Credit Cards vs. Digital Wallets
What’s A Better Payment Method: Credit Cards vs. Digital Wallets
Credit cards have been the king of payments for decades now. North America has fallen in love with them. And with credit being a big part of a person’s financial life, they won’t be going anywhere any time soon.
But a new form of payment is quickly becoming more popular. Digital wallets have been the favored payment method around the world, particularly in Asia, for years now. And are just now starting to become more popular in the West.
So what do business owners and decision makers need to know about these two forms of payment? And how can businesses ensure they’re prepared to accept this new popular form of payment? Read on to learn more.
First introduced in the 1950s by the Diner’s Club, credit cards have been one of the most popular types of payment method for American consumers for decades. They’ve also historically been one of the most convenient.
Consumers fell in love with credit due to the ability it gave them to purchase goods and services while being able to pay for them in installments over time. Albeit with fairly high interest rates.
As convenient as credit cards make purchasing products and services that might otherwise be too expensive for people at the moment, they also have many drawbacks.
The Problems Credit Cards Present
One of the big problems with credit cards is fraud. Since their introduction, credit card fraud has been an issue for both consumers and businesses. Worldwide businesses are expected to lose $130 billion to credit card fraud between 2018 and 2023.
While different protections have been put in place over the years to try and mitigate the risks and damage of fraud, criminals have seemingly always found ways to get past those defenses. They are constantly finding new ways to compromise business systems to steal customer data.
Even the addition of the chip, which was supposed to button up the security of credit cards, has not made them completely secure.
Many chip cards still contain magnetic strips on the back that can be copied by criminals to create a duplicate. Duplicates that can be used to commit fraud against unassuming businesses and individual consumers.
But, what might be one of the biggest risks though, is consumers just plain losing or misplacing their credit cards. Leaving them vulnerable to being found by less than scrutable people. Free to be used at unsuspecting retail or e-commerce businesses. Resulting in lost merchandise and chargebacks that the company may be liable for.
Digital wallets, while fairly new to North America, have been one of the most popular alternative payment methods in many places around the world, particularly in Asia, for years.
Digital wallets are financial accounts that allow a consumer to save their personal information, such as credit and debit card info, shipping information, and other payment data, in one digital space. This information can also be stored on their phone allowing for quick and easy checkout through features like QR-codes, or face scans.
There are two ways that digital wallets can function. They can either be directly linked to a consumer’s financial accounts, or used as a literal digital wallet that consumers can add money to for future uses.
While North American digital wallets are still technically digital wallets, they function slightly differently to international digital wallets. For example, while you can store your credit card information on North American digital wallets, and still earn credit card points, international wallets don’t have this functionality.
Why Your Customers Love Digital Wallets
The popularity of digital wallets stems from their convenience and security. When a consumer enters a retail establishment with a point of sale system set up to accept payments from digital wallets, paying for their goods is as easy as taking their phone out and scanning a QR-code, or simply logging into their digital wallet for online payment methods.
The extra security comes from the fact that the consumer’s bank information, debit, or credit card info is connected to that QR-code, which is protected during the transaction by tokenization. It’s also more secure as a shopper would open their phone with their biometrics, so unlike a misplaced credit card, a misplaced phone could not be used to make a purchase without the phone password or owner’s biometrics.
Tokenization is a security measure that creates a unique digital identifier specifically for that transaction to protect the consumer’s personal information. This token will never be used in another transaction. A new one will be created for the next transaction.
Digital wallets offer convenience and security that consumers love and that is becoming harder for other forms of payment to match. They also offer the same installment features, in the ever growing by now pay later (BNPL) space, such as PayPal’s Pay in 4 and Alipay Credit.
Credit cards aren’t going anywhere. Especially with how important credit is to a person’s financial history. But digital wallets are here to stay, and will only increase in popularity. And as the world becomes more interconnected and borders are opened back up post-pandemic, being able to accept digital wallets for both brick and mortar, and e-commerce businesses, will be crucial for future financial success.
You might think that enabling your current point of sale system to accept digital wallet payments, especially foreign digital wallets, is a complicated and pricey process. But with Pockyt we can assure you it’s not.
We’re so committed to helping our partners connect with the billions of consumers around the world who prefer to pay with digital wallets, we’ll fund the integration of our software to your existing payment processing system. We only take a commission when someone makes a purchase using one of our supported digital wallets and it is less than credit cards.Through a single integration, we support 30 digital wallets and BNPL solutions such as Klarna and PayPal’s Pay in 4.
To learn more about why integrating your point of sale system with Pockyt is a no-brainer, contact our team today.