Apple Pay, Google Wallet, PayPal, Android Pay, and a slew of bank and retail specific digital wallets are all fighting for consumer attention. Some thought this was going to be the year of the digital wallet, but conversion to EMV cards has occupied most of the spotlight in 2016. As merchants and consumers look for even faster transactions and take advantage of newer contactless-enabled equipment, attention is swinging back to contactless payments. Digital wallets are in the news again.
Why Digital Wallets?
A digital wallet is an app on a smartphone or other device that enables consumers to pay via a contactless NFC (near-field communication) signal or by scanning a QR (quick response) code. Contactless-enabled terminals are on the rise and offer consumers more opportunities to pay with a digital wallet on a mobile device. The payment environment is becoming more friendly to digital wallets.
Digital wallets give consumers the flexibility to link to the payment methods of their choice, either a bank account or credit card. The convenience of paying with a mobile device without handling cash or a card coupled with a fast transaction time leads to an enhanced customer experience at the point of sale.
For merchants, digital wallets offer a powerful way to leverage their loyalty programs, as Starbucks has done while successfully converting a faithful following to their mobile app. Furthermore, the option to order and pay in advance with a mobile device is gaining users. Starbucks now has 1 in 20 orders place ahead of time via their app.1 Other fast food chains are following this model to offer consumers flexibility and rewards to build loyalty.2
Simplified checkout also drives sales and helps finalize transactions quickly. Integration with online shopping and one-click checkouts makes shopping easier and faster.
The Digital Wallet Landscape Is Evolving
At the moment, Apple Pay claims a dominant position in the digital wallet landscape. In their 2016 second quarter earnings phone call, Apple announced that three out of four contactless payments in the United States are made with Apple Pay.3 However, the push by credit card companies and banks to promote their own contactless payment options is challenging Apple’s hold on contactless payments.
MasterCard’s new MasterPass program is marketing the ease of contactless payments via mobile device. A simple, one-step payment process works across channels and streamlines payment in-store and online. Furthermore, MasterCard has announced partnerships with Microsoft Wallet, Android Pay and Samsung Pay to enhance those existing digital wallets with MasterPass starting early in 2017.4 These partnerships will connect the existing digital wallet users, hundreds of banks, and make it easier for merchants to accept digital wallets through the MasterPass API.
If the biggest challenge to digital wallets has been fragmentation in the marketplace that challenges consumer adoption, MasterCard’s unifying approach may solve several issues. Consumers will still be able to decide which digital wallet they would like to use or they may choose to go with the brand name recognition of MasterCard and sign up directly through the card. For merchants, having a single API to process transactions will simplify signing up to accept digital wallet payments. For consumers and merchants alike, having the security promised by MasterCard builds confidence in contactless payments.
Integrity Provides the Contactless Technology to Accept Digital Wallets
As digital wallets become more widely adopted and used, merchants will need to be equipped to accept payment via a digital device. Clearly displaying the contactless icon will invite customers to use this low-risk option at checkout. Consumers are looking for faster transaction times and convenience so acceptance of digital wallets like Apple Pay, Google Wallet, or MasterPass can give businesses a competitive edge.
Online integration with digital wallet programs will speed up online checkouts, too. Users who have long used PayPal will experience a familiar fast checkout experience. One-click checkout is becoming an expected feature of online shopping.
Integrity is dedicated to providing merchants with the latest payment processing technology, including the ability to accept contactless payments via digital wallets. Contact us today to learn more about our latest contactless payment-enabled technology, including the Verifone vx520 Contactless, PAX S80 and Clover Mini.
- Eule, A. (2016, Nov. 3) Starbucks’ Earnings: Here’s the Most Interesting Number. http://www.barrons.com/articles/starbucks-earnings-heres-the-most-interesting-number-1478209336
- Houck, B. (2016, Nov. 6) McDonald’s Is Finally Launching a Mobile Order-and-Pay App in 2017. http://www.eater.com/2016/11/6/13541514/mcdonalds-mobile-ordering-pay
- (2016, July 26). Apple (AAPL) Timothy Donald Cook on Q3 2016 Results – Earnings Call Transcript. http://seekingalpha.com/article/3991811-apple-aapl-timothy-donald-cook-q3-2016-results-earnings-call-transcript
MasterCard enables Masterpass for Microsoft Wallet, Android Pay, Samsung Pay. http://www.mobilepaymentstoday.com/news/mastercard-enables-masterpass-for-microsoft-wallet-android-pay-samsung-pay/