Consumers like to shop online — and not just for “nice to have” items. As consumers, we buy groceries, order pet supplies, pick out new clothes and schedule appointments, all from our mobile devices.
At checkout, we no longer need to input payment methods, as retailers have begun offering more flexibility by prompting a payment from digital wallets. Consumers have come to expect this kind of experience when shopping online, so why wouldn’t they hold these same expectations of digital banking?
The banking industry has long talked about appealing to the “cashless consumer.” During the pandemic, businesses, large and small, and their primary financial institutions had to complete this pivot in an instant. Many businesses across the nation stopped accepting cash payments at their physical locations, pushing consumers to rely heavily on digital wallets or physical credit cards as they shopped at a distance.
Payments and e-commerce shopping were forever changed as the majority of consumers across all generations embraced a new, mobile-first normal. With three out of five Americans regularly using their digital wallet, financial institutions need to reimagine their payment capabilities and think digital to stay relevant and maintain wallet share.
Digital Wallet Usage Climbing
A digital wallet is a payment system designed to protect banking credentials, allowing users to bank safely in person, at ATMs and through digital channels.
Digital wallets have moved beyond a simple contactless payment method to encompass a holistic “super wallet.” Exponentially growing in popularity, digital wallets made up 48.6% of 2021,s e-commerce transaction value.
An FIS report predicts that use of digital wallets, led by tech giants including Apple, Amazon, PayPal and Google, will surpass physical credit cards in 2022, representing nearly a third of e-commerce spending in the U.S.
Use of digital wallets is expected to surpass physical credit cards in 2022.
Leading fintechs like PayPal maintain brand recognition at point-of-sale (POS). When a shopper has already established their PayPal account, it’s convenient for them to checkout with that payment method. Financial institutions should learn from this simplistic model to win customer or member trust and compete. Without these capabilities, users will look elsewhere for innovative payment solutions.
While financial institutions may still feel wary about the adoption of digital wallets, there is no need to fear. Each virtual payment method still requires a card from a financial institution to be on file, and community banks and credit unions can leverage the same innovative technology as fintechs with the help of their digital banking provider, enabling them to elevate their card offering at the point of sale.
How Digital Wallets Benefit Consumers
Digital wallets can be safer than physical wallets. They encrypt the consumers’ banking information, protecting them from fraudulent attempts. Through encryption, digital wallets ensure that no consumer data is transmitted from a device. Users should still maintain security best practices to protect their device from fraudulent activity by utilizing the card alerts and controls functionality.
Beyond security enhancements, digital wallets encompass a central form of payment and identification with support for credit and debit cards, bank account information, immunization records, healthcare cards, electronic forms of identification, flight or concert ticket and gift cards. They organize the content of a physical wallet while facilitating seamless peer-to-peer payments and optimizing convenience.
Although the benefits are enough reason to provide digital wallets for users, there is a user need that drives financial institutions to offer electronic payment options. As apps and social media drive mobile commerce, the global e-commerce market is anticipated to reach $7.3 trillion by 2024. FIS’s 2021 Global Payments Report predicts that by 2024, digital wallets will be the primary electronic payment method. This imminent change will force financial institutions to evaluate the way they offer digital credit cards to users in a digital world.
How to Achieve Top of Wallet with Push Provisioning
Because fintechs now have a presence in consumers’ everyday lives, expectations for seamless digital experiences and convenience are elevated. Users can choose between leaning on their bank or credit union to support them with the latest technology — or looking elsewhere for the best alternative.
In this situation, financial institutions have an advantage that fintechs do not — an established relationship with their customer or member. Besides intuitive technology, users want personalized experiences and service. By nurturing existing relationships, financial institutions can build loyalty and stickiness that will give consumers a difficult choice should they consider leaving their primary banking provider.
A Leg Up:
Fintechs might seem like they have the edge in banking. But banks and credit unions have the advantage of established relationships with customers.
By leveraging a credit card origination system, financial institutions can attract new customers or members, seamlessly convert them in a mobile-first application, run automated rules-based decisioning and, once approved, digitally provision new credit cards to Apple Pay, Samsung Pay and Google Pay wallets. With push provisioning, users are empowered to begin transacting as soon as they are approved. This functionality eliminates the need for users to manually enter in their credit card information or visit a branch location.
Push provisioning offers consumers the kind of digital convenience they expect when activating their new card. With digital wallets and push provisioning financial institutions can strengthen relationships while future-proofing their credit card strategy.
Learn more about push provisioning and about Alkami’s cloud-based digital banking solutions.