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Digital wallets or E-wallets already cover 66% of the existing e-commerce industry in India, and by the end of 2023, they are expected to replace cash and become India’s leading point-of-sale payment method.
While, from a customer’s perspective, digital wallets provide flexibility, convenience, and, most importantly, rewards & offers. From a business’s perspective, they help in building trust, enhance customer retention and streamline checkout processes.
Specifically for D2C (Direct-to-consumer) companies, digital wallets provide an excellent opportunity to use rewards and offers to improve customer experience and drive customer retention.
In 2022 itself, the number of mobile wallet transactions soared to 3,866.6 billion in India, with anticipation to cover a majority share through 2025.
Let’s analyse the benefits and impact of digital wallets for businesses and how D2C brands can benefit by adopting white-label digital wallets.
What is a Digital Wallet?
A digital wallet, also known as e-wallet, is an app on your phone. You can make online or in-store payments using QR (quick response) codes or NFC (near-field communication) technology.
Digital wallets are widely used PPIs (Prepaid Payment Instruments) in India that let your customers use the amount stored in the wallets to make purchases and payments from their phones. PPIs are mostly available in the form of electronic cards or e-wallets, and your customers can use them to make payments and remit or transfer funds to their families and friends. Thus, the digital wallet is a type of PPI that is a convenient, cost-friendly, and rewarding payment method to offer to your customers.
Types of e-Wallets
Let’s briefly understand the mobile wallet types with examples and how they benefit the merchants.
| Types | Meaning and Benefits |
| Closed wallets | It means the company selling goods or services creates its own online wallet to allow customers to use it only with that company and the users of the same wallet, e.g., Makemytrip, Bookmyshow, etc. You get first-party customer insights when you use a closed digital wallet type since it is highly customized and can be used to make payments for goods sold only on your website. |
| Semi-closed wallets | They allow your customers to make payments to the listed brands and stores with a feature to make online and in-store payments. These wallets are issued by the NBFCs or Fintech institutions such as Paytm, PhonePe, etc/In addition to the benefits available for closed wallets, semi-closed wallets let your customers transfer the funds in the wallet to other wallet users’ bank accounts. |
| Open wallets | It refers to the m-wallets that are provided in partnerships with banks, and they allow cash withdrawal facilities in addition to all other benefits that semi-closed wallets offer. ICICI Pocket and M-Pesa by Vodafone Idea are examples of open wallets. Open wallets allow customers to perform transactions from anywhere and use them for cash withdrawals from the partnered bank’s ATMs. |
However, the RBI’s release of the PPI interoperability guidelines has removed the differentiating factors of these e-wallet types. Since these guidelines allow a full-KYC-compliant customer to use his wallet to transfer funds, withdraw cash, or make payments, irrespective of the type of wallet.
How Does it Impact Business Metrics?
Drives Customer Retention
Mobile wallets can help you retain your customers since they provide attractive rewards through cashback or discounts to your customers. In fact, for every new registration on the e-wallet, customers get rewards that let them explore your products.
Builds Brand’s Trust
When you focus on customer preferences and constantly advance your offerings as well as payment methods, customers gain more trust in your brand, and you can retain them longer.
Through digital payment apps, customers get flexibility, convenience, and faster payment options that do not require them to carry cash or plastic cards.
Streamlines Checkout Processes
Digital payment wallets also help you streamline your checkout process, making it simple and easy for your customers to complete their purchases faster.
Offering a faster checkout experience to your customers will help you reduce your card abandonment rates and boost your sales.
Incentivises Customers with Loyalty Rewards
When you use e-wallets to provide loyalty rewards, such as cashback or discounts on future purchases, you can increase customer retention. Customer loyalty points incentivize them to their purchases with your company, which will make them buy more products from you in the future.
Enables Faster Refunds
Since digital wallet apps store your customers’ money in an electronic wallet on their phones, your customers can request refunds quickly. These wallets also enable faster processing of refunds since it does not involve bank transfers. This leads to improved customer experience with greater customer satisfaction.
More Payment Options
You can cater to a broader range of customers with different payment preferences with digital wallets. Adding more payment options can improve your cart abandonment rate and offer better customer satisfaction.
Facilitates Greater Control
White-labeled e-wallets allow D2C companies to gain better control over customer data. The customer data contributes significantly to conducting behavior and demand analysis to generate customer insights.
At the same time, a third-party payment wallet doesn’t offer control over customer data. With customer insights and data, you can enhance customer satisfaction and retain them longer.
Provides Access to Real-time Data
Mobile wallets provide real-time updated data and insights about the transactions incurred by your customers. These details can help you understand their preferences, and you can use them to improve your product or service offerings.
Considering these ample benefits of the payment wallet apps, more D2C brands want to enhance their payment methods. But how should you select a white-labeled digital waller provider?
Let’s consider key things to consider when choosing your white-label mobile wallet partner.
Things to Consider While Choosing a White-Label Wallet Provider for your online stores
| Customisation | Security | Integration | Customer Support |
| The provider should be able to provide complete customization of the e-wallet to match your brand’s unique voice and specifications. | The provider should offer a secure digital wallet interface that complies with industry security standards to provide your customers with security and privacy. | The provider should offer a seamless integration process with your brand’s e-commerce platform, resulting in a streamlined customer checkout experience. | The provider should provide reliable customer support to resolve your customers’ issues quickly and efficiently. |
Things to Keep in Mind While Issuing Digital Wallets to Customers
While issuing e-wallets for your customers, you need to be careful about certain aspects such as technological capabilities, compliance requirements, and what features to add. Let’s see what factors you must consider before issuing your e-wallet to your customers.
Technological Capabilities
You need to understand which software or technological stack you will need depending on your type of business and customers’ demands. You also need to understand the front-end or back-end development for your e-wallets.
The front-end development will let you create an e-wallet app to offer your customers using specific frameworks. On the other hand, the back-end development will help you create a web interface using programming languages such as Java and Python.
Compliance Requirements
The entire payment system in India is regulated by the RBI, and it has authorized the National Payments Corporation of India (NPCI) to operate retail payments such as UPI, IMPS, etc.
Thus, you must comply with the regulatory requirements when you issue your e-wallet to your customers.
Inclusion of Features
You can add multiple features to your mobile wallet, such as peer-to-peer transfers, ATM withdrawals, budgeting tools, expense management services, invoicing tools, etc. However, depending on your customers’ needs, you should select a digital wallet type that caters to their unique demands.
Final Thoughts
Stay on top of retaining customers by offering ease of payment processing, and attract more customers with lucrative rewards, cashback offers, and discounts with digital wallet. Get in touch with Cashfree Payments and amplify your reach with simplified payment solutions.
