Digital Wallets: What’s Good for the Payments Industry is Good for Retailers…Right?

As the online payments industry continues to evolve, new digital wallet solutions, such as mobile payment apps and e-wallet platforms, are becoming increasingly popular and reshaping the way consumers transact. As new payment options continue to gain traction, traditional payment methods, including credit cards, can’t compete with the convenience of digital wallets. Adding popular new payment options can improve the shopping experience by reducing the friction associated with checkout, making it faster and easier, but there are some pros and cons that brands should consider first.

While these payment options do offer convenience to consumers, and increased conversion rates to retailers, here are four pros and four cons to consider before embracing this evolving trend.

4 Pros of Digital Wallets

Some of the advantages of digital wallet payment options include:

1. Enhanced convenience and speed: Digital wallets can streamline the checkout process (especially on mobile devices) by eliminating the need for users to manually enter payment details. This convenience can lead to faster order completion and in the process reduce cart abandonment rates and increase ecommerce conversion rates.


2. Improved security: Digital wallets often employ robust security measures, such as tokenization and encryption, to protect users’ payment information. By minimizing the exposure of sensitive data during transactions, digital wallets can mitigate the risk of data breaches and fraudulent activities, instilling confidence in customers and fostering trust in the online retail experience. Further, retailers may also experience lower instances of fraud-related chargebacks because the digital wallet itself already exists behind the mobile device’s security features, reducing the likelihood that someone other than the wallet owner uses it to pay. This reduction in fraud liability can result in significant cost savings for retailers.

3. Increased reach and access: Digital wallets enable online retailers to tap into a broader customer base, including those who may not use a traditional bank, or by extension a bank debit card or credit card. By accepting digital wallets, retailers can cater to a growing segment of tech-savvy (and even underbanked) consumers who prefer mobile-based payment solutions, and thus open up their online product assortments to a new segment of customers who were previously excluded.

4. Lower interchange fees: Accepting digital wallets can potentially lead to lower interchange fees for retailers, because digital wallet transactions often have a different fee structure compared to traditional credit cards. Many digital wallets circumvent “traditional” credit card payment rails, so the retailer is charged a lower transaction processing fee than with credit card payments. By encouraging customers to use digital wallets, retailers can benefit from reduced payment processing fees and optimize their cost structure.

4 Cons of Digital Wallets

Four of the disadvantages for retailers include:

1. Limited adoption: While the popularity of digital wallets is on the rise, not all consumers have adopted this payment method yet. Integrating digital wallets as a payment option may not immediately resonate with certain customer segments.

2. Technical challenges: Integrating digital wallets into an online retail platform may pose technical challenges, especially for smaller retailers or those with limited resources. It requires ensuring compatibility with various digital wallet providers, implementing secure and reliable payment gateways and maintaining compliance with industry standards. These technical complexities can be time-consuming and costly to overcome; however, shopping cart providers like Volusion and Shopify do offer an easier route for adding digital wallet options to checkout pages.

3. A fragmented market: The digital wallet market is fragmented, with numerous providers offering different features, functionality and user experiences. Online retailers must carefully evaluate and select the digital wallets that align with their target audience and business objectives. Managing multiple digital wallet integrations and keeping up with updates and changes from different providers can be resource-intensive and complex. Which leads to the next point…

4. The paradox of choice: Having too many payment options, including multiple digital wallets, on the checkout page can overwhelm customers and lead to decision paralysis. The paradox of choice arises when consumers are presented with an excessive number of options, making it difficult for them to decide. This can result in increased cart abandonment rates as customers become hesitant or uncertain about which payment method to choose. Retailers should strike a balance between offering diverse payment options and avoiding choice overload to ensure a seamless and conversion-focused checkout experience.

So What Should Ecommerce Retailers Do? 

The question is not whether or not to add digital wallets as payment options, but when to add them, and which are the best choice. Retailers should undertake a thorough evaluation process to make these decisions. First, they should assess their customers’ preferences, considering factors such as demographics, technological adoption rates and mobile usage patterns. We also recommend surveying customers to help prioritize.

The evaluation should also consist of an honest assessment of the retailer’s technical capabilities and resources to manage any added payment tender in order to ensure a smooth integration of digital wallets into their payment infrastructure.

Additionally, retailers should carefully analyze the potential benefits and drawbacks of adding digital wallets, including cost savings on interchange fees, technical complexities and the impact of the paradox of choice. Conducting a cost-benefit analysis and weighing these factors against their specific business goals and priorities will guide retailers. One approach might be to look at how their payment penetration and ecommerce KPIs evolved when they first added, for example, PayPal, when it was a new tender being adopted by consumers. Can the retailer draw any analogies between their experience with PayPal and any new digital payment options to help prioritize which to add and when?

Ultimately, retailers should consider digital wallets as part of a holistic payment strategy that aligns with their target audience, enhances the checkout experience and supports their overall business objectives. By thoroughly evaluating these considerations, retailers can leverage the advantages of digital wallets while effectively managing any associated challenges, driving customer satisfaction and maximizing conversion rates.

As VP of Merchant Business Development, Michelle Wood oversees the merchant network side of the Wildfire Systems platform. Her team builds productive partnerships with online retailers and affiliate networks, bringing them into the Wildfire platform and improving their incremental revenue opportunities. With over 16 years of experience in digital media, affiliate marketing and influencer media sales, Wood has worked with many of the world’s most notable enterprise ecommerce companies to acquire new and loyal customers and exceed revenue targets with positive ROI. Prior to Wildfire, she held executive positions with leading performance marketing companies including and

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