A digital wallet, also known as an e-wallet or mobile wallet, is an app or online service that allows users to store e-tickets and documents electronically, as well as to make financial transactions. An early version of a digital wallet came online as early as 1997, when Coca-Cola installed two vending machines in Helsinki (Finland) that accepted payment by text message. This major new technology has come a long way since then, and is now available in two basic versions. For this article, we spoke with Marius Galdikas – the CEO at ConnectPay.
“Digital wallets like Apple Pay and Google Pay don’t store any value, but are linked to credit and loyalty cards, plane tickets, and other things. Alipay and WeChat Pay, on the other hand, are especially prevalent in Asian countries, and they do store value. This means that, in addition to using them for paying merchants, they can also be used to handle your funds, just like you would those in your physical wallet. These latter are, basically, super apps that feature a massive range of functionalities. This is now a global trend – people are tired of juggling numerous single-purpose apps on their smartphones,” Marius said.
Benefits of digital wallets to consumers
By integrating a value-storing digital wallet, businesses enable their customers to perform more functions with their proprietary apps. For instance, in addition to simply scanning it at a point of sale to get recognised, they can now use the app for online shopping, making payments, and receiving cashback and discounts on products they’re actually interested in. Needless to say, higher functionality and value, in turn, increases brand loyalty.
Once you have an app with an integrated digital wallet, you may also start enriching it with additional technologies, such as AI. For instance, Ikea’s app enables not only payments, but also a number of augmented reality functions, such as virtually placing a piece of furniture at home. The ASOS app, for its part, leverages this technology to assist users with picking the right products:
“Let’s say that I’m going to an event and I want to look a certain way. This app will process the information that I provided and automatically fill my digital shopping cart with the best-matching products it can find on its database,” Marius explained.
Benefits of digital wallets to businesses
The primary benefit of digital wallets to businesses is the cost savings they make possible. The standard 0.85% charge on card payments make seem like a trifle, but if we’re talking about large companies with revenues in the billions, this may amount to dozens of millions in potential revenue left on the table.
Another key benefit applies more specifically to high-velocity merchants. “This comes down to such merchants being able to integrate extra services into their apps, thereby boosting customer loyalty. The best example of this is, arguably Starbucks. With their app, you can easily avoid long queues, receive discounts, and get other benefits – all thanks to personalisation. For urban customers who, say, hold multiple meetings per day, the value of this app is colossal,” said Marius.
On the other hand, merchants selling products like furniture or electronics would benefit much less, as their customers only make repeat purchases 1-5 years apart. And when you’re buying something that costs anywhere between hundreds and thousands of euros, the loyalty benefits a brand may be able to offer you will matter less than price and shipping speed.
When do e-wallets become viable for businesses?
The first thing to note here is that a business considering a digital wallet must already have an app with at least 2,000 active users. This is the approximate cut-off point, below which the benefits of this technology will not be particularly significant.
With that said, there are, roughly speaking, three main reasons for a business to start looking at digital wallets as a potential solution. “If you’re losing out to your competitors, you should probably step up with a new solution that would make your business unique. The second reason holds for mature companies looking for greater efficiency. For instance, if you notice that you’re spending a lot annually on financial services, you might want to reduce them. And the third reason is wanting to boost customer engagement and loyalty by providing them with more functionalities and a more straightforward user experience”.
Luckily, integrating a digital wallet into a pre-existing app is trivially simple. Platforms like ConnectPay do most of the heavy lifting – matters related to processes, compliance, payments, and security – on behalf of their clients. All it takes is signing a contract, implementing a few API integrations, and we’re off to the races. The only thing you should be aware of is that you might have to minimally increase your spend on customer support to cover inquiries related to your app’s newly expanded functionality.
The future of digital wallets
At ConnectPay, we’re now focusing on two of the most promising areas for digital wallets: sports clubs and alternative finance.
“Sports clubs can benefit from digital wallets because fan loyalty in this area is already huge – fans don’t just run from one team to another willy-nilly. In Europe, we currently have some basic experimental solutions, but we think it could go way further. Digital wallets could help sports clubs engage fans even more by telling them about what’s going on with the club, highlighting new products and merchandise, upselling, and more,” said Marius.
As for alternative finance solutions like investment and crowdfunding platforms, digital wallets are poised to enter this sphere very soon – and at mass scale. After all, managing funds is at the very centre of these businesses. And since alternative finance companies aren’t themselves financial institutions, our e-wallets can enable them to collect funds, invest into projects, withdraw earnings, and so on. We can already see this trend picking up steam both in Lithuania and in Europe more broadly.
If you think you’re ready to equip your business with the latest in financial technology – contact us today and we’ll set you up with a digital wallet in no time! And if you have any questions, please feel free to drop us a line by following this link.
