s unlikely we’ll see a general global outage any time soon, the prospect of occasional dropped connections is much more realistic. Whether it’s a large-scale network outage or you just find yourself in one of those occasional coverage dead zones, we’ve all experienced the frustration of struggling to get service.
In that sort of situation, e-wallets are useless. They depend entirely on there being a stable internet connection available for the transaction to go through.
Needs a functioning device
In a similar vein, your device has to be working properly in order for you to use the e-wallet app. If it breaks, crashes – or even if you just run out of battery – then bang, there goes your latte (unless you have a backup, of course).
Many retailers are focusing quite heavily on issues such as automating sales process and setting up payment terminals to take digital payments. It’s easy to see why. The gains to be made in terms of convenience and speed are phenomenal. But all of it relies on everything functioning as it should: their tech, the e-wallet system, and your phone or other mobile devices. If any one of those goes down, so does the payment.
Digital payments for tomorrow
The success of e-wallets continues apace. They’re so useful in so many situations that they’re bound to enjoy increasing popularity over the years to come. Not only are they ideal for use in physical stores, but they also offer great payment solutions for freelancers and anyone who doesn’t have access to traditional banking services.
For now, though, it’s a good idea to make sure you have a backup payment method in the event of any unexpected problems. There’s nothing worse than having to abandon a purchase because your transaction isn’t going through. And let’s face it – nothing should ever come between you and your latte.