Trending digital wallet business

A couple of years back, wallet was though as a human accessory used to storing money. Coming back to now, the wallet is mobilized and is quickly becoming the newest Smartphone trend. They are the apps or website that simplifies the payment functionality.

Importance A wallet allows a consumer to 'store' money in itself so that while doing an online transaction consumer can directly pay using the money already in the wallet instead of going through the process of entering card or internet banking details, etc. Just like the physical wallet we have.

Mobile wallet also let the user to save their card information to securely store in the cloud which helps them for making one click payment. Depending on the regulation of a country, importance of wallet increases even more. Such as in case of India, here due to RBI regulations (e.g., mandatory 3d secure password in card payments), the process of paying via card takes a long time and hits success rates badly, not just on the desktop web but even more so, on the mobile phones.

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Difference between Digital Wallet and Digital Payment GatewayOften Mobile Wallet is confused with the different payment gateway. There is a huge difference between payment gateway and mobile wallet. The payment gateway is the server to which a business connects their website or cash register. Payment Gateway connects the buyer and seller for any online payment transaction. It is a secure channel/medium to complete the transaction; it is the equivalent of a physical Point of Sale (PoS).

For any online transaction to be completed, merchants will need to have a payment gateway. If not it is just like saying a customer goes to a retail store and gives his card for payment and the merchant does not have a PoS. Merchants can indeed use only a digital wallet.

Both the terms are related to online payments. Online payment processing is what's happening in today’s fast-paced and competitive business environment. Virtual money channels are often an important part of running an online business and they themselves become the trending business. Globally, payments industry revenues in 2011 were approximately $900 billion. Today, any business that can’t process payments online is missing out on a huge customer database. This has given rise to several mobile wallet services.

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Retailer Mobile Wallet Retailers, like KFC, Starbucks and McDonald’s, have been quick to define a mobile wallet strategy, and as a result are becoming big influencers in the eco-system. Retailer wallets, in addition to other features, enable shoppers to make purchases via mobile phone by means of credit card, 1 click, digital wallets like PayPal, prepaid or gift cards. Retailer wallets have a huge advantage, because the value proposition is very clear. Many retailer wallets has improved the customer journey, and brought together all of a retailers value added services such as fast ordering, loyalty, couponing, online payment in a more organized way, as a result consumers has been quick in their adoption.

Diverse Commerce Related Capabilities The ubiquity of Smartphone places unprecedented computing power at the fingertips of millions of consumers. Today’s smartphones function not only as communications devices, but as search tools, storage for merchant offers, price comparison mechanisms, peer-to-peer money transfer systems, payments devices, gaming consoles and social sharing tools. Digital Wallets combined with Smartphone technology enables it for the widespread payment acceptance. So wallets can be closely integrated with other capabilities. They present diverse commerce-related capabilities extending well beyond payments.

Ecommerce CheckoutsMobile wallets are enabling merchants and manufacturers to market their wares in more efficient and relevant ways. The new reality is that well-designed and delivered mobile wallets are highly relevant to both consumers and merchants, and therefore support commerce on an extremely broad level.

Coupons & Loyalty ManagementThese two marketing tools can now be delivered in more personalized, relevant and location-sensitive ways. As mobile wallets are getting mature they are offering various breakthroughs like consumer incentives other than price alone, this will appeal to merchants as well.

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Peer-To-Peer Payments, Transfers And Social LayersThese include the mobile purchase of digital content. For example, purchase of music, books, games, apps, or transfer of money.

Key Players in this mobile wallet industry. These players not only built the industry, they were also instrumental in developing the standards and rules guiding participation.

Apple’s Digital Wallet Apple currently stores customers’ payment information under unique Apple IDs, enabling Apple customers to make simple double-click payments for digital content via its iTunes, App, iBook and Mac App stores. This EasyPay feature is an example of how the company leverages its vast set of retail customer relationships. Apple also introduced its Passbook application for iPhones and announced that it has 400 million consumer relationships, which gives it substantial issuing scale potential in the payments arena. Passbook electronically stores virtual items, such as coupons, offers and gift cards. In

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many ways, it is a mobile wallet prototype that could integrate payments with marketing and purchase incentive capabilities.

PaypalPayPal is an American worldwide online payments system. It is one of the largest internet payment companies. Here, Account credentials are saved online, not on the mobile device. At time of payment, users are sent to a checkout screen that allows them to check out or send money using their account information saved with the provider without needing to re-enter credit card numbers or shipping addresses.

Paypal also offers SMS communication protocol allowing interchange of short text messages. It is generally used to purchase digital goods (ringtones, avatars, games) or send money P2P or P2B. Here, No security or encryption, sent in clear text only (except during transmission over the air).

Pago, Serve, Google Checkout, Amazon Payments are some of the other examples of wallets who operate in a similar way as paypal do.

Google WalletGoogle’s Wallet store is an alternative form of payment with no increased cost to merchants. It is an easier way to pay in stores, pay your friends and pay online. On May 15, 2013, Google announced the integration of Google Wallet and Gmail, allowing users to send money through Gmail attachments. Like the main service, Google Wallet's Gmail integration is also currently only available in the US, to those 18 or older. To be sustainable, however, it will need to generate sufficient value (in terms of transactional and other data) that Google’s core business can leverage.

Google wallet has the feature of contactless technology. Customer holds mobile device in close proximity to the merchant’s point-of-sale terminal to initiate payment. Customer account credentials or tokens are stored on the mobile device.

Other wallets using this service includes, Isis (Near Field Communication), Paycloud (Sound) and Starbucks (Quick response [QR] Code)

PaytmPaytm alone has a user base of 20 million users. It is owned by Noida-based One97 Communications. It is the most popular mobile wallet in India. Paytm, which has an annualized transaction value of $600 million, is currently funded by SAIF Partners, Intel Capital, Sapphire Ventures and Silicon Valley Bank. At present, Paytm earns 1-1.5 per cent of payments as transaction fee. But through its mobile-commerce business, where it works as a marketplace for merchants to sell their products, Paytm earns higher transaction fees of up to five per cent. It has about 10,000 offline and 16,000 online merchants currently registered on its mobile-commerce platform. Recently, it added booking of bus travelling to its facilities after receiving funding from Alibaba Group holding Ltd.

FacebookRecently, even facebook has also introduced the payment features in its messenger. The feature, which allows friends to send and receive money using Facebook’s messaging app on iOS and Android as well as on the desktop, was previously only available in a few cities in the U.S., including Seattle, Portland and Austin. Facebook has its intentions to delve further into the payments business, with a move that could potentially upend popular payments apps like PayPal or Venmo.

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While online business has always been vulnerable to fraud, modern payment processing services include security measures that verify each credit card number and intercept potential criminal attempts before a transaction takes place. This fraud stands out as the main hurdle for the online payment systems.

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