Why Are Digital Wallets Important?
More than 44% of Europeans say yes to paying with their digital wallets apps. And this is not a passing phenomenon.
Reports predict that Europe’s mobile wallet transactions will increase by 277% from $188 billion in 2020 to $708 billion in 2025. Another report says that digital and mobile wallets will be used in over 50% of global e-commerce transactions by 2024.
Security, flexibility, and convenience are the three main factors behind the huge appeal of e-wallets. And the rapid growth in mobile commerce has catalysed much of this change.
The reasons?
- Growing mobile usage – More people are using mobile devices for everyday tasks – from checking mails, hailing a cab, to paying for their purchases. They love the flexibility digital wallets offer to pay on the go using their mobile device. Buyers and merchants are also more aware, hence more willing to use them.
- More secure – Mobile wallets are more secure because they use 2-factor authentication to verify users and payments. This includes the use of biometric authentication such as fingerprint/ iris scan or face recognition. In case a user’s phone is lost or stolen, they can lock their phone and e-wallet to prevent unauthorized use.
- Simpler for consumers – E-wallets do away with the need to carry bulky wallets with physical cards. Thus, consumers can carry all the info they need to shop on their smartphones or mobile devices.
What are digital wallets?
Digital wallets are apps that encrypt and store users’ payment info like credit/ debit card and bank account details. Thus, shoppers can use e-wallet apps to pay for purchases instead of having to use physical cards every time. This is convenient for the shopper because they don’t have to type in their card details every time they shop. They can easily pay touch-free and with just one click.
People can also use e-wallets to transfer money to others. Users can install e-wallet apps on their mobile device (smartphone, tablet, smartwatch) and link it to their cards or bank accounts. To make a payment, a user opens their app and scans the merchant QR code or holds their phone over the merchant’s NFC-enabled POS terminal. Apple Pay, Google Pay, and PayPal are some of the most well-known e-wallets that work globally.
How do digital wallets work?
Digital wallets encrypt and store the payment data of users. They use 2-factor authentication to verify a user’s identity and payment details so that shoppers and merchants are secure from fraud. These wallet apps use wireless technologies like Wi-Fi and Near-field communication (NFC) to transmit data. This is how it happens:
- Via NFC – at checkout, users open their wallet app on their smartphone (most modern smartphones are NFC-enabled) and bring it near the merchant’s NFC-enabled POS terminal or mobile phone. The app remotely transmits the payment data to the merchant’s system. Once the payment is successful, it confirms the same to the shopper. All of this happens within seconds.
- Via QR codes – at checkout, users open their wallet app and scan a merchant’s QR code. The payment info is transferred remotely and is sent to the right person or business.
Are e-wallets safe?
Yes, digital wallets are highly secure. That is because they use advanced tech such as multi-factor authentication, tokenization, and encryption. Some e-wallets use biometric authentication such as fingerprint, facial, or voice recognition. This adds an extra layer of protection in case someone’s smartphone is stolen.
Top 3 digital wallets in Europe
PayPal, Apple Pay and Google Pay are the most-widely used digital wallets across Europe. If you want to reach a wider number of consumers across multiple countries, you must support these wallets. Below we tell you a bit more about each of these:
1. Apple Pay
Apple Pay is a digital wallet that is available exclusively for iOS devices, including iPhone, Apple Watch, and iPad. It is a popular payment method in several countries and a leading digital wallet in Europe. Apple Pay works online or in-store – anywhere that accepts contactless payments. Consumers can use it to make touchless payments on the go. They can pay right from their devices without touching buttons or terminals, or handling cards or cash. Users authorise payments with Touch ID, Face ID, or their passcode. They can also transfer money to other users. It uses Device Primary Account Number (DPAN) and secure tokens to encrypt and protect payment data. All major banks and card schemes support Apple Pay. There is no additional fee for merchants to accept payments through Apple Pay.
2. Google Pay
Google Pay is a digital wallet that can be used on both Android and Apple devices. It is another highly popular e-wallet in Europe. Google Pay can be used to make contactless payments and allows users to link their credit/ debit cards, bank accounts, or PayPal accounts to it. Google Pay also uses DPAN and tokens to secure payment data. Merchants can also link loyalty and rewards programs to build relationships with their customers.
Merchants do not have to pay any additional fee to use Google Pay.
3. PayPal
PayPal is one of the oldest and most widely-used digital wallets. PayPal works with both Apple and Android devices. Users can make online payments, pay in-store, and transfer money using their PayPal accounts. They can link their cards, bank accounts, or digital wallets to their PayPal accounts. Consumers pay merchants directly from their PayPal account or by scanning a merchant QR code. Businesses can also use PayPal to pay their employees. PayPal charges merchants fees for transactions and using their services.
How Can Novalnet Help?
We can help you set up digital wallets so that you can easily and quickly start accepting payments. Based on your business goals, we can help you choose the e-wallets that are best suited for your business, guide you with the right strategy and tools to get you going. Novalnet is a global PSP, trusted by Europe’s leading brands to handle their payments. Our state-of-the-art technologies and methods help you accept payments globally. From our instant payment plug-ins to our AI-based risk management tools, we have the resources to get your payments up and running in no time, and with zero hassle.
Reach out to us today to know more.
Jose Augustine is the Chief Business Development Officer at Novalnet with extensive experience in European payment industry and a knowledge powerhouse.