Will Digital Wallets Replace Credit Cards?

Take a moment to consider just how many cards you’re carrying around in your wallet. The average American carries two to three credit cards on them. And that doesn’t include debit cards, gift cards, and customer loyalty cards.

Increasingly, consumers are using digital wallets to manage these payment options. Globally, the number of credit and debit card payments are expected to drop from 51% to 46% thanks to cashless payment options.

What are Digital Wallets?

If you own a smartphone, odds are you already have a digital wallet among your other apps. Apple Pay, Samsung Pay, and Venmo are all examples of digital wallets.

A digital wallet is similar to a physical wallet except you store it on your phone. It digitizes your payment information so you can pay retailers and even send money to friends more easily.

So instead of digging through your wallet to find the right card, you access the card on your digital wallet and scan your phone over the card reader. The card reader uses near-field communication (NFC) technology to wirelessly accept your payment.

Digital wallets have been around for a while, and consumers are gradually starting to embrace this technology. Digital wallets started becoming more mainstream in 2008 but this trend picked up just in the last couple of years.

What are the Benefits of Using Digital Wallets?

The speed, security, and accuracy of digital payments benefit consumers and retailers alike and the biggest benefit of using a digital wallet is the convenience it provides.

No more digging through your wallet or purse looking for the right card. And transactions are faster because you simply wave your smartphone over the card reader.

This cuts down on checkout lines and improves the experience for retail customers. And increasingly, businesses have started to reward customers for using digital wallets or making in-app payments. For instance, Starbucks offers free drinks for customers who pay using their app.

Some people are hesitant to use this technology because they’re worried it isn’t safe. But your payment information is actually more secure when you use a mobile wallet. Anyone can steal your physical wallet but it’s much more difficult to access payment information on your phone, even if your phone is stolen.

Will Digital Wallets Replace Credit Cards?

Digital wallets will continue to become more widespread as the technology continues to improve. Global mobile payment revenue reached $405 billion in 2015. By 2022, that figure is expected to exceed $1.3 trillion.

So will digital wallets replace credit cards? Yes, but it will take time. And when I say it will take time, I’m referring to “technology time” which means it moves at an increasingly faster pace. Of course, there will always be customers who will prefer to pay with a credit card or even cash but in the next three years, paying with an actual credit card or cash will be similar to paying with a check today, very unlikely and very cumbersome.

The best way businesses can prepare for this trend is by offering as many payment options as possible. Upgrade your equipment and train your staff so you can begin accepting payments via digital wallets. If you don’t, I can promise you that your competitors will.

To your success!

Brian Johnson
Written by Brian Johnson