Smartphones are consumers’ new wallets. That is, with their convenient mobile wallet integration, there is no need to carry physical credit cards with you anymore.
I never carry my wallet with me. If I leave the house, the only thing I make sure I have on me is my phone and my keys. Why?
Well, because my phone is not only my device for contacting anyone, keeping up-to-date on socials, telling time, conducting internet research, taking photos, and more, it is also my wallet.
With smartphone integrations like ApplePay, GooglePay, SamsungPay, Paypal, Venmo, online virtual terminals, and more, there is really no need to carry a physical wallet or physical credit cards with me.
Which means I get to forgo the burden of slugging around a cumbersome purse everywhere I go. It has been a freeing experience.
Beyond the fact that most merchants accept mobile payments, I typically end up doing the majority of my shopping online anyway—even grocery shopping.
In this article, I am doing a deep dive into how smartphones have replaced physical wallets from personal experience and why businesses should consider implementing payment technology that accepts mobile payments.
A Contactless Caveat
I will add a little caveat to this, however. There have been a few times I needed to quickly run into the market to grab some eggs or veggies for the day, and I didn’t have time to place an online order or enough in my cart to get a free pickup with a mobile order.
The problem? The particular market I go to doesn’t have point-of-sale devices equipped to accept mobile payments.
Every time I find myself checking out, I always wonder, “Why?” Why don’t they implement new payment technology? It really can be such a hassle having to remember to grab my physical cards if I know I am stopping by this store on the way home from work.
In many cases, I ask myself if it’s worth it to switch to a new grocery store. In fact, more than half of American consumers prefer to use mobile wallets over traditional payment methods. They would find it less convenient to shop at a location that doesn’t offer mobile payment solutions. Some may, in fact, choose somewhere else that offers more convenient payment options.
However, my particular store is in the direct path home and offers groceries at a more affordable rate… so I am currently still debating this dilemma.
Can Smartphones Hold Drivers’ Licenses?
So, what about my driver’s license? I said previously that I only leave home with my smartphone and keys.
Okay, okay, you got me here. While some states, including California, have started a new mobile driver’s license program. It isn’t fully inclusive or functioning. So, if I only leave my house with my smartphone and keys, where do I keep my driver’s license?
No, I am not the type to leave my driver’s license in my car. In fact, my friend did this once, and it was stolen. Well, everything in her car was stolen. Actually, her car was stolen. Yeah, okay, she forgot to lock her car at night and woke up to an empty parking spot, a police report, and an excruciating appointment at the CA DMV.
Though smartphones can carry things beyond encrypted card information, like boarding passes and event tickets, a digital ID isn’t going to cut it if I get pulled over or am ordering a glass of wine with dinner (As needed when you look well under 40).
Besides, If I am ordering a glass of wine at dinner, I am probably on a date, which means my man picked me up; I didn’t drive, so leaving my driver’s license in my car still wouldn’t be an option.
So, how does the smartphone get away with being the only thing I bring if I need to carry my ID?
Smartphone Wallet Cases
Yes, smartphones carry digital wallets, but they can also conveniently attach to phone cases that are also physical wallets. I always use a smartphone case that has a hidden card slot. So yes, on those rare occasions when I need to pull out my ID or my physical credit card at those antiquated grocery markets, I will have what I need on me while only grabbing my smartphone when I leave the house.
Now that we’ve reviewed how smartphone mobile wallets are my choice of payment, let’s review what exactly mobile wallets are, how to use them, and why all modern-day merchants should consider implementing payment technology that accepts mobile wallet payments.
What is a Mobile Wallet?
So, let’s get down to the nitty-gritty. What exactly is a mobile wallet?
A mobile wallet is a virtual smartphone application that securely stores digital credit or debit card information. Consumers use a mobile wallet in lieu of a physical card, cash, or check to pay for goods and services at a merchant location. If a merchant accepts contactless transactions, a client can use a mobile wallet to pay.
Additionally, mobile wallets can manage photo IDs, loyalty cards, gift cards, event tickets, boarding passes, and more. Popular mobile wallets include:
- Apple Pay for iPhone
- Google Pay for Android phones
- Samsung Pay for Samsung phones
The brand of the smartphone would determine which mobile wallet a cardholder uses. All major mobile wallets work with all issuing banks and card brands, such as Visa, Mastercard, American Express, and Discover.
Mobile Wallets Vs. Digital Payment Apps
Mobile wallets do not work for peer-to-peer transactions. For example, you’re paying your friend back for the coffee they bought you on the way to work. You would not use a mobile wallet; rather, you would use a digital payment app such as Venmo, Zelle, or Paypal to transfer funds directly from your bank account.
How To Use A Mobile Wallet
Mobile wallets are easy to set up and use to make payments. Most smartphones come with mobile wallet apps already downloaded. Now, the user would simply need to locate the app on their device and enter their card details once, and they will be securely stored for future purchases. A user can add as many credit or debit cards as they like. However, they can only select one card as the wallet’s default card.
