Covid has fast tracked both consumer and business digital adoption and the growth in e-wallets has been well documented. However, making the most of this conversion to digital payments depends on vendors thinking big and building sticky, says South African payment service provider, DPO South Africa.
“The spike in e-wallet usage during the Covid pandemic is likely to encourage increased usage going forward. Many shoppers wanted to avoid contact during payment and so downloaded the wallets. After using the products for some months it’s fairly likely they will continue to do so going forward, but the real opportunity to maximise the growth will require some agile thinking,” says Brendon Willianson, CSO at DPO South Africa.
What are they, who uses them, and why?
The term e-wallet is fairly broad, covering a variety of payment methods. The first is the more obvious one where your card is stored on an app and you just need your phone rather than having to carry a physical wallet around with you. When shoppers use SnapScan, Zapper, Apple Pay or Samsung Pay they are essentially using an e-wallet.
The second is a digital vault which is not necessarily connected to a card or bank account. They allow both deposits and withdrawals and are connected to a mobile number as their digital store of value. Locally these include MTN’s MoMo and FNB’s eWallet.
Looking at who uses e-wallets, Williamson says the real growth has been in the higher income demographics. This is because access to cash in South Africa is still so easy and he says it will take some time for digital wallets to show significant growth across all demographics.
“Wallets have traditionally been successful on the back of remittance in the lower-income demographic,” says Williamson. “The attraction of some of the wallets in not requiring a bank account is a strong adoption driver, but while South Africa is underbanked, it does not have a high unbanked population.
“While digital wallets will continue to show growth, perhaps not at the rapid rate that we are seeing in the mid- to higher-income demographics. Right now wallets are really speaking to the banked individual, looking for convenience and a low-contact payment method.”
What will separate the winners from the losers?
There are currently a number of digital wallets available. From a merchant perspective all the various products can be both confusing and frustrating and Williamson says the same holds true for the consumer.
“Looking to the future it will be up to the payment vendors to differentiate their offerings. Whether it’s the ability to pre-fund their wallets so consumers can limit the amount available on the wallet, or if it’s the smart use of loyalty and voucher programs. It will be up to consumers to decide which value proposition creates the stickiness that keeps consumers engaging with the wallet,” says Willianson.
From a cost perspective, because the majority of wallets run over the same rails as cards in South Africa, Williamson says transactional cost is not likely to influence uptake. This is in stark contrast to international markets, where many fintech companies have created their own rails, and wallet transactions are far more attractive to consumers and merchants.
Williamson says the real game changer for wallets will come when they are able to integrate into the big loyalty schemes like eBucks, Discovery Loyalty, and Momentum Multiply. What’s more, he says the ability for wallets to generate and store a digital receipt – which will ensure a smooth return and exchange process – will help push consumers to reach for their e-wallets for the bigger ticket items rather than the coffee, lunch and parking payments they are currently used for.
“Wallets are more than just about making payments. You need to keep your customer in the app and using it for more than just fast, low-value payments. It’s about giving the customer extra value and the ability to cash out in a variety of ways. Great experiences, a variety of options and meaningful value-adds could see wallets become a very real part of our daily lives in future. The best, and most efficient way to achieve this will be through industry collaboration.”