With digital wallets now being used more after a years-long ramp-up, there’s a new battle brewing over which wallets consumers both know and trust with their payment credentials.
Big Tech pulled ahead with Apple Pay and Google Pay installed and ready to use on smartphones essentially out of the box. But banks are no longer content to let Silicon Valley eat their lunch. That culminated in the late January announcement that Zelle owner Early Warning Services will operate a digital wallet with participation from 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 PYMNTS.
It’s part of the broader discussion around the rising use of digital wallets and which ones consumers trust and are familiar with as a key component in a growing mix of alternative payment methods (APMs). Mlynarski understands that’s it all about experience and security.
“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.” That means encryption and network tokenization prevents a card’s Primary Account Numbers (PAN) from ever being exposed in a way that’s easy to steal.
For online card not present (CNP) transactions, he noted that trust becomes a major driver of preference, pointing to PYMNTS research finding that 55% of consumers surveyed do not store their payment details with eCommerce merchants due to security concerns.
The digital wallet debate goes beyond security to consumer experience, which can be almost as decisive as security when it comes time to check out and what method shoppers choose.
Rattling off a list of APM providers, including Apple, Google, PayPal, Affirm, Sezzle, and in Europe, methods like Sofort and iDeal, Mlynarski said, “We’ve seen the most logical provider for a digital wallet, at least a consumer would say, is their bank.”
“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 regarding the purchase itself, so adding digital wallets as an APM to online checkouts is increasingly a no-brainer, but there are caveats.
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.”
However, the NASCAR effect of too many logos crowding the checkout page must now balance the digital wallet element with credit, debit and buy now pay later (BNPL), among other methods.
Rather than focus on a gaggle of digital wallets to choose from at checkout, he wondered if merchants would be wiser to focus on driving more value through loyalty or other ways to create sales lift. “It’s a very heavily guarded and debated topic of what leads to shopping cart abandonment, what actually increases higher sales, what drives the conversion of that sale, and ultimately minimizes that security risk from a chargeback or a fraud,” he said.
How this shakes out as the EWS effort backed by seven major banks versus Apple Pay, Google Pay, the major card networks and the BNPL providers will be an evolution worth watching.
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.”
The rest of the field sees it differently, as do shoppers, which is why BofA supports a multifaceted approach to checkout that places consumer preference squarely at the center.
“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.”
Even so, he noted that over 150 million card holders are effectively pre-registered for the forthcoming EWS wallet, which he feels can organically drive consumer checkout experiences without burdening merchants with too many costly integrations.