If a payment terminal has a sideways “Wi-Fi-like” symbol on a card reader or signage that says “accepts ApplePay, GooglePay, etc,” customers know they can use their mobile wallet to complete a purchase.
Next, a customer will open their app, typically with biometric identification, and with the simple wave of a smartphone or smartwatch over an NFC-enabled payment terminal, the mobile payment is complete.
Near-field Communication Technology
When a customer makes an in-store purchase with a mobile wallet, the smartphone app uses near-field communication (NFC) technology to communicate between payment devices.
Contactless payments require near-field communication (NFC) or radio frequency identification (RFID). NFC-enabled cards and devices allow contactless communication between payment devices with a small embedded chip emitting communication waves.
Biometric verification is how a smart device uniquely identifies a user. It evaluates distinguishing biological features and structures such as facial, fingerprint, iris, and voice recognition.
Smartphones and mobile apps use biometric verification to authenticate digital transactions. For example, mobile wallets on iPhones use a face scan to pay for goods at the store. Additionally, the app store uses fingerprints or facial recognition to complete all purchases.
Smartphone Payment Trends
Consumers can pay for goods and services such as groceries, gas, utility bills, hospital bills, concert tickets, restaurant tabs, and much more all through their smartphones. Moreover, p2p payments have become increasingly popular, using digital payments on smartphone apps to transfer funds.
Digital Assistant Payments
Smartphone voice-activated digital assistants like Siri and Google have really made life feel more luxurious. These personal digital assistants have evolved further into smart home devices or speakers. Manufacturers have created devices like Amazon’s Alexa, Google Home, and Apple’s Siri in portable speaker form.
Users give voice commands to complete an action or receive spoken information from these devices. These tasks include asking about today’s weather, getting an update on traffic, and googling unknown information. In addition, users can ask their smart speakers to buy products or services with their voice. Payment information is stored digitally, and the machine does the rest.
According to recent statistics, 35% of smart speaker owners use the device to buy goods like groceries, clothing, home care products, and more. Additionally, 28% of the surveyed use smart speakers for making direct payments or transferring money from p2p.
Merchant Benefits of Accepting Mobile Wallets
There are a variety of benefits to using and accepting mobile wallet payments. The below reasons are benefits your business should consider when debating why your business should accept mobile wallet payments:
- Appeasing New Generations
- Staying relevant
The prosperity of a business is contingent upon a merchant’s ability to evolve with modern-day technology in payment processing. It is essential to adopt the different types of digital payments that are essential for consumer satisfaction.
Below, we will dive deeper into each one of these mobile payment benefits for your business.
Mobile Wallets Are More Secure
Unlike physical credit cards, mobile wallet payments are more secure. For starters, swiping a magstripe card is one of the least secure payment methods. The magnetic stripe holds all the card information in one easy-to-access spot. It’s simple for a skimmer to collect all the data needed to replicate that card.
Even if a customer uses a contactless card, the card information is still viewable when the card is in the cardholder’s hand. However, the actual credit card number is not transmitted when customers use a mobile wallet.
Instead, the mobile wallet transmits a unique encrypted one-time number that the merchant’s payment processor can use to complete the transaction. The real card number is never exposed.
Additionally, before customers can use their mobile wallets, they must unlock their smartphones using a password or biometric data. If their phone were ever stolen or lost, it would be impossible for anyone to use their mobile device to make a payment without providing the required authentication credentials, making mobile wallets more secure than carrying physical credit cards, which can easily be lost, stolen, or duplicated with no protection.
So, what does this matter for your business? Secure payments mean less liability for your business. Why? Because more secure transactions mean fewer fraudulent transactions or stolen card information. The more likely transactions at your business are authentic, the less likely you will suffer from the consequences of consumer chargebacks.
Mobile Wallets Are More Convenient
Most consumers avoid stores that do not accept their go-to method of payment. Convenience drives most decisions. In today’s world, we rarely leave home without our smartphones. Therefore, the most convenient payment option would be with our mobile wallets.
Also, for those with a variety of credit cards, mobile wallets are a more organized way to access all card options—without carrying brick-like wallets around.
Merchants offering digital payment coupled with mobile wallet acceptance will surely be set apart. Providing your consumers with transaction ease is the best way to gain a loyal clientele.
Mobile Wallets Are Touch-Free
Although contactless payments had already been released years prior, it was the COVID-19 pandemic that helped them gain true popularity. COVID’s raised concern for health and safety piqued contactless interest. Contactless payments are one way to facilitate limited exposure and contamination risk.
Customers can make contactless payments via mobile wallets or NFC-enabled credit or debit cards. Ultimately, contactless payment is a transaction where the consumer does not have to hand a cashier their cash or card to complete the purchase. Mobile phones and cards can simply be “tapped” on a reader.
