Why digital wallets are here to stay, thanks to COVID-19
A couple of decades ago, being able to pay for transactions without having to carry huge amounts of cash was just a dream. These days, however, cashless transactions and digital payments are now a reality. It began with credit cards, and the phenomenon soon spread out to introduce digital wallets or e-wallets.
Digital wallets are mobile apps that allow people to transact with retailers using only their mobile phones. These apps also allow users to remotely settle bills and transfer money to other people. All that is needed to use them is a stable Wi-Fi or data connection.
The technology is fairly recent but quickly became as ubiquitous as credit cards were in their prime. Its coming was inevitable after Apple paved the way for smartphones with the first iPhone in 2008, and after its competitor, Google, launched the Google Wallet in 2011. It took some time, but many people are now comfortable with using these alternative payment methods, thanks to the pandemic.
Why e-wallets were crucial during the COVID-19 pandemic
The pandemic presented to everyone the perfect opportunity to understand what the biggest benefits of mobile wallets are. During the initial lockdowns, people needed the means to transfer money from one account to another and to pay their bills that did not require physical contact. After all, to avoid infection, one has to avoid getting too close to another for fear that the person might be an asymptomatic patient.
As a result, usage of these wallets surged in 2020. According to eMarketer, 2020 alone accounted for a 29% growth in mobile payments in the United States. The analyst said that 92.3 million people in the United States have admitted to using mobile wallets to make payments for purchases or loans for at least six months last year.
The analyst added that usage of these wallets shows no sign of slowing down or stopping this year, with the pandemic still a looming threat. In fact, eMarketer believes that more than half of mobile device users will have adopted e-wallets by 2025.
Retailers, of course, are not to be left behind by the consumers. eMarketer’s data show that 67% of retailers throughout the country are now accepting cashless transactions.
One of these is Vitamin Shoppe, which was in the planning stage of implementing contactless payments before the pandemic. The resulting fear of contact from members of the public pushed the retailer to fast-track its deployment plans, an act that allowed it to preserve its business despite the health crisis. Now, all stores in its chain provide digital receipts and QR scanning for customers.
It’s not a surprise then that the United States grew to become the second-largest market for these cashless payment options. The industry itself is seen to rise by 24% and reach a cumulative value of $2.4 trillion this year. Last year, the US accounted for $465 billion worth of payments made using mobile wallets.
Of course, these increments would not have been possible or would have occurred at a much slower pace if there had not been a pandemic.
E-wallets will continue to be indispensable post-pandemic
One could argue that the surge in mobile wallet usage is a blip in the statistics or a trend that will go away once the pandemic is declared over. Experts, however, believe that e-wallets will continue to be indispensable to even the average person in the post-COVID era.
One of these experts is Visa’s President of Technology Rajat Taneja. Mr. Taneja believes that the growth of contactless transactions will continue to rise at the same pace even after the pandemic. This opinion is supported by the results of a survey by Visa, results of which were released in March this year.
According to Visa, which saw an impressive increase of 30% in 2020 from 2019 in contactless transactions, 47% of its respondents stated that they are more likely to support stores with cashless payment than those that do not. 50% of these respondents also lauded the use of contactless payments and the safety, as well as convenience, that it offered them during the pandemic.
Global Payments’ chief information officer Guido Sacchi echoes Mr. Tejana’s sentiments. Mr. Sacchi added that more people are turning to more impersonal forms of payment due to the fear of getting infected.
What benefits does mobile transactions have for businesses?
Businesses that have not yet made the switch should think about taking that leap of faith as well. The trends are pointing to the longevity of cashless payments beyond the pandemic. Aside from convenience, there are many other benefits that these entities can get from the transition.
One of these is data collection. Mobile wallets contain customer information, some of which are passed on to retailers through transactions. This information includes names and contact details, which they can use to build a lead database. Aside from that, there is a myriad of ways that enterprises can take advantage of this information.
One of the most obvious applications is direct marketing or targeted marketing. Retailers can group leads into various categories, including purchasing behavior. When planning promotions for new products, the data gleaned from the use of contactless payments can be used as a reference as to who must be targeted for the new campaign.
With a customer information database in place, marketers can plan more effective advertising campaigns based on previous behavior.
Aside from customer behavior, the use of electronic payment methods also speeds up important tasks like generating sales reports and bookkeeping. Information from digital wallets can be exported to CSV spreadsheets, and imported to accounting software like Xero and Quickbooks.
In other words, digital wallets help make businesses more efficient on the management side. With this otherwise time-consuming function taken care of, proprietors can focus on two other tasks that drive the enterprise’s survival – sales and marketing.
Digital wallets represent an important investment that entrepreneurs have to make as soon as possible. Short-term motivations like the COVID-19 pandemic justify the need for this capital expenditure, but the long-term benefits bring a return of investment in terms of customer satisfaction, business efficiency, and ramped-up sales.
