E-wallets: What do retailers need to know?

What are e-wallets?

An e-wallet is a payment method using any device that connects to the internet, such as smartphones. They are designed to help people shop more quickly and securely online and in-store. The digital wallet software allows those connected to the internet to transfer money to businesses or other mobile users using near field communication.

The e-wallet, which can hold store cards, loyalty cards and travel cards, alongside bank account information, can be accessed via a PIN. In-store, contactless payment terminals can be used to transact, while at home it can speed-up online shopping, storing payment details. Providers such as Visa can update consumers on their usage via text alerts.

Why are we talking about it now?

Visa Europe revealed this week it is to launch its digital wallet V.me in the UK this autumn. The O2 Wallet launched last month, joining Barclay’s Pingit in the market. Contactless payment – which uses credit cards, debit cards, key fobs and smartcards to pay – is becoming increasingly commonplace. Asda, Co-op and WHSmith are among those piloting it. Barclaycard released a new PayTag sticker last month, which can be attached to credit cards to allow contactless payment. 

What are the advantages for retailers?

Retailers are able to streamline their customer checkout process, enabling shoppers to purchase more quickly and easily, meaning retailers can take advantage of impulse purchases and the psychological advantage of not using cash. If their use becomes widespread, digital wallets could also ease some of the logistical and security concerns around holding large amounts of cash in tills and safes.

What are the drawbacks?

The success of e-wallets relies on changing consumer habits, no mean feat when you consider online grocery still represents just 3.8% of the market more than a decade after its launch, according to IGD. Moreover, however hard e-wallet providers try, there will be wary consumers worried about invasion of privacy and security, as well as hackers determined to undermine the system and access personal information. 

What’s next for e-wallets?

Providers will now embark on a process of working with retailers to increase the scale of the use of e-wallets. Visa Europe believes it will have 30 major retailers signed up by the end of the year. It expects that by 2020, half of its business in the UK – forecast to be worth about  £383.6bn – will be through e-wallets.