The Rise Of Digital Wallets

And why every retailer should take note.

Posted by Andrea Baker on

With Android and Samsung Pay recently launching in Australia, and Apple Pay available but still locked in battle with some of the country's biggest banks, 2016 has arguably been the year of the digital wallet.

Based on near-field communication technology, the rise of the digital wallet heralds the beginning of a new era that, according to Westpac, could see cash disappear totally by 2022.

At its heart the digital wallet offers a host of potential benefits to retailers and customer alike, but how exactly does it work, where is it at, and what's in it for retailers? 

Quick rundown

At the most basic level the digital wallet allows consumers to pay for items using their smartphones rather than bank cards and cash. It works by linking bank cards to apps that provide a method of payment.

Not only are the big technology players like Apple, Google and Samsung all on board, but banks have also embraced the trend, and retailers like Coles are also vying for a slice of the pie.

In Australia, getting consumers to pay via contactless technology is relatively easy - we have one of the highest adoption rates of contactless payments in the world. Each day transactions are completed using options like Visa PayWave, which boasts more than 28 million transactions in this country alone each month. And more and more people are getting are comfortable using the contactless method.

These transactions are undertaken using near-field communication, meaning you can hold a card with a chip, or place a compatible mobile phone near a contactless card reader, and opt to pay from your credit or debit account.

The digital wallet, like those by Apple, Android or Samsung, takes it one step further allowing you to choose between cards and payment options using the security of your fingerprint or a code to fund your morning latte. 

Apple Pay

Apple Pay

Apple Pay was launched in Australia in November 2015. Much anticipated, it has been the source of huge controversy because of an all-in brawl with some of the nation's biggest banks.

In Australia, Apple Pay currently works with American Express–issued credit and charge cards, ANZ-issued Visa credit and debit cards, ANZ-issued American Express cards and ANZ-issued MasterCard credit cards.

View our range of POS Stands perfect for accepting digital wallets.

That means it doesn't work with three of Australia's Big Four banks. Why? Because Apple will only allow payments through Apple Pay, not any of the apps developed by the big banks. Apple argues that's because the banks won't share their fees, the banks argue Apple is restricting consumer's ability to choose their payment method. 

Samsung Pay

Android Pay

In July, Google jumped aboard the gravy train, launching Android Pay in Australia. Having keenly watched the Apple debate play out from the sidelines, they've teamed up with anyone and everyone including all major credit cards and debit cards. You can see a more comprehensive list here.

Boasting simple set-up, consumers choose their device, load their credit and debit cards and then hit the shops. The facility works when you "wake" your phone and place it next to a card reader displaying the Android Pay or Contactless symbols. No need to open apps, remember pins or log in.

When consumers tap and pay at select merchants, their loyalty is also rewarded, with points and offers automatically recorded. 

Samsung Pay

Launched in June, Samsung Pay operates via select Galaxy devices. In addition to contactless payments, Samsung Pay offers the unique capability of paying via magnetic swipe, making it compatible with pretty much any terminal that accepts credit cards.

To set it up, users either scan or manually enter a card's details, and up to 10 cards can be registered, although only CitiBank and American Express have so far come on board.  

The future

Whether we like it or not the future is undeniably digital. The benefits include security, ease of use and accessibility for consumers.

For retailers, the potential is vast. While digital wallets do not reveal customers' actual credit card details, they do record purchases in the name of loyalty. This provides retailers with a host of digital marketing and consumer data opportunities.

Meanwhile digital wallets also allow for a "purchase anywhere, anytime" mentality, and reduce the risk and loss potential of fraud using fingerprint technology. That's not to mention swifter checkout times and lower payment processing fees - a win-win for the average merchant. 

The wrap up

The Apple versus Australian banks battle may yet to be resolved, but regardless, cash is an increasingly distant memory from days not long gone by. Now it's down to retailers to get on board and be at the cutting edge of the cashless trend, taking all the spoils of a new frontier.