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Thanks in large part to COVID-19, global digital wallet usage surged three years ahead of expectations in 2020. As a result, it is now more important than ever for merchants to provide an easy, frictionless payment experience. Consumers must be able to pay how and where they want, and at all points of engagement with a merchant.
To learn more about why and how merchants should enable digital wallets for in-store purchases, PaymentsJournal sat down with Tristan Roffey, VP of Strategy & Digital Innovation at Blackhawk Network, and Sarah Grotta, Director of Debit and Alternative Products Advisory Service at Mercator Advisory Group.
Digital wallet usage is soaring
2020 was a tipping point for digital wallet utilization, as demonstrated by the findings of Blackhawk Network’s recent Global Digital Payments Insights report. Blackhawk surveyed over 13,000 consumers across nine countries and found that 59% of respondents started using, or increased their use of, digital wallets since the pandemic began; 17% used a digital wallet for the first time.
“What we’re finding is that not only are there a lot more consumers that are using them for the first time, but the consumers that were using them prior to the pandemic are now using them more frequently. We’re also finding that consumers spend more when they use digital wallets, but there’s still some frustration among consumers around lack of acceptance,” said Roffey.
The influx of QR code scanning for payments has contributed to this growth. Prior to the pandemic, QR codes had little traction in the United States. Now, they are everywhere from menus at restaurants, to contactless checkout options, to digital payments at the grocery store.
It’s not just tech-savvy consumers that are embracing the digital wallet, which indicates that digital wallets are here to stay. “When you find that consumers who really don’t consider themselves to be tech-forward are finding value in wallets for e-commerce and in-store, then you really know that you’re moving into mass adoption. And that’s certainly beginning to occur,” noted Grotta.
Adoption on the merchant side is growing, too. “It’s really winning over both large and small merchants and snapping QR codes [is] not really a new experience for consumers. So again, I think that’s really helping to lay the foundation for fast growth,” Grotta added.
COVID-19 impacted consumer digital wallet usage in-store
The pandemic’s impact on retail and payments was unprecedented, challenging the long-held sentiment that the payments industry is sluggish and resistant to change. “What we’re seeing now, particularly in the last year and a half, is that if you put the right value proposition in front of them, both consumers and merchants will change their payment habits on a dime,” said Grotta.
While many retailers were quick to adapt to COVID-19, the true drivers of change were consumers, who moved to quick, smart, and safe purchasing tools in response to the pandemic. “Once you’ve become accustomed to paying in a touch-free, contactless manner, there’s really no going back. It’s a cleaner, safer, faster and better transaction. There are a million reasons why people enjoy paying this way,” said Roffey.
The pandemic also conditioned consumers to enjoy—and expect—a breadth of payments options. “There’s actually some data to suggest that if a merchant isn’t offering their consumers a contactless payment experience, there are some consumers that just won’t shop there anymore. I’m actually one of those consumers myself,” admitted Roffey.
With smartphone penetration in North America at nearly 100%, most of today’s consumers now have the option to facilitate transactions via their mobile device anywhere they are. As a growing number of merchants implement the infrastructure needed to accept such payments, the time is right for digital wallets to become a primary payment method in the brick-and-mortar environment.
“This year and next year are really going to be building years for mobile wallet acceptance in-store. This is something that’s really going to take off in 2023 as that value proposition for mobile wallets becomes even more compelling given their ability to support a variety of different sources of funding,” said Roffey.
Why merchants should enable in-store wallet acceptance
On the merchant side, deploying digital wallet capabilities in-store is a lucrative choice. According to Blackhawk Network’s survey, 43% of respondents reported shopping more often since they began using a digital wallet; 38% reported spending more money at retailers where they can use digital wallets.
Digital wallets are also incredibly effective at driving merchant awareness and customer leads. For example Giant Eagle’s 474 supermarket and GetGo locations are now accepting PayPal and Venmo as forms of payment in-store. To encourage consumers to participate, PayPal is running a promotion offering consumers $10 cash back the first time they spend $40 at Giant Eagle using either digital wallet.
The thriving affiliate marketplaces of Buy Now, Pay Later (BNPL) lenders also drive millions of leads to merchants on a daily basis.
“If merchants aren’t accepting these digital wallets, not only are they losing out on the traffic that can be generated by these digital payment methods, but they’re also missing out on a considerable amount of promotional dollars that go into the pockets of their customers,” said Roffey.
The right way for merchants to deploy new payment methods
Ultimately, the implementation of digital wallets is crucial to creating a convenient customer experience that keeps shoppers coming back for more. As a result, it is crucial for merchants to enable digital wallets as an in-store payment option.
Of course, that’s easier said than done. So how should merchants approach this?
First, they must ensure they have the right infrastructure in place to support the use of digital wallets. This includes the right technology, training and education for cashiers at the point-of-sale, and marketing materials that drive in-store awareness. After all, a customer won’t use a payment method if they don’t know it’s an option.
If merchants fail to incorporate these components into their launch, it will be more difficult to achieve lingering consumer interest. This can hinder long-term growth. The good news is that industry leaders such as Blackhawk Network are eager to step in and help retailers optimize their digital wallet strategies.
“We’re here to guide merchants along their journey to ensure they’re maximizing the benefit of these new payment methods while minimizing any disruption to the stores and making that experience as great and manageable as we possibly can for the consumer,” Roffey concluded.