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Digital wallets, especially when used for mobile commerce, are gaining increasing favor among consumers, finds a report from the Adobe Digital Index, a research unit of Adobe Systems Inc., which carries implications for acquirers and payment gateways.
In a survey of 400 U.S. consumers, Adobe found that the number shopping carts consumers actually end up purchasing increases by 10% when digital-wallet payment options are available.
On mobile devices, the percentages are higher: 23% of purchases on smart phones use digital wallets compared with 19% on tablets and 16% on desktop computers.
Consumers like using digital wallets on mobile devices because they are more convenient than entering credit or debit card data for each purchase, Tyler White, an Adobe Digital Index analyst, says in a press release. “People also are more wary of entering their credit card information on mobiles,” White says. “They don’t feel as secure.”
Digital wallets like PayPal Inc., Visa Inc.’s Visa Checkout, Google Inc.’s Google Wallet, Braintree’s Venmo, Softcard, and MasterCard Inc.’s MasterPass, have been around in some form for a number of years. Indeed, PayPal says it has more than 157 million active digital wallets, and it processed $12 billion in mobile payment volume in the third quarter, a 72% increase from the year-ago quarter.
Newcomer Apple Pay, Apple Inc.’s digital-payment scheme, may eat into some of that share. Apple Pay is designed for contactless and in-app purchases, and seems well-poised to become the default digital wallet for many consumers using Apple devices, White says.
This growth in digital-wallet use testifies to the payment services becoming “even more critical to enabling purchase activity and increased conversion rates,” says Rick Oglesby, senior analyst at Double Diamond Payments Research, Centennial, Colo.
With that growth comes an opportunity for acquirers and gateways, he says. “Acquirers and payment gateways need to be wallet-enablers and they need to move quickly to enable the newer wallets,” Oglesby says. “Wallets that can be embedded in mobile operating systems, such as Apple Pay and Google Wallet, have a particularly high potential due to operating systems’ presence during all consumer activities.”
That is backed up by Adobe Digital Index data, especially when consumers use apps on smart phones. From June 2013 through June 2014, app use on phones increased 70% compared with 35% on tablets, Adobe says.
And, it seems that Apple users are app savvy. Of app launches Adobe included in the Adobe report, 65% were made with iOS devices compared with 34% on devices using Google’s Android operating system. That could push Apple Pay’s market share higher as more retailers add it as an option for in-app purchases, Adobe says.
Acquirers should not run away from digital wallets, especially for e-commerce, Oglesby says. “Regardless of whether or not the wallets represent a threat, in the online environment they are important enough that they need to be embraced,” he says. “A good example of this is Braintree’s support of Apple Pay—while Apple Pay represents a clear threat to portions of Braintree’s business, Braintree still moved quickly to support it.”
Most acquirers and independent sales organizations have little need to worry about digital wallets at the moment, says Adil Moussa, principal at Adil Consulting. One reason is because only large acquirers processing for the largest merchants need to cater to their merchants' strategies for using digital wallets, he says. “Most of the other ISOs and acquirers deal with smaller merchants that are not really going to be doing much with digital wallets,” Moussa says.
Another reason is that consumers are not in a position to impose their choice on merchants. “That being said, the cool factor may push consumers to ask for readers to use their latest gadgets,” Moussa says.
