After years of growth, users are fighting over which digital wallets they trust with their financial information.
Big Tech lead with Apple Pay and Google Pay pre-installed on devices. Banks no longer want Silicon Valley to feed them. In late January, Zelle owner Early Warning Services announced a digital wallet with Bank of America, Capital One, J.P. Morgan Chase & Co., PNC Financial Services, Truist, U.S. Bancorp, and Wells Fargo.
“Through that initiative, I think merchants, consumers, and banks will all see a gain there, and create a better checkout experience for our customers,” Bank of America (BofA) Head of Product, Merchant Services, Wally Mlynarski told.
It’s part of the larger conversation about digital wallets and which ones customers trust and are acquainted with as part of a growing mix of alternative payment options (APMs). Mlynarski knows experience and security matter.
“The online experience over the years has been fraught with fraud and poor experiences for customers,” he said, adding that “that pain really starts to drive people to look differently at how they check out, and wallets can be there to drive a better experience for those customers.”
Clearing up some haziness around digital wallets, he noted that “one of the major misconceptions is that digital wallets aren’t secure. Actually, a digital wallet is very secure because it’s using EMV cryptograms and tokenization.” Encryption and network tokenization protect a card’s Primary Account Number (PAN) from easy theft.
He added that trust drives preference for online card not present (CNP) transactions, data revealing 55% of consumers polled do not retain their payment credentials with eCommerce businesses due to security concerns.
Trust, Familiarity
Consumer experience, which might be equally important as security while checking out, is part of the digital wallet issue.
They’ve seen the most natural source for a digital wallet, as least a customer would say, is their bank, Mlynarski added, listing Apple, Google, PayPal, Affirm, Sezzle, and in Europe, Sofort and iDeal.
“Who holds the risk associated with that and who do I, as a consumer, hold accountable for my experience as I’m working through that,” he said. “That’s why it comes back to financial institutions and banks. We have to maintain that.”
Merchants are on the front lines of purchases, so adding digital wallets as an APM to online checkouts is becoming a no-brainer, but there are drawbacks.
Mlynarski noted, “Merchants have been feeling the brunt of this for a bit, and they’ve had it both in a card present and not present perspective. For card present, I think wallets have solved a problem and helped create a faster, more expedited checkout.”
The NASCAR effect of too many brands cluttering the checkout screen must be balanced by credit, debit, and purchase now pay later (BNPL).
He pondered if retailers would be better off focusing on loyalty or sales lift rather than a plethora of digital wallets at checkout. “It’s a very fiercely guarded and contested issue of what leads to shopping cart abandonment, what really boosts greater sales, what drives the conversion of that transaction, and ultimately reduces that security risk from a chargeback or fraud,” he added.
Consumer Preference Decides
Watch how the EWS initiative supported by seven major banks compares to Apple Pay, Google Pay, the main card networks, and the BNPL providers.
Mlynarski said, “the initial play from a banking perspective is that banks have a right to offer a wallet for their customers because customers are looking to their banks to help solve this checkout experience problem.”
BofA supports a comprehensive checkout method that prioritizes consumer desire since the rest of the field and shoppers disagree.
“We want to make all alternative payment methods available for our customers,” he said. “That includes enabling the likes of Apple Pay or Google Pay, or even international payment types [including] Sofort, iDEAL, Routepay, or other checkout experiences that drive conversions for customers that are transacting on our merchant side. That’s a foundation.”
However, over 150 million card holders are pre-registered for the EWS wallet, which he believes may naturally boost customer checkout experiences without burdening retailers with too many costly connections.
