Digital wallets are doing for the payment industry what the Web did for the publishing industry, opines Anand Shrivastav
From transforming the publishing industry to blogging, the Internet has sparked an online revolution with numerous digital tools and modes. A parallel digital disruption has been observed in the payments industry as digital wallets are fast becoming key role players.
A digital wallet is essentially a system that securely stores value along with information and password for making payments online as well as offline. These can be used for making payments or transferring money whether online using computers, mobile or smartphones. Increasingly, digital wallets are being made not just for basic financial transactions but also as a mode to store money usually kept as currency or deposited in a bank.
If the consumer is paying with a mobile device, the process can be as simple as punching the merchant’s mobile number and amount and sending SMS to his digital wallet provider to make payment, or swiping card on to a reader attached to a smart phone, using an app, or even holding up their NFC-enabled phone to its reader at a merchant’s cash register. For the consumer, the digital wallet is about convenience and simplifying the transaction process, whether to send or receive money. However, despite a lot of technology innovation in this area, the digital wallet is yet to completely reach out to the masses with its widespread appeal as many consumers are still are unaware of it.
We are still in the early stages of innovation and conversion of the consumer financial transaction sector, and the emergence of a digital wallet connected to marketplace is the next act. The definition of a digital wallet continues to evolve as innovations come to market and the term is sometimes used synonymously with “mobile payment.”
The adoption of digital wallet/mobile payment is gaining traction. It is time for businesses to adopt and benefit from this simple yet effective technology. Operating with a mobile payment feature can add additional layers of customer value and encourage user uptake of mobile money solutions. It facilitates customers to transact anytime, from anywhere, and with anyone with expediency and gives the businesses a competitive edge. For example digital wallets can help farmers, artisans, professionals such as teachers, trainers, merchants or businesses not only sell their products/services but have assured and quick payments.
A digital wallet also holds the user’s financial information to identify the customer automatically, as well as shipping information to speed up transactions. The customer also benefits in multiple ways. They do not have to carry wallets with wads of currency or credit/debit cards anymore because their mobile can use the digital wallet. Additionally, complex transactions are no longer needed because the digital wallet allows customers to purchase based on information entered.
Merchants can benefit from digital wallets as it is fast, secure, and guarantees payments. Smart phone manufacturers and application developers on the other hand, are continuing to innovate giving more functionalities regularly. The digital wallet design space is particularly interesting because the range of features that can be provided on mobile is endless. Every society today uses some form of currency, so this is an area that would eventually include people from all walks of life.
Digital wallets currently only include mobile financial transactions and the mobile banking aspect. However, there are a few applications currently available, that allow users to show a valid form of identification. The growth of digital wallets today needs to start including the non-transaction parts of a digital wallet as well. Along with identification, the digital wallet applications need to include other parts of the wallet like loyalty/rewards a well as interoperability. Once everything that needs to be included in a digital wallet has been included, the process needs to be incentivized to encourage people to use a digital wallet.
For sustainable growth, there is need to create a large market so that more retail businesses and individuals take to mobile transactions, thereby enabling trade flows. Currently, the growth of digital wallets today, is still in its early days and sometime away from reaching the scale required for profitability. But it will happen sooner than later.
The promise of a mobile wallet lies in the potential it offers to overcome all these limitations. Consumer can carry an unlimited number of loyalty, membership and financial cards and see at a glance as to how close they are to receiving a benefit or premium. Information regarding the balance on prepaid and gift cards can be instantly accessed. Coupons can be collected and managed automatically in electronic form and accessed at the drop of a hat, enhancing the customer delight.
Real opportunities come from the ability that the mobile wallet can provide retailers, to deliver offers and information to customers based on who they are, where they are, what they are doing, and what they are interested in – all based on the customer’s profile information in their digital wallet. The combination of location-based information and access to behavior data about customer purchasing history and their preferences will enable retailers to meet customer needs in ways that have never been possible before. It will also help retailers recognize their valued customers whenever they are on/around their location and provide them the ability to order remotely, instead of waiting for them to present a physical card when they are in the checkout line.
Next generation mobile wallets would not only bring in more customers on board but would also make them feel more valued and delighted. Mobile wallets not only focus on payments but a whole gamut of financial transactions – all to enhance the overall customer experience.
Anand Shrivastav is Chairman & Managing Director, Beam Money.
