How Digital Wallets Affect Consumers
It’s not a surprise hearing words combined with “digital”. Banking and commerce have entered the digital world, giving a beat to new terms. A digital wallet or an eWallet is one such phrase. It refers to the app or software, an online platform or service that allows electronic transactions. A digital wallet is like keeping your money in a safe digital place. It makes payments possible with a scan of a QR.
With digital wallets, carrying cash or a purse with you is unnecessary since all your money is safely stored in your digital mobile device. You don’t have to search for an ATM to withdraw cash; you no longer mix which card to use, how much your balance is, or what PINs you’ve set for different cards. A digital wallet stores your bank information in a secure place of reference. The biggest perk of using a digital wallet is its safety. Your passwords and security measures will protect your finances even if you bump into a thief.
Digital wallets fall into three categories: closed, semi-closed, and open.
- Closed wallets are developed by companies and can only be used for transactions with the issuer, with refunds and cancellations stored in the wallet.
- Semi-closed wallets allow transactions at select merchants, with agreements required for merchants to accept payments.
- Open wallets are issued by banks and allow for all transactions of semi-closed wallets, as well as funds withdrawal and transfer.
Digitalization has transferred banks and financial institutions into the online realm. Google Pay, Apple Pay, and Garmin Pay are more commonly used than most bank names. Marketing and business benefit greatly. They gather information about consumer behavior, purchasing habits, and frequencies.
Why People Use Digital Wallets
With digital wallets, consumers have also become digital, developing their digital preferences and digital habits. Consumer behaviors have changed thanks to these developments. They prefer businesses that have digital payment methods and turn commerce into a matter of a simple finger touch.
Besides the convenience of digital wallets, they also attract users with their safety. A PIN, Face ID, or passcode makes it safe and secure, and private to the user. Other advantages include the following:
- Importing tickets and important documents into the wallet
- Freeing pockets and bags from physical wallets and cash
- Shopping through pre-saved billing and card information
- Ordering rides for you and your family even when physically away
- Keeping track of finances and being watchful of expenses
- Earning bonus points and rewards when you pay electronically
- Sending and getting transferred money within seconds locally and internationally
Impact of Digital Wallets on Consumer Behavior
Traditional payment methods have been replaced by more practical and safe alternatives due to the development of digital wallets. Examining the effects of digital wallets on customer behavior is significant as their use expands. In this setting, businesses can more effectively reach their audiences and improve the whole customer experience by analyzing how digital wallets impact consumer spending patterns and purchasing decisions.
What’s easy and convenient is consequently attractive and pushy. Consumers have developed post-pandemic habits that will last for a long time. The attraction of cashless payments and the rise of online stores introduced consumers to new advantages and conveniences they would not let go of.
Change in shopping habits means that consumers now aspire to reduce in-store shopping time. At the same time, they prefer sitting at home browsing an online store and making a purchase with their digital wallets. Consumers are expected to pay with digital wallets at 39% by 2025.
The retail industry is undergoing tremendous changes. Convenience and a wide range of available products push consumers to shop online rather than spend time reaching a physical store. Acknowledging this tendency, many manufacturers and businesses introduced online payment methods, selling, and delivery options.
The stimulus-organism-response (SOR) theory explains how the changed environment–introduction of e-wallets; affects the organism–buyer; to respond with an action– online purchase. Shoppers are attracted by digital wallet features and become more inclined to purchase online. They take control of the items, track with the shipment tracking, and can decide to return still in the purchase process. eCommerce has been growing with the integration of digital payments and smoothens the customer support process with the cloud phone systems. Many new SaaS-based offerings have appeared in the market recently, like the WaaS delivery model, that can drastically improve customer shopping experience for eCommerce. Thus, electronic and digital innovations have revolutionized businesses in recent years.
Customer e-Satisfaction and e-Loyalty
All these digital changes we are experiencing push us towards developing greater customer satisfaction and loyalty. If you think to yourself, you’ll realize that the trust towards electronic transactions is higher than that of financial institutions. Similarly, businesses gain more customer trust and loyalty.
The simplicity of use results in satisfaction which contributes to long-term loyalty. It’s simple, digital wallets perform undisturbed and justify users’ expectations. They are speedy and secure. What’s left to customers but trusting the business? From the business side, many reward their customers for using digital wallets. The rewards come in cashback, discounts, or coupons. Digital payments and rewards are common in hospitality and services. Consumers opt for ghost kitchens when dining instead of running to a takeaway. These are popular as buyers get their purchases delivered to their doors without leaving the house. And, of course, for the convenience of paying electronically.
We perceive the data that 80% of transactions are expected to reach 80% by 2024. We are dazed but never ask ourselves how. The reason is satisfaction with the method. Consumers are so overly satisfied with electronic transactions that sometimes they over-purchase or unnecessarily purchase.
Impulsive Buying Decision
Impulsive buying happens instantly when consumers browse the net and feel an immediate need or desire to purchase. They feel an urge; an inner voice, a typical shopaholic, keeps telling them to proceed with payment. The urge grows since they realize the item is an impulse away.
Any impulsive action results from outer triggers. Digitally, the online environment and its perks serve as such triggers. Psychological factors play an essential role in creating impulse buying behavior. It is a risky business if you are prone to shopaholism. Not only the convenience of the process but the app design, the outstanding logo design, and appealing colors trigger impulse buying.
Impulse buying doesn’t bother many consumers since they don’t physically feel how money leaves their pockets. Impulsive decision-making leads to overspending and wasting your intangible finances. Users experience enjoyment and satisfaction, visual appeal and convenient interactions, and the feeling as if they’re spending someone else’s money pushes them to make an impulse purchase.
Attachment to digital devices avails us, the 21st-century digital humans, of the need to carry much stuff around. A phone connected to the Internet is enough for traveling around and leaving. Well, without forgetting to charge it. Digital tendencies have led to new digital concepts. We covered digital or electronic wallets. We delved deep into the impact of digital wallets on consumer behaviors and preferences.
These apps or software allow electronic transactions, and provide consumers with convenience, security, and speed. They have become game-changers in the digital economy. Business operations are also affected by digital tendencies.
Digital wallets tremendously impact the retail industry and eCommerce. They push consumers towards online shopping and reduce in-store time. The simplicity of using digital wallets results in satisfaction, which contributes to long-term customer loyalty. Additionally, digital wallets lead to impulsive buying decisions, and consumer trust in electronic transactions is higher than that of financial institutions.
Whatever we face with digitalization, as consumers, it is necessary to be wary of the attraction. No matter how convenient and secure, self-control must outweigh the temptation of overspending.