The lure of the digital wallet is being able to leave the physical wallet at home, and being able to do the things we do with our physical wallets more efficiently without them. The millennial-minded are increasingly looking for an easier life – and that means less baggage and fewer things to remember.
Before the launch of the Apple Watch, Apple pre-sold an amazing one million units in a single day in the USA alone – almost as many as the total number of wearables sold by all suppliers up to that point. With Apple Pay integrated in to its core, we can expect Apple’s watch to be the catalyst for a rising demand from consumers to make seamless transactions via digital wallets. Although the adoption of the digital wallet has not yet hit the heights industry experts predicted, payments by phone have risen in the first quarter of the year. Globally, over a quarter of online payments are being made by mobile, and interestingly this rises to 44 per cent in the UK [Ayden’s Mobile Payments Index].
Lightening the load
To truly become a viable alternative to a physical wallet, a digital wallet will need to do more than just enable payments – after all, we don’t use our wallets just to pay for things. Digital wallets have the potential to offer everything we get from our physical wallets and more, offering seamless integration between our online and offline lives, and delivering benefits that reward us for our activity and help inform us in making decisions. But until a digital application can act as the central point from which customers can access and make use of bank accounts, ID cards (driving licence, work access pass), receipts and loyalty cards, we’re likely to still carry around squares of cardboard in pockets and bags.
Currently our payment options are varied and complex. For every transaction we make, we make a choice at the point of purchase between loose coins in pockets, notes in wallets, debit or credit cards (contactless or chip and PIN), Paypal services, or even the good old-fashioned cheque. With a digital wallet, we can make these decisions once by setting default options for payments of different kinds, and then forget about them and go about our daily lives. Our payment preferences are set, remembered and thenceforth actioned on demand with a simple swipe, finger scan or PIN authorisation. Payments are tracked, balances are checked, and we get simpler transactions together with more useful information when we need it.
Redefining rewards for customer loyalty
Customer loyalty schemes are another area of our lives that could be transformed by digital wallets. Many schemes are based on flimsy loyalty point collection cards that are more likely to be languishing in a kitchen drawer than sitting handily in your wallet awaiting the moment of purchase, particularly in stores that you use only occasionally. If we were to carry loyalty cards for every store we use, many of us would need a wallet the size of a small country.
And once we manage to collect our points, we want to be able to spend them on things that add real value to our lives. Customers are becoming increasingly disenchanted by schemes failing to offer simple redemption processes and rewards that feel tailored (or even rewarding). Do you feel special when you find out that everyone around you is also sipping a freebie coffee?
Starbucks have managed to move their users on to digital loyalty cards by providing an app that processes both the payment and the reward transactions. It’s working for their customers, but is limited to the single brand. Moving this ideology to a central arena where multiple brands can operate will make tracking rewards much easier for consumers.
Digital can open the doors to targeted loyalty programmes that reward individuals like never before, while in turn providing companies with unprecedented amounts of data with which to tailor their offerings (and, of course, rewards). For instance, simply using your digital wallet to download an album could be a trigger. Listen to the album daily and add it to your favourites, and these actions (or more accurately, the data that these actions could send to loyalty reward scheme providers) can be used to reward you with money off, priority booking, or even VIP treatment at a future gig.
Brands could go a step further and use GPS location data to alert customers to local ways to boost their points balance, or even to bestow instant acts of kindness on their most loyal customers, such as the chance to come into a nearby store and receive a – targeted and relevant – freebie. By using data smarter, brands achieve greater loyalty and word-of-mouth advocacy, and customers receive personal and meaningful rewards, leading to an increase in brand affiliation. And of course, if a reward scheme is accessed from a digital application, that makes it easier for the customer to share it with their friends and family – straight from the phone that delivered the reward to them. Bragging rights can fuel positive engagement on social media with huge marketing value. And let’s not forget that every moment shared on social media could be a moment of potential reward or relationship.
The answer to the question of who will be first to offer a digital wallet that can truly replace – and improve on – our physical wallets, remains to be seen. But until we see a solution that performs multiple functions – payments, loyalty, ID, and maybe even a digital version of those crumpled up passport photos of family and friends, our wallets and phones will remain separate necessities.