Where are all the eWallets?


We’ve likely all seen people paying for their morning coffee by tapping their phone on the payment terminal. You may have also wondered why you’re still fumbling with cash and an endless number of cards when the technology clearly exists to make physical and online payments more streamlined. But while our wallets can become digital, why aren’t they quite mainstream yet?

What are eWallets?

Technically speaking, an eWallet is a piece of software that stores credit, debit, bank account, loyalty card or gift card information and allows the wallet owner to use those stored payment details to pay merchants or peers online where the eWallet will automatically fill in payment information. EWallets installed on mobile devices (mobile eWallets), can also work for in person purchases, with phones and payment terminals equipped with NFC (near field communication) technology being able to communicate payment details and authenticate transactions in fractions of a second.

Apple Pay, which launched in 2014, was the first touchpoint many U.S. consumers had with an eWallet. But elsewhere in the world, consumers have been using digital wallets to make all their purchases for over 10 years.

Source: Wikimedia Commons

The Japanese Osaifu-Keitai, or “mobile wallet”, was introduced in 2004 by NTT Docomo and allows millions of Japanese consumers to make payments to more than million retailers simply by tapping their cellphones on a merchant’s terminal or on a transit ticket machine.

So Who’s Really Using Them?

Even though eWallets aren’t exactly universal in North America, they’re still being used by some consumers regularly. Mobile eWallets for in store purchases, on the other hand, aren’t nearly as common as companies like Google, Apple and Samsung had anticipated, at least not yet.

In 2016, mobile eWallet payments made up $75 billion worth of transactions, which equates to just 1% of U.S. retail sales, and that’s with some very big-name ad campaigns promoting them. A recent MasterCard study shows that lack of awareness can’t be blamed for the lack of user adoption in the U.S. as many know and understand the concept behind digital wallets.

China on the other hand has been much more enthusiastic about adopting eWallets. Three in five Chinese consumers make payments with their smartphones and eWallets are seen as the norm.

China’s middle-class consumers accumulated wealth in lock-step with the rise of the ecommerce. As a result, Chinese shoppers were very familiar with online shopping, and when combined with China’s late-mover advantage (China shifted to digital payments directly from a cash-based economy), this simply resulted in the right conditions being in place at the right time to successfully establish China as a large-scale early adopter of digital payments.

While countries like the U.S., having already made the switch to credit and debit cards from cash, won’t benefit from the same late-mover advantage, China’s mass adoption of digital payments does present an eWallet framework for the rest of the world along with insight into what consumers expect from an eWallet.

Barriers to Adoption

Source: McKinsey

While eWallets haven’t been adopted as quickly as many hoped or expected, the trend appears to be shifting. New research predicts that mobile wallet payments will reach 9% of U.S. consumer spending by 2020 and, more broadly, digital wallets will represent $1.2 trillion, or 18%, of overall U.S. retail spending within the same period.

What Needs to Change?

Being slow to offer the features consumers are consistently asking for in their eWallets, like loyalty programs and peer-to-peer payments, is contributing to the slow adoption on a mass scale. With those features on the horizon, retailers and merchants will increasingly need to support eWallet payments.

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