The mobile wallet might be one of the most exciting consumer innovations to come along in awhile. With it, people can leave their cash and plastic at home in favor of paying via a smartphone or wearable device. As a business owner, you are probably asking a rather obvious question: Will the growing popularity of this technology lead buyers to spend more?
How Do Mobile Wallets Work?
If you are unfamiliar with this relatively new style of payment, here’s how it works: Consumers first put their credit card information into their mobile device’s wallet app where it is stored securely. When it comes time to buy a product or service, they simply place their device near a card processing reader equipped with near field communication (NFC) technology. Within a matter of seconds, the reader interfaces with the consumer’s device, charging the credit or debit card stored in the wallet and conveying the information to the processing company. Without a doubt, NFC payments are changing the way people do business and purchase products.
Why Mobile Payments Trump Cash
It has long been known that consumers will spend more if they are not physically pulling actual coins and bills from their pockets and handing them over to a merchant. Even years ago when checks were the only non-cash option, businesses recognized the power of “proxy” money. Now with the introduction of mobile wallets, even credit and debit card transactions seem archaic.
Why is this? Spending is easier when there is no need to count out change, enter a pin number, or sign a receipt. Since the process of spending money is fast and easy, those using digital wallet payments may be inclined to spend more.
Obstacles to Success
In spite of the promise that digital wallets hold, a surprisingly small number of consumers use the technology. By some estimates, only about 2 percent of the U.S. population has embraced it. Due to a combination of concerns about security and a lack of trust in the companies that operate the digital wallets and take the NFC payments, most people still prefer to swipe or “dip” their plastic.
The Future of Digital Wallets
Slow adoption is no reason to dismiss digital wallets. The fact is that they simply have too much potential. Digital wallets can facilitate consumer benefits such as loyalty cards and coupons. In addition, they can work in tandem with the location features of consumers’ phones to alert them when deals and sales targeted specifically to them are nearby.
The smarter, more usable and more consumer-friendly digital wallets become, the better are their chances of universal adoption. Stay tuned; the next few years should be a very interesting ride for this promising payment technology.