It is quite a common scenario to arrive at the checkout at the supermarket and start fumbling through your wallet for cash, or through several cards to find the right one to make your payment. Digital wallets have been developed and designed to make this process (and many others) a lot simpler, faster, and hassle-free. As a result, digital wallets are quickly becoming lifestyle apps – being used on a daily basis for various financial needs.
3 Generations of Digital Wallets
Digital wallets have been around for some time now, since the late 1990s. They were developed to serve various purposes and weren’t widely adopted until a few years ago. We can identify 3 generations:
1st Generation:
The 1st generation of digital wallets came to rise at the peak of the “dot-com boom” by several companies. The wallets worked well and served the purposes needed, but failed because they did not receive enough publicity, the user interface and experience were clunky, internet adoption was low and smartphones didn’t exist as we know them now. In addition, consumers were still skeptical about sharing their financial information, particularly in programs developed by small and unknown software publishers. These wallets came about and disappeared with little impact.
One example is the first mobile contactless payment option that Coca-Cola created in 1997. They installed vending machines that accept payment via text message.
2nd Generation:
The 2nd generation of digital wallets was more impactful. This is mainly because it had some big names behind it such as MasterCard, Visa, and others. The only problem was that these services were exclusive. You could not store all your credit card information and you had to have a separate program for each card. Alongside this technology came the express purchase option, which allowed consumers to make online purchases. However, the same issue prevailed and consumers were limited to using sites that are part of that specific program’s network. The lack of convenience became a deal-breaker for consumers.
One example is Google, which launched a mobile wallet in 2011 that allowed users to pay, collect points, and redeem them using NFC. This wallet was limited to one phone model and was accepted by a few merchants.
3rd Generation:
Today’s generation – the 3rd generation of digital wallets has become a lot more practical. They are software programs or applications that the user can download on their PC or smartphone, and are much more versatile and user-friendly. They can be used for various purposes and truly satisfy their purpose – quick, easy, and safe transactions that work in all situations. On a steady progress journey to become more and more versatile, the latest generation of digital wallets has become lifestyle applications.
Some examples are Venmo, Samsung Pay, Apple Pay, etc…
Perspectives: Digital wallets for consumers, merchants, and issuers
Users adopt digital wallets because of the simple and secure user experience. As a result, retailers and issuers are increasingly adopting and providing digital wallet services. By looking at the different players in the digital wallet ecosystem, we can discover the incentives that have made digital wallets so popular.
Consumers:
As the time spent on smartphones increases, consumers become more comfortable using them for their financial needs and daily transactions. The security that these wallets provide further convinces consumers that these wallets are a more practical and safe option. This comes along with the possibility to archive and keep track of payment records.
The flexibility, user experience and availability of digital wallets also make them attractive to consumers. Quick, practical, and personalized transactions and features make the adoption of digital wallets a preference over cash, credit cards, and other typical methods of payment.
Merchants:
Inconvenient payment options are one of the most common reasons for merchants to lose customers. The convenience of digital wallets thus serves as an important selling factor. Furthermore, because they may be used for tailored marketing and discount vouchers, digital wallets promote consumer loyalty and security. The purchase trip becomes easier and more appealing with solutions integrated into digital wallets, which can lead to increased sales.
Issuers:
Issuers are being driven by consumer behavior and increased competition to adopt digital wallets. Digital wallets are becoming increasingly popular among issuers as a way to attract new consumers and keep existing ones.
As the number of users grows, digital wallets have a significant impact on payment volumes and revenue.
It is critical for issuers to thoroughly investigate the market and clients, as well as the potential impact of the digital wallet. They can increase user engagement and revenue by integrating into an appropriate digital wallet.
Digital Wallets as Lifestyle Apps
Nowadays, digital wallets are quite literally transforming the way people manage every aspect of their lives. Those that give access to a wide range of financial resources and tools to their users are now termed “super wallets”.
Not only are consumers able to make payments through these super wallets, but they also benefit from various services such as making investments, taking out loans, tracking accounts, and more. Some wallets have even been developed to allow the user to order food deliveries, schedule appointments, or even hail a taxi. This has turned these super wallets into full-on lifestyle apps.
Expected Growth in the Use of Digital Wallets
- The digital wallet business has been gradually rising. According to a new report, the number of users nearly doubled between 2019 and 2020 when the coronavirus pandemic began.
- Half of the world population (around 3.6 billion people) is expected to be using digital wallets by the end of 2022.
- The mobile payments market does not seem to be slowing down anytime soon. A report done by Payments Cards and Mobile predicts that 51% percent of all transactions will be cashless by 2024. They expect the market to reach $15.69 trillion by 2028.
- Traditional payment methods, such as credit and debit cards, are on the decline. The physical aspect of payment systems clearly influences consumers’ payment choices. Society is moving toward more contactless technologies, and cash will play a smaller role in our transactions.
The Takeaway
Lifestyle apps are built to make our lives easier. They serve to fulfill a need rather than entertainment, purchasing, or browsing purposes only.
Digital wallets no longer simply serve payment or transaction purposes. They are now satisfying the growing need to make the management of finances simpler and more convenient throughout one’s daily life.
This is also why we have developed Purpl – built to make your everyday financial needs a breeze.
