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4 Drivers influencing Consumer Digital Wallet Adoption

The demand for digital payments is unprecedented and there is a push for flexibility, agility and speed.

A Deep Dive Report dated Nov. 2, 2021,  PYMNTS.com, reports the global digital payments industry is forecast to hit a value of $6.6 trillion in 2021, a 40% increase from two years ago, and could reach $10.5 trillion in the next four years.

The payments landscape has seen the emergence of new payment options in recent years, such as mobile wallets, peer-to-peer payments, real-time payments and digital currencies, all of which have found widespread adoption.

As a result of surging innovation, mobile payments are expected to grow nearly 50% to a value of $4.6 trillion by 2025.

Digital wallets are the most used applications to pay for goods and services. 49% of consumers currently use digital wallets to pay for goods and services. In comparison, another 37% said they use digital wallets to pay more than any other method, according to PYMNTS’ research.

According to Inmar Intelligence, contactless checkout options have grown increasingly popular among shoppers, with 85 percent of respondents saying that it is important that a retailer offers a contactless payment experience. 

Here are 4 drivers influencing consumer digital wallet adoption:


What’s online is offline

If you think being omnichannel is simply having the same inventory on your website as you do in store – you are missing the larger picture. Omnichannel means selling channels seamlessly interact in not just inventory but also, for example, shipping times, loyalty programs and payment options.

According to Forrester Predictions 2022, customers and employees are demanding more: seamless cross-channel experiences, convenience, and around 80% of consumers will see the world as all-digital, with no divide. Consumers also expect companies to double down on building a successful and sustainable digital customer experience.

Alternative payment options readily available online have been shut out of brick-and-mortar. Brick-and-mortar has been laden with legacy payment processing limiting payments to cash, credit and debit with progressive processors including app payment options such as Google Pay and Apple Pay.

In contrast, online check out has many more alternative payment options like Zelle, Trustly, AeroPay, BNP,Crypto, Venmo and Paypal.


Physical cash vs. petty cash

According to CNBC, consumers are abandoning (physical) cash: Amid the coronavirus crisis, Americans are abandoning cash almost entirely in favor of “tap and go” transactions and have finally embraced contactless and digital payment methods after years of reluctance. Fewer and fewer adults use printed or minted U.S. currency at all any more.

About 3 in 10 Americans said they make no purchases with cash in a typical week, up from a quarter in 2015, according to the Pew Research Center. As a result, tap to pay transactions jumped more than 100% year over year, a separate report by Visa found.

However, petty cash is still common in P2P (Peer-to-Peer) transactions like Venmo and this is not just reserved for Gen Z. Here are some stats:

  • About 14% of adult Americans use Venmo for making P2P transactions.
  • Venmo had over 50 million active accounts in 2019.
  • Venmo processed nearly $160 billion in total payment volume in 2020.
  • The average Venmo transfer amount is $60.
  • Over 7 million Venmo users belong in the 18-34 age group

Consumers are accustomed to paying with venmo for ecomm online. They expect to have the same option in-store.


Tap Now Pay Later

Buy Now Pay Later – or BNPL was ecomm’s version of Layaway. Except, unlike Layaway, you can bring home the item AND then make payments as opposed to layaway where you couldn’t bring the item home until your payments were complete.

In 2020, BNPL migrated into brick and mortar/physical stores. Capgemini’s Voice of the Customer 2021, revealed that gen Z is ditching credit cards for more budget-focused alternatives such as Buy Now Pay Later. A Klarna-commissioned survey of more than 13,000 respondents in 13 countries found that more than three-quarters of 18-24-year-olds and more than 70% of 24-40-year-olds use their mobile devices more readily to shop than they did two years ago.


It Must Be the Money….(Sorry Nelly, It’s Not).

Digital wallet key players are offering ,not just payment options, but digital rewards programs where the customer has the ability to acquire and redeem loyalty points just as they would during an online checkout.

From College Bookstores to coffee shops to big box retail, these changes are seeping through any form of physical place of transaction.

“Consumers’ ordering and payment expectations are being driven by convenience, choice and security,” she said. –  said Lisa Regelman, director of Loyalty and Growth Marketing for Peet’s Coffee.

A captive audience and minimal competition put campus bookstores in a great position to succeed over the past 100-plus years.

However, online competition and the climbing expectations of consumers have changed that once-bulletproof business model, according to Oracle NetSuite. Undergraduates expect to move between online and in-store experiences freely.

“The answer for many stores to stay competitive and to stay relevant is we have to invest in technology and that is a huge shift from where we traditionally come from in this industry,” said Alex Lyons, CIO at The Duck Store.

According to the Blackhawk Network Global Digital Payments study, which surveyed more than 13,000 consumers in nine countries including the U.S., Canada and U.K.; across all regions, 69% of respondents who are digital wallet users reported shopping more often since using a digital wallet, and 54% reported spending more money at retailers where they can use digital payments.

A majority of respondents (85%) reported that digital wallets have made shopping easier.


What To Do

Chain Store Age’s Special Report on Digital Payments states 63% of global consumers are more likely to shop at a retailer if it accepts the digital payments they use and 73% say they want to be able to pay the same way they pay online and in-store.

According to Moty Aruschin, CEO and Co-Founder of Sensepass, retailers should look for the solution that provides agnostic access to a myriad of payment options.

Tap and Pay and POS by branded payment providers such as Visa Tap and Pay, Clover, Paypal Zettle could not be as expansive. The main objective is to offer the same payment channels that you offer online in-store.

“This is unprecedented change,” said Cyndie Martini, CEO of Member Access Processing. “Now that consumers are used to it there is no going back. For the first time, consumers are going out of their way to find retailers that offer contactless payment options”.