Small BusinessPaymentsPayment Methods
PayPal Editorial Staff
PayPal Editorial Staff
May 14, 2024
May 14, 2024
Thanks to the ubiquity of smartphones, digital wallets are becoming one of the top preferred payment methods for consumers. Shoppers love the speed and simplicity of paying with their phones – more than half of Americans surveyed by Forbes said they use digital wallets more than traditional payment methods, and 64% said they use digital wallets as much as traditional payment methods.1
Businesses looking to maximize their revenue and conversions should accept the payment methods their customers want to use, which includes digital wallets. The result? You could capture more sales and improve your checkout experience.
Read on to learn how to accept digital wallets as a payment method and how to set them up. Plus, discover how you can drive conversions and sales through a single integration with PayPal.
What is a digital wallet?
A digital wallet, also known as an e-wallet or virtual wallet, is an app that makes it easy to store and use various payment methods. Rather than holding physical cards like a physical wallet, a digital wallet stores information: credit cards, debit cards, gift cards, loyalty cards, bank accounts, insurance details, concert tickets, membership cards and more.
In addition to storing data, digital wallets make it easy to use those accounts to pay with just a tap of a button, making transactions with small businesses simple.
How do digital wallets work?
Digital wallets streamline the payment process by leveraging technologies such as:
- Near Field Communication (NFC). NFC is pivotal for contactless payments, enabling two devices – like a smartphone and a payment terminal – to exchange information over a short distance, typically a few centimeters.
- Bluetooth and Magnetic Secure Transmission (MST).Some digital wallets support payments through Bluetooth, allowing for a broader range of transaction environments. Similarly, MST technology mimics the magnetic stripe on traditional payment cards, expanding the usability of digital wallets to payment terminals that do not support NFC.
- QR codes. QR codes enable direct information exchange between the digital wallet platform and the payment system through a simple scan.
Security is paramount, regardless of the transmission method. Digital wallets typically safeguard user data with encryption and employ tokenization to generate a unique, one-time number for each transaction. Meanwhile, accessing a digital wallet may require authentication through facial recognition, fingerprint scanning, or PIN entry.
Once authenticated, users can select the digital wallet option at checkout to bypass entering card details manually when shopping online. For in-store purchases, users unlock their device, select a payment method, and position their mobile device near the payment terminal for a swift, contactless transaction.
Types of digital wallets
Popular types of digital wallets include:
- PayPal.PayPal makes it easy to store credit and debit cards; pay with QR codes; apply credit card rewards; choose buy now, pay later options; and even check out with crypto.
- Apple Pay. Apple Pay is built into Apple Wallet and available on eligible Apple devices.
- Google Pay.Google Pay is the in-built digital wallet for Android OS devices.
- Alipay. Alipay, a cornerstone of digital payments in China, offers services beyond transactions, including bill payments, money transfers, and financial services.
- WeChat Pay.WeChat Pay, integrated within China's largest social media platform, WeChat, facilitates easy payments both online and offline through QR codes.
While these e-wallet examples vary in features and geographical reach, they illustrate the prevalence of digital wallets today.
How do you accept digital wallet payments?
Brick-and-mortar businesses can accept more contactless payment options using a point-of-sale (POS) device designed to accept wallet technology. Shoppers can then use their smartphone, smartwatch, or other NFC-enabled devices to select their preferred payment method from their digital wallet, and then hold the device near the POS reader to complete the transaction.
Want to make it easy for shoppers to pay with their card of choice when shopping online? For e-commerce, simply enable your site to accept digital wallet payments. Because customers’ payment information is saved in the digital wallet, you simplify the online checkout process.
With PayPal, you can accept contactless payments with ease. PayPal's payment terminal integrates with your entire checkout process, from digital wallet payments to Venmo to QR codes.
The benefits and ease of accepting digital wallets
Offering checkout options like digital wallets provide several benefits for both merchants and shoppers, including:
- Greater speed and convenience. Digital wallets let people pay with a tap, which can reduce online cart abandonment and speed up checkout lines.
- Increased security. Digital wallets require authentication, such as a PIN, fingerprint, network tokenization or face scan. This can protect customers from having their payment methods stolen while also protecting merchants against fraud.
- Better positioned for the future. Digital wallets are becoming the payment method of choice for digital-native consumers who always have their phones close at hand. By accepting digital wallets, you can cater to millennial and Gen Z shoppers, who hold significant purchasing power.
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