Digital Wallet Usage Continues to Grow: What Does This Mean for Financial Institutions?
In recent years, digital wallets have become increasingly popular as more consumers embrace the convenience and security of digital payments and more businesses accept digital payments. Digital wallets are virtual wallets that allow users to store and manage their payment information, including credit and debit card details, bank account information, and other payment methods, all in one place. As digital wallet adoption and usage continues to grow in popularity, what challenges do they present for financial institutions?
The Digital Wallet: Convenient and Secure
Digital wallets are growing in popularity in part due to convenience. With a digital wallet, users no longer need to carry a physical wallet or credit card to pay for goods or services. They can use their smartphone or other mobile device. This is especially useful for consumers who are always on the go and prefer not to carry cash or cards with them.
Another reason why digital wallets are growing in popularity is security. Digital wallets use data encryption technology to protect users' payment information on their mobile device and use tokenization to make the transaction secure at the merchant. Additionally, digital wallets often require biometric authentication, such as fingerprint or facial recognition, before a payment can be made. This adds an extra layer of security and reduces the risk of fraud which makes it a safer way to pay than carrying and using a plastic card.
Meeting Digital-First Expectations
With the increase in the adoption of digital wallet usage, financial institutions (FIs) are being forced to make changes to keep up with today’s digital-first landscape. According to Aite-Novarica Group, “Cardholders expect digital everything and have little patience for manual processes or interactions.”
There are some challenges that digital wallets present for financial institutions, credit unions, and banks. FIs face high-adoption rates of competitor digital wallets and have a harder time fast-tracking technology changes within their organizations. These factors, along with legacy system integrations, make it challenging for FIs to quickly launch a modern credit card platform, new payment solutions and their own digital wallets.
Early adopters of the digital wallet rely heavily on Apple Pay, Google Pay, and Samsung Pay which are native to their mobile devices. One of the biggest challenges for financial institutions is to change this consumer behavior by providing their own mobile-first credit cards and digital wallets. FIs are beginning to turn to partners to help them address these challenges. In fact, nearly 70% of financial institutions said partnerships will be important to their business strategies for the upcoming year.
Partnering for the Win
Partners offer mobile-first credit card platforms with advanced cardholder features such as real-time rewards, instant card issuance and provisioning to a digital wallet. Using a branded app or white label platform developed by a trusted technology partner can help FIs get a credit card program live quickly and efficiently with all the bells and whistles that customers or members are expecting.
Digital wallets are growing in popularity due to their convenience and security, but FIs are facing challenges with keeping up with this trend. As more consumers switch to digital wallets, financial institutions must start offering their own digital wallet services or partnering with existing providers in order to remain competitive in an increasingly digital and mobile world.
To learn about partnering with Deserve to build your own mobile-first credit card program, contact us today.