Contactless payment readers and devices must be equipped with near-field communication (NFC) capabilities or radio frequency identification (RFID) technology. A small chip inside the device emits radio waves from a payment device to the payment reader at a short distance. NFC capability is recognizable on a contactless reader or card with a small icon resembling a sideways Wi-Fi symbol.
With this technology, contactless cards or mobile wallets are simply waved or hovered over a card reader. In less than 2 seconds, the transaction is complete. Contactless payments are not only more hygienic than EMV and magstripe payments, but they are also quicker and more secure.
Mobile Wallets Are Faster
We all know what seems like an awkwardly long wait before a chip transaction is approved before you can remove the card.
Sometimes, you and the cashier smile politely at each other in silence; sometimes, you stare at the terminal screen begging for the next prompts; other unfortunate times, the cashier will take it upon themselves to ask, “So, how’s your day going?” to fill the silent void.
Thankfully, with mobile wallets, hovering a smartphone over the payment terminal for a second will do before the payment is successful.
So, how does this benefit your business? Quick checkouts reduce lines and wait times for customers. Reduced wait time generates quicker turnover, happier customers, brand loyalty, and higher profits.
Tech-Savvy Generations Driving Digital Payments
Digital payments will continue to dominate the payment industry in the years to come. Naturally, the increasingly tech-savvy generations will ultimately drive the continued advances in digital payment solutions. Gen Z, Millennials, and Gen Alpha are steering the direction of the world’s market and economic advances.
So, as the younger generations become more technologically advanced, the demand for cutting-edge digital payment solutions will continue to increase. A cashless society is quickly approaching. Soon enough, the only means of payment will be digital currency.
Younger generations are adopting digital payments at a rapid pace. So, what does this mean for your business? If you want your business to stay relevant and keep up with the times, you must also adopt modern digital payment solutions.
Contactless Payments Are Pushing Out Traditional Payments
Mastercard and Visa have both reported that after 2020, over 50% of cardholders prefer to use contactless payment over traditional methods. Furthermore, American Express and Discover now only issue contactless compatible replacement cards. Soon enough, all card issuers will replace cards with contactless features.
The Outcome of Mobile Payment Adoption for Merchants
Smartphone technology and tech-savvy generations drive the need to adopt smartphone payment solutions. However, consumers can only increase their use of contactless and mobile payments if merchants equip themselves to accept these forms of payment.
Merchants who utilize the latest smart technology will optimize their sales. Smartphones can complete digital payments with their integrated mobile wallet and the help of contactless credit card readers at merchant locations.
Smartphones can also complete an electronic transaction with a secure online gateway. Merchants must work with a digital payment processing company that offers electronic payment platforms and the latest terminal technology.
Consequently, advances in smartphone technology offer merchants the flexibility to become eCommerce-compatible, mobile, or stationary. All three avenues for business can utilize any electronic processing service to meet their needs. ECS provides our merchants with innovative payment technology. Making it easy to offer mobile payment options to their valued consumers.
Digital Payments Conclusion
Digital payments are constantly evolving. Smartphones can pretty much handle any digital payment transaction. Whether an online order, QR code scan, mobile wallet, or digital wallet money transfer, smartphones have your customers covered.
Ultimately, smartphones can handle it all. Because of this, a business needs to stay up-to-date with modern technology.
Consumers are looking for the safest and most convenient way to shop. Contactless and digital payment options provide increased hygiene, transactional ease, and security.
Offering the latest payment processing solutions so your customers can use their mobile devices will keep you relevant in the marketplace and competitive in your industry.
Frequently Asked Questions About Smartphone Mobile Wallets
Mobile wallets store digital versions of credit or debit cards. Cardholders can use mobile wallets to pay for merchant goods and services.
Conversely, mobile payment apps like Venmo, Paypal, and CashApp are social payment services for peer-to-peer payments linked directly to a cardholder’s bank account. Generally speaking, most legitimate merchants do not take payments from a social payment app.
Smartphone mobile wallet payments are more secure, convenient, and quicker than traditional payment methods. These benefit merchants with less fraud, fewer chargebacks, quicker lines, and more loyal and happy customers.
To encourage customers to use their smartphones for payments, you can hang signage or use stickers near the terminal to market the payment option and educate your employees on how to offer mobile wallet options to customers at checkout.
Credit card processing fees depend on the type of contract you are on. If you use a flat-rate payment processor like Stripe or Square, you will be paying the same percentage regardless of the type of transaction.
However, merchants on an interchange plus pricing plan and accepting smartphone mobile wallet payments will pay the same credit card processing fees as they would with a contactless payment.
These transactions will benefit the merchant as swiping, keying, or inserting a chip may cost the merchant more in interchange rates. However, the kind of credit card also plays a role in the interchange costs.
Updated January 2024