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Will digital wallets reach their full potential?

Jul 24, 2013 Dave King

Will digital wallets reach their full potential?

Digital wallets are an important development in the electronic payments sphere. While consumers' only alternative to cash used to only be credit, debit or ACH cards, they now may be able to organize their finances more effectively using online resources such as PayPal. This offers a large deal of convenience and can potentially be a great way for customers to manage their money more responsibly.

Adoption imminent - if merchants listen

Increasingly, there is significant debate over the chances that mobile payments will catch on, especially because of the challenges that have cropped up over time. For example, creating a positive user experience has proven difficult for some merchants, and this may be limiting the ability for businesses to harness these technologies to boost their results. VentureBeat pointed out that at the MobileBeat 2013 conference, executives from several leading mobile payments enterprises asserted that changes must be made in many cases before these solutions become a part of consumers' everyday lives.

Braintree's GM of Mobile Aunkur Arya explained at the event that mobile devices have become many customers' primary computing devices, but merchants are often falling short when it comes to motivating patrons to use these gadgets to make purchases. One of the big problems is friction: If shoppers aren't able to enjoy an experience that is convenient and intuitive, they will most likely go back to using other payment methods instead of their smartphones.

However, experts were confident that if this problem is solved, digital wallets have the potential to become the next major way that customers complete transactions.

"There are three waves converging to form the tsunami of mobile payments," CEO of PocketChange Ari Mir said, the source reported. "Consumers are more comfortable with publishing their digital identity publicly. At this point, a majority of consumers have purchased something online with a credit card, and people spend a tremendous amount of time on their phones. Understanding that mobile is synonymous with convenience is what it will take to win."

CNET explained that one of the barriers merchants must surmount is getting American consumers to make the jump from awareness of digital wallets to using them actively. The source noted that in a study by comScore, just 51 percent of 1 million U.S. shoppers polled said that they knew about digital payment providers beyond PayPal. Additionally, while 72 percent of individuals had heard of PayPal, only 48 percent had actually used it.

Interest in digital wallets was high even though may of the study's subjects were not yet adopting these tools. In fact, 62 percent of respondents stated that they think these financial management tools sound useful to them, and nearly half were interested in using mobile payments in general.

Solving the problem
Other than customer experience, merchants do have other adjustments to make before mobile payments tools are truly ready for widespread adoption. For example, security is still a significant worry for many candidates for digital wallet use, as the loss of financial information can be a devastating event. If hackers are able to gain access to another person's payment data, it's possible that they could use these resources to make unauthorized purchases or commit identity theft. These events are often difficult to resolve and have long-lasting effects on victims' consumer credit reports. Understandably, people want to do what they can to avoid such incidents.

Companies stand to greatly increase their revenue if they implement mobile payments solutions correctly. When customers are provided with tools that are convenient and safe, they will be likely to flock to the businesses supplying these technologies. Consumers are always looking for better ways to pay, so it's important that organizations harness their interest. Doing so is likely to boost bottom lines and drive customer loyalty.