The rise of digital wallets: and what they may mean for payments as we know it?
The thoughts of Lee McNabb, Head of Strategy & Research, Payments at NatWest
When debating the future of payments, predictions often default to digital payments being the “death of cash”. Our view is different; cash will be around for a long time, but the future will be one of less cash not cash less.
The pandemic has accelerated existing trends and both businesses and consumers need to prepare for the continued and swift shift to online and mobile payment models; a shift that will increasingly see smart devices and wallets cannibalise cash, cheques …and even cards as payment tools. For while cash will be around for many years to come, the coming decade will see digital payments, enabled by smart devices, grow at a speed that could herald the end of the plastic card.
…the coming decade will see digital payments, enabled by smart devices, grow at a speed that could herald the end of the plastic card.
Overseas markets are rapidly transitioning from cash to card to device payments: a tangible example of this is in Asia, where Alipay now boasts over a billion users and digitalisation in general, wallets, in particular mean users never need own a plastic card and, many retailers no longer accept non wallet payments.
The pandemic has reshaped our needs and it won’t be enough for mobile wallets to merely store payment tools, they must evolve to host additional services and offer enhanced buying experiences. And while the rise in contactless payments has paved the way for their success, customer expectations only continue to rise; the brands that excel will be those that actively look for ways to create enjoyable, seamless experiences that engage customers across the channels they find most valuable. This includes prioritising enhanced experiences and offering new choices such as receipt/guarantees storage or multi currencies; whilst making it effortless for retailers to accept payments.
But while the growth in wallets increased as a result of the pandemic so too did the use of digital banking and banking apps. NatWest, immediately after the first lockdown, saw a 70% increase in new weekly digital registrations for customers to access their account information and make payments, while born of necessity there has been minimal switch back to non-digital activity. Banking (and payments) have become something you do, not somewhere you go, meaning customers can pay in a cheque on their app, check credit scores, track and analyse their spending and even switch mortgages from the comfort of a screen. While acknowledging that sometimes we need to talk to a person, offering ‘Tap to call’ options or being able to book an appointment, demonstrates that apps and digital banking have a key role and can sit alongside the growing number and sophistication of digital wallets. The balance we have always to address is about meeting multiple customer needs.
NatWest, immediately after the first lockdown, saw a 70% increase in new weekly digital registrations for customers to access their account information and make payments
Digital banking and digital wallets are the entry point to a vast ecosystem of data, that can reduce on-boarding, ease transaction frictions, support new compelling offerings and build a virtuous circle of data. This will be encouraged by governments, banks, corporates, and payment providers who all stand to benefit from the digitalisation of payments; and as long as digital solutions be they apps or wallets, remain simple, smart and safe, customers will continue to engage and benefit from their usage.