Which digital wallet is best for the consumer and the merchant?

The list of available digital wallets is growing. There is one for every month of the year, including AliPay, Amazon Pay, Apple Pay, Google Pay, Masterpass, PayPal, Paytm, Samsung Pay, Shop Pay, Venmo, Visa Checkout and WeChat Pay. I’m sure this is not an exhaustive list and more exist around the world. Which one is best for the consumer and the merchant, and could there be one digital wallet for all your needs?  

Determining which digital wallet solution is better, whether it's Amazon Pay, Visa Checkout, Masterpass or PayPal, can depend on several factors, including the individual's personal preferences and the specific features and functionality offered by each solution. There may be some differences in the specific features and capabilities offered by each digital wallet. Visa Checkout may be more widely accepted among merchants, particularly those that accept Visa cards. PayPal has a large user base and offers a variety of additional features and services beyond its digital wallet.

Accepting multiple digital wallets can also help merchants to future-proof their payment processing infrastructure, as new digital wallets are constantly entering the market. By being able to accept a variety of digital wallets, merchants can ensure that they can continue to meet the changing needs and preferences of their customers.

Within the EDC Retail Practice, we believe that it is important for merchants to evaluate the costs and benefits of each digital wallet before deciding which ones to support, as supporting too many digital wallets can also lead to additional costs and complexities in payment processing and reconciliation. Not to mention a cluttered checkout. Moreover, not all Payment Service Providers (PSPs) can support all wallet types. However, for merchants who already use a PSP or Acquirer that supports the digital wallet in question, adding the digital wallet may be relatively easy. In some cases, the digital wallet provider may even offer pre-built integration tools or plugins that can be easily added to the merchant's existing e-commerce platform.

Merchants already realise with the growing number of digital wallets it can be a challenge to decide which is best for your business. No one payment provider exists that supports all wallet types. For the last couple of years, the main international card payment networks have a solution that could make it a little easier for merchants with a solution called “Click to Pay”.  

"Click to Pay" is a digital wallet payment service developed by EMVCo, a global standard organization for secure payment transactions. EMVCo is owned by American Express, Discover, JCB, Mastercard, UnionPay, and Visa, and it manages the EMV specifications for chip-based payment cards. Launched before the global pandemic, just as e-commerce traffic was surging as consumers turned to more digital retail, food delivery and online entertainment services, the EMVCo Secure Remote Commerce (SRC) simplifies the online checkout process to make it consistent, convenient, and secure. E-Commerce solutions based on EMV SRC Specifications are indicated by the Click to Pay icon and known as Click to Pay solutions.

Click to Pay enables customers to make online payments with ease and convenience. It eliminates the need for customers to enter their payment information for every transaction, instead, they can securely store their payment details in their digital wallet and use them to pay for purchases on any website or app that accepts Click to Pay. It took me around 12 seconds to register my payment card in the Click to Pay wallet. Unfortunately, I am yet to find an online merchant in the UK where I can use Click to Pay. Admittedly I have only passively looked for just over a week during my normal online shopping. I look forward to that one-click experience using my recently registered card in Click to Pay.  

In summary, Click to Pay and EMVCo aim to make online payments simpler, faster, and more secure for both customers and merchants. Click to Pay uses several security measures to protect consumers' sensitive information and ensure the integrity of online transactions. These security measures include:

1. Tokenization: Click to Pay uses tokenization to replace consumers' actual card numbers with a unique digital identifier, which helps to protect their card information from fraud and unauthorized access.
2. Encryption: Click to Pay uses industry-standard encryption technology to secure consumers' data and prevent it from being intercepted by unauthorized parties.
3. Biometric authentication: Click to Pay supports biometric authentication methods such as fingerprint recognition and facial recognition, which provide an additional layer of security for users.
4. Two-factor authentication: Click to Pay supports two-factor authentication (2FA) methods such as SMS verification, which requires consumers to enter a code sent to their mobile device in addition to their password or biometric authentication.

In addition to these security measures, Click to Pay is designed to comply with the Strong Customer Authentication (SCA) requirements under the European Union's second Payment Services Directive (PSD2). SCA requires that online transactions be authenticated using two or more independent factors, such as something the consumer knows (like a password), something the consumer has (like a mobile device), or something the consumer is (like a fingerprint). Click to Pay's support for biometric authentication and 2FA methods helps to ensure that transactions are SCA compliant and provide an additional layer of security for consumers.

Click to Pay is intended to be a secure and convenient alternative to traditional online payment methods such as credit cards, debit cards, and PayPal. It uses advanced security features, including encryption and tokenization, to protect consumers' sensitive information from fraud and unauthorized access. You don’t have to get off the sofa to find your traditional wallet, find the right plastic card, type all those numbers in, expiration date and security code without making a mistake, then remember 2 or 3 random letters from your security password or re-type the one-time-passcode that the bank has texted to your mobile phone.  

With Click to Pay, consumers can create a digital account with their payment information, shipping addresses, and other details, which can be used across multiple online merchants. When making a purchase, consumers simply select the Click to Pay option at checkout and confirm the payment with a single click. The advertised merchants that are already supporting Click to Pay is growing and include Adidas, Amazon, Best Buy, Dell, Expedia, Etsy, FreshDirect, Fossil, Marriott International, Neiman Marcus, Saks Fifth Avenue, StubHub, Travelocity, Walgreens, and Under Armour. Although not are all these are available in the UK or the EU. Acquirers and PSPs that have enabled Click to Pay are actively working to onboard more merchants to be Click to Pay ready.

