With the rise of digital wallet adoption expected to reach over 5.6 billion people by 2030, marketplaces can provide consumers with more than just secure and convenient payment options.
Digital wallets are emerging as an all-in-one solution, with super apps like Alipay and WeChat in Asia offering services such as utility bill payments, ticket-booking tools, and personal wealth management. This reflects a trend toward digital wallets as service-rich applications, consolidating a wide range of functionalities – from being a central hub for all financial interactions to offering an immersive, personalised experience, incorporating loyalty programmes, discounts on favoured items, and even augmented reality features.
Facing the current digital acceleration, marketplaces have a prime opportunity to tap into the benefits offered by digital wallets. One of the clearest advantages of a digital wallet is convenience, as exemplified by the popularity of platforms such as Apple Pay and Google Pay. Users appreciate the ability to make purchases swiftly and securely without the need to re-enter payment details repeatedly. Digital wallets can store financial information, like credit cards and bank details, in a secure environment, providing users with a frictionless transaction experience.
Moreover, digital wallets play a substantial role in fostering trust between the user and the marketplace. Security is a paramount concern in online transactions. Digital wallets tend to incorporate sophisticated security measures, such as encryption and tokenization, which substitute sensitive data with a unique identifier. Consequently, consumer financial details remain protected in the unlikely event of a breach. The assurance that their data is safe encourages users to transact with confidence, which in turn, bolsters the marketplace’s reputation.
For marketplaces, trust and convenience translate into increased user engagement. The fewer barriers between a customer’s desire to purchase and completing the transaction, the higher the likelihood of conversion. A smooth payment process means fewer abandoned shopping carts and more successful transactions. Digital wallets are therefore not just a payment method; they are an engagement tool that marketplaces can harness to keep users within their ecosystem.
The integration of embedded payment services into marketplaces paves the way for both a seamless user experience and the creation of richer customer engagement models. Taking cues from prominent players like IKEA and ASOS, which integrate augmented reality and AI for superior customer interaction, marketplaces can foster brand loyalty through hyper-personalisation – rewarding users with prompt cashback options, exclusive discounts, and tailored services.
The benefits to marketplaces can also be measured in terms of cost savings and operational efficiency. Digital wallets can significantly reduce card processing fees for high-volume merchants, marking large savings. Moreover, an integrated digital wallet solution is advantageous, particularly for businesses with frequent, low-cost transactions. A key example is the Starbucks app, which acts as a payment method and a rewards system, offering a model for success, especially in busy market environments.
A major advantage that digital wallets offer marketplaces is adaptability, as they can swiftly adjust to shifts in the market and evolving consumer habits. They can also seamlessly integrate with various platforms, supporting different payment methods and currencies, which is particularly advantageous for marketplaces that aim to reach a global audience. Additionally – as regulations surrounding digital transactions evolve – digital wallets can quickly adapt to new standards, ensuring that marketplaces remain compliant with laws designed to protect businesses and consumers. This flexibility allows marketplaces to be competitive and responsive to market trends and regulatory changes, ultimately providing better and more secure services.
Another strategic benefit of digital wallets is the wealth of data they generate. Marketplaces can analyse purchase behaviours and preferences, leading to tailored offers and personalised shopping experiences. Additionally, this data allows marketplaces to spot gaps in the market and accordingly adjust their product lines, ensuring they meet the evolving needs of their customers. As we move further into the era of data-driven marketing, the insights gleaned from digital wallet transactions are increasingly valuable for marketplaces looking to optimise their user engagement strategies.
Investing in digital wallet integration may seem challenging at first, given that short-term returns on investment can be difficult to quantify, but there is significant value in long-term engagement and retention. For example, sports clubs and arenas, anchored in fan loyalty, are prime candidates for this value expansion – which can be harnessed by integrated wallet solutions through upsells and enhanced user engagement.
But more to the point, with a reliable financial solution provider, integrating a digital wallet into a marketplace can be an easy process. Those experienced in providing robust Embedded Finance can handle the complexities of processing payments and compliance behind the scenes, while the business focuses on its core activities. The integration can be incorporated into the marketplace’s existing design, preserving the app’s familiar interface while enhancing functionality with the capabilities of a digital wallet.
This editorial piece was first published in The Paypers' Fintech for Marketplaces and Platforms Report 2024 which taps into the fast, ever-expanding ecommerce industry, being the ultimate source of information for businesses looking to expand and grow their consumer base.
Marius Galdikas is the CEO of ConnectPay. With over two decades of experience in digital product development and business growth, Galdikas specialises in leading the creation of advanced financial platforms, driving the vision of ConnectPay to be a major B2B fintech innovator in the EU. His leadership focuses on fostering strategic growth and technological excellence within the industry.
ConnectPay is an all-in-one financial platform for online businesses, offering embedded financial solutions with built-in compliance. Its modules include SEPA and SWIFT payments, multi-currency IBAN accounts, wallets, Banking-as-a-Service, and merchant services. All processes operate via a fraud prevention and compliance management ecosystem, with KYC verification and AML/CTF monitoring. ConnectPay holds an EMI licence from the Bank of Lithuania and is a member of the Eurozone monetary authority.
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