Digital wallets are rapidly changing the way customers pay. With the growing popularity of Apple Pay® and Google Pay®, small businesses need to embrace the digital wallet revolution – or risk being left behind by competitors who’ve already taken the mobile payment route.
If you are new to digital wallets, here are some important questions to help you understand this new and exciting payment technology.
Broadly defined, a digital wallet is software that electronically and securely stores credit and debit card numbers, loyalty or rewards program numbers and maintains a running balance of money within the application or app. A digital wallet can be accessed from a computer, laptop, tablet or mobile phone.
Point-of-sale (POS) terminals with contactless capability can enable customers to “tap to pay” at checkout with their mobile phone. The payments are made securely, as digital wallets encrypt payment card data, walling off that information from hackers. With digital payments, even if a consumer’s mobile device is stolen, the hacker would still need to get past biometric authentication or a user passcode to gain entry to the payment data.
Small businesses are turning to digital wallets to make checkout faster and improve consumer experience. Those who do are scoring points with customers who increasingly view digital wallets as their preferred form of payment. Don’t believe us? Look at the stats:
For consumers, the benefits of digital wallets are many:
There’s no question, digital wallets are growing more and more popular. According to the 2019 Bank of America Merchant Services Small Business Payment Spotlight, the number of consumers choosing to pay with digital wallets like Apple Pay and Google Pay has doubled in two years, going from 5 to 10 percent.
Retail leads adoption across industries, with 69 percent of respondents accepting digital wallets. It’s also most popular among consumers 44 and younger, with almost 20 percent using it in-person.
Note: Survey respondents were asked "How do you usually pay for purchases when shopping at small businesses? Select all that apply." By design, the question results in percentages that do not add up to 100%.
Source: Bank of America 2019 Small Business Payments Spotlight
Digital wallets are able to pay for goods and services electronically using a technology called near-field communication (NFC), which comes standard with most mobile phones. NFC allows a mobile phone to wirelessly communicate in a very tightly confined area. It typically ranges only several centimeters, which enable digital payments at the checkout counter without broadcasting payment information too far away where fraudsters may intercept it. And in the unlikely event that they do manage to steal the data, it’s encrypted and useless to them.
Consumers that have activated their preferred digital wallet on their mobile devices can easily tap their mobile device on a contactless-enabled POS terminal, plug in their PIN number or biometric passcode on their phone, and complete the payment. Payments are paid through the registered payment tender in their digital wallet from a credit or debit card or other digital payment platform (like Apple Cash).
To accept payments via NFC, small businesses require a NFC-enabled payment terminal. This technology comes standard with most modern chip-card terminals. They are fairly affordable and easy to get. The Clover Go, for example, accepts contactless NFC payments with your smartphone or tablet.
The Small Business Payment Spotlight shows that 58 percent of small businesses don’t currently accept digital wallet payments, which means now is the time to get ahead of the competition. Especially because 34 percent of shoppers say if they can’t pay their preferred way they’d be “annoyed,” and 17 percent said they “wouldn’t make the purchase” at all.