Visa and American Express also offer their own digital payment solutions, such as Visa Checkout and Amex Express Checkout, respectively. These solutions are like Click to Pay in that they allow consumers to store their payment information in a digital wallet and use it to make online purchases more easily and securely. Visa Checkout was officially launched in 2014 as a digital wallet solution developed by Visa Inc. Visa has already announced that it is phasing out Visa Checkout and transitioning to Click to Pay as its primary digital payment solution. Likewise, Masterpass from Mastercard, Click to Pay is expected to be the preferred solution moving forward. Consumers over time will become less familiar with Masterpass and Visa Checkout as they are phased out of the payment acceptance ecosystem.  

As a major player in the digital payments industry, PayPal certainly keeps a close eye on the competition and is likely aware of other digital wallet solutions such as Click to Pay and Visa Checkout. However, PayPal has a strong market position and a large user base, so it may not be overly concerned about these new entrants to the market. Competition is always a factor in any industry, and PayPal may be working to enhance its own digital wallet solution and add new features to remain competitive. PayPal has also been expanding into other areas of financial services, such credit and lending, and cryptocurrency, to diversify its offerings and stay ahead of the curve in a rapidly evolving industry.

Conversely, Amazon Pay and Shop Pay (from Shopify) is very similar to Click to Pay. While Amazon Pay, Shop Pay and Click to Pay aim to provide a seamless and secure online payment experience. All these digital wallets offer similar features, such as the ability to store payment information securely, streamline the checkout process, and provide enhanced security measures to protect consumers' sensitive information.

Ultimately, the best digital wallet solution for an individual will depend on their specific needs and preferences, as well as the availability and acceptance of the solution among their preferred merchants. It may be worthwhile to try out different digital wallets and compare their features and functionality before deciding on one that works best for you.

Introducing too many digital wallet options could potentially confuse customers, especially if they are not familiar with the different solutions available or do not understand how to use them. This can lead to a frustrating customer experience and may even cause some customers to abandon their purchases altogether. Having multiple digital wallet options can also provide customers with greater flexibility and convenience, allowing them to choose the option that best meets their needs and preferences. Customers who are already familiar with using digital wallets may appreciate having multiple options to choose from and may even prefer one digital wallet over another based on their specific features and capabilities.

To mitigate confusion and ensure a positive customer experience, it is important for merchants to clearly communicate which digital wallet solutions they support, as well as provide clear instructions on how to use each one. Merchants can also consider offering guidance and support to customers who may be unfamiliar with digital wallets or need help choosing the best option for their needs.

The time it takes for a merchant to integrate, include, and support Click to Pay can vary depending on several factors, such as the merchant's existing technology infrastructure, the complexity of their checkout process, and their level of experience with integrating new payment solutions.

In general, the process of integrating Click to Pay involves a few key steps, including registering with Click to Pay, implementing the required API, testing the integration to ensure that it is functioning properly, and submitting the necessary documentation to become fully compliant with the solution. Click to Pay is supported by several PSPs and Acquirers, although these can vary depending on the region and market. However, some of the major acquirers that support Click to Pay include:

• Adyen

• Checkout.com

• Global Payments

• First Data

• Fiserv

• Mastercard Payment Gateway Services

• Stripe

• Worldline

In addition to these major acquirers, there are many other PSPs and acquirers that support Click to Pay, so merchants have a wide range of options when it comes to selecting a partner to facilitate their Click to Pay integration.

Interestingly, Braintree is another payment service provider that supports Click to Pay. Braintree is a payment solution provider that is owned by PayPal and offers a range of payment methods.

In summary

The success of any payment solution ultimately depends on its ability to meet the needs of both merchants and consumers, as well as its ability to offer a seamless and secure payment experience. As Click to Pay continues to gain traction and expand its reach, it will be interesting to see how consumers respond to this new digital wallet and whether it becomes a popular payment solution for merchants.

Online payments are not complex, but the choice of online payment methods is growing and the ability to integrate and accept them is becoming more complex for merchants. As the payments landscape continues to change and evolve, merchants and consumers will continue to demand innovative and convenient payment solutions that meet their specific needs. This could lead to the development of new wallets that offer different features and capabilities, or the evolution of existing wallets to better meet the changing needs of the market. Payment as a function is only the tip of the iceberg for digital wallets. There are many more services that both merchants and consumers will expect to see embedded in their preferred digital wallet in the next 5 to 10 years.  

It is important to note that as the number of digital wallets increases, there is a risk of customer confusion and complexity, which could result in a negative customer experience. It will be up to PSPs and wallet providers to ensure that their solutions are user-friendly and easily integrated into the checkout process, to avoid confusing customers and potentially harming adoption rates.

EDC has decades of experience of establishing a payments strategy, evaluating, and selecting the right payment partners to achieve payment optimisation for some of the world’s largest online merchants. If you want to learn more, do not hesitate to contact EDC.

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The content of this article does not reflect the official opinion of Edgar, Dunn & Company. The information and views expressed in this publication belong solely to the author(s).