The world is witnessing an emergence of  digital wallet marketplace wherein online wallets, also popularly called as mobile wallets, e-wallets or digital wallets, occupy an important place.

According to Forrester Research, the market for digital wallets could reach $90 billion by 2017. Social media is riding on this new wave. Instagram and Pinterest are allowing users to shop and sign up. Facebook boasts of an auto fill feature that stores your credit card information for future purchases.

Background

Merchants/retailers were used to the electronic payment infrastructure that was in place for nearly 30 years. But after 2004, the payment gateway business began to flourish as online travel bookings took off. This industry witnessed another major boost in between 2011-2012, when recharges, utility payments and online shopping took off. Though much different from mobile wallet business, the rise of payment gateway business speaks volumes of the potential and rising significance of digital payment business.

Furthermore, as the sales of mobile devices continue to surge, both consumers and retailers are eyeing digital wallets. Consequently, in 2014 the share of digital payment volume surpassed that of paper-based payment methods.

So one of the technology areas where mobile devices are now set to drive unprecedented innovation and transformation is the consumer payments industry, especially digital wallets.

So what are these digital or e-wallets basically?

It is a digital service accessible via web or a mobile application. When you make an online payment transaction, you can have your e-wallet do much of the work. Most of the digital wallets make use of technologies such as NFC and offer several commerce-related features such as offers, coupons, loyalty rewards, electronic receipts, and product information. We foresee more collaboration on open technology platforms for better mobile payment applications.

Put simply, mobile wallets speed up the checkout process and make a consumer’s life easier. MasterCard's Pay Pass, eBay’s PayPal, Google Wallet and Apple Pay are some of the popular digital wallets.

Could Hurdles that Plague Digital Wallets Mass Adoption Be Overcome?
Yes, if consumer’s concerns related to security, privacy, and lack of the necessary infrastructure are taken care of, mass adoption of digital wallets could occur. Here’s what could be done?

How to Spread Awareness about Digital Wallets?

As per a report by comScore, few people use digital wallets and even fewer are aware of what digital payment technologies accomplishes. It indicates that only 12% of consumers have used digital wallets other than PayPal and while 72% are aware of it, only 48% have used it.

So merchants will have to switch to platforms that accommodate digital wallets and incorporate capabilities like near-field communication, contactless readers, and rich graphical displays to allow consumers to choose digital wallet as a payment instrument.

How to Make Digital Wallets Secure?

There is no foolproof way to keep personal information secure at all times on smartphone. However, the best way out is to adopt best available technologies to make mobile wallets as secure as possible.

The technology used should have multi-step authentication schemes and encryption plus and an option to remote wipe the data in case of theft.

How to Earn Consumer Loyalty & Confidence?

Rewards and loyalty play a significant role when it comes to making and retaining loyal customers. But moving forward consumer loyalty will be far more than just points earned for purchases.

Realizing this, vendors will have to work hard to provide an enriching customer experience. For instance, if a consumer links his/her Citi Rewards card to a Google Wallet and earn rewards for usage, the vendors have to figure out how to show those rewards credit in their Google Wallet or on Citi's mobile app.