Digital Wallets: Cashless Through Digitalisation

Digital Wallet

With mobile commerce transactions increasingly becoming the norm, it is not surprising that digital and mobile wallets are finally turning from an industry buzzword into a mainstream application. Both consumers and business customers are looking for ways to wade through the digital quagmire as easily and quickly as possible. They want to make transactions wherever they are, using a range of payment methods. Whether it’s loyalty cards, digital vouchers, receipts, transaction tickets, or credit cards, they can now all be stowed away electronically in digital wallet applications.

A Better Understanding Of Customers

Digital wallets afford us great convenience — and, with that, may entice consumers to make more transactions, buying when they would not have been able to make a purchase previously. They are one of the drivers behind the rapid growth in mobile payment transactions, which Gartner predicts to reach US$ $721 billion by 2017, with annual average growth rates of 35 per cent.

From a business perspective, what is even more intriguing about digital wallets is the fact that they possess a rich digital signature that captures the when, what, where and why transactions are made. With that, they have the potential to help different stakeholders in the m-commerce value chain to develop a much better understanding of their customers.

The data held within the digital wallet will allow companies to analyse aspects including transaction frequency, spending habits, and brand preferences. These can then be linked with social and other external data sources to create in-depth customer profiles, and on this basis, predict their behaviour more accurately to create warm selling opportunities.

Homing In On The Customer

More than 50 financial institutions worldwide including Bank Of America, Royal Bank of Scotland, PNC, Compass and BB&T have begun to offer digital wallet services to customers. MasterCard, not one to lag behind in the race, has launched its own MasterPress. Using digital wallets, financial institutions can run analytics to create a complete 360-degree profile of their customers. They can keep track of what you buy, when and why you buy a particular product, and what you did just before such a transaction. For instance, did you seek out online reviews or compared prices before making a purchase?

In conjunction with mobile operators, retailers and payment network providers, banks can design targeted offers, offer personalised products, perform on-site behavioural targeting, develop recommendation engines and identify contextual insights – all in real time. In the same way, retailers stand to benefit from digital wallets when it comes to increasing marketing ROI, ensuring customer loyalty and reducing customer loss, or ‘churn’.

They can provide customised promotional offers by monitoring customers’ buying habits, keeping track of their preferences and frequency of purchase as well responding to queries in real time. For example, your favourite restaurant could ‘sense’ that you are in the vicinity and send you an instant promotion on food and drinks the minute you get off a cab and pay the fare using the digital wallet.

Digital Wallets & Contactless Payments

Many prominent telecom players such as AT&T, O2 in the UK, T-Mobile USA and Verizon Wireless have begun to make significant strides in the area of contactless payments using mobile phones. Google’s Wallet service allows users to turn compatible Android mobile devices into contactless payment tools, so the contents of the wallet can be used not only for online and mobile purchases but also for in-store payments.

EE and Vodafone in the UK, along with Japan’s highly successful ‘Osaifu-Keitei’ or ‘Wallet Mobile’ service, which is used on more than 65 million phones, are offering contactless payments for public transport, using their digital wallet applications.

Similarly, Apple’s iBeacon, enabled by Bluetooth low-energy wireless technology, and recent advancements in Near Field Communication (NFC) technology, allow mobile devices to pair through wireless when the device is in close proximity of a retailer’s terminal. Such features offer better payment systems to the customer and allow marketers to use customers’ location data in order to enhance their experience.

Where Next For Digital Wallets?

In addition to ensuring convenience and a personalised shopping experience, digital wallets offer users enhanced security features such as fingerprint scanning, voice recognition, virtual card numbers and NFC encryption among others. The UK Cards Association claims that digital wallet technology is partly responsible for reducing ‘card non-present’ fraud by 3%.

Though privacy remains a major concern when it comes to data of any kind, digital wallet providers are increasingly adding controls to ensure data security and empowering customers to opt-in or opt-out from allowing them to use data. Although the digital wallet technology is yet to take off full scale in the global market, there is much promise. The digital wallet could very well be a game-changer, with the potential to actually replace the physical wallet much sooner than expected.

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Suhas Patil is Senior Manager at Mu Sigma and has over 12 years of experience of developing analytics and technology capabilities for technology, insurance, payment and banking industry. An alumnus of Chicago Booth School of Business, Suhas plays a key role in helping Fortune 100 client take data driven decisions for various marketing, operation, product, sales and IT business problems. Some of his recent work includes improving promotion effectiveness for e-commerce business, setting up Rhythm of Business and reporting capability for a major technology company, creating and enabling consumption of targeting models for product organisation.

  • Amit

    Brillant Article . !!