Accepting digital wallet payments is becoming standard practice for any business that processes in-person customer transactions. Consumers are increasingly making purchases with their phones instead of their physical wallets, and retail businesses are equipping themselves to do business in an era where the “tap” is quickly replacing the “swipe.” The share of consumers intending to use three or more digital wallets increased from 18% in 2021 to 30% in 2022.
Read on to learn everything you need to know about accepting digital wallet payments for your business.
What’s in this article?
- What are digital wallets?
- How to accept digital wallet payments
- What hardware do I need to accept digital wallet payments?
- Benefits of digital wallet payments for businesses
- Costs associated with digital wallet payments
- Digital wallet apps
What are digital wallets?
Digital wallet technology turns smartphones into payment devices that can initiate financial transactions. Similar to a physical wallet, a digital wallet holds various payment methods—credit cards, debit cards, and bank account numbers—to be used at the point of sale.
Functionality varies depending on the underlying technology. Most digital wallets allow mobile devices to make payments at any point of sale that is enabled for contactless transactions, but some also allow customers to use rewards, spend loyalty points, or store concert and movie tickets, personal identification, boarding passes, and more.
We’ll focus on the payment aspect of digital wallets and what businesses need to know to begin accepting this increasingly common payment method.
How to accept digital wallet payments
Most payment processing providers support digital wallet payments. If you already have a provider, contact them for assistance with setting up these payments within their ecosystem of hardware and software. If your payment processing provider doesn’t currently support digital wallet payments, it might be time to find a new provider.
If you’re just getting started with accepting customer payments, you might still need to select a merchant services provider and open a merchant account. These providers can help you accept and process payments from customers via payment methods like credit and debit cards, checks and ACH transfers, and digital wallets. They also usually provide the point of sale (POS) software and hardware needed to accept payments at brick-and-mortar retail locations and online. Depending on which you choose, your merchant services provider may also offer ecommerce, marketing, or analytics support.
What hardware do I need to accept digital wallet payments?
Digital wallet payments are processed in person using near-field communication (NFC), a technology that enables two devices in close proximity to wirelessly communicate with each other. Mobile card readers and modern payment terminals often accept contactless payments using digital wallets.
Benefits of digital wallet payments for businesses
It’s good to expand the number of payment methods you accept. Limited payment options can create a barrier for would-be customers and reduce conversion rates. That said, there are unique advantages to accepting digital wallets.
Encrypted transactions make digital wallets highly secure and fraud resistant. And customers increasingly prefer digital wallets over other payment methods: 15% of digital wallet users report regularly leaving their physical wallets at home, and an additional 11% consider doing so when they know they’ll be able to use a digital wallet.
Because digital wallets interface with most modern payment systems, most businesses have minimal—if any—work to do in order to accept this payment type. All Stripe hardware is enabled to accept contactless digital wallet payments. And as consumer enthusiasm for digital wallets grows, so does adoption from businesses, as they quickly become the new standard.
Costs associated with digital wallet payments
Payment processing providers often charge fees to process these contactless payments. However, Stripe charges no additional fees to process Apple Pay payments, and the pricing is the same as for other card transactions.
Most digital wallet providers make money by charging a small percentage on each transaction to the banks and other financial institutions that host the payment methods stored in the wallet. In most cases, this extra cost isn’t charged to customers or the businesses they patronize.
Digital wallet apps
The digital wallet market will continue to expand, with new competitors entering the space in the next few years. Currently dominant digital wallet providers include widely used apps like Apple Pay, Google Pay, and various apps from the major credit card networks, but this is an actively expanding industry.