Monday , July 15, 2024

Digital Wallets: Users Are Happier, But Adoption Still Lags Among Consumers And Merchants Alike

Customer satisfaction with digital wallets is on the rise, which is helping propel consumer adoption and usage, according to J.D. Power’s newly released 2024 Digital Wallet Satisfaction Study. Despite the increase in customer satisfaction, though, the study found wallets providers still have work to do to raise adoption among both merchants and consumers.

J.D. Power’s consumer-satisfaction score for digital wallets was 664, up from 660 in 2023. Ease of use online and in-person was the top factor driving the increase, according to the study. J.D. Power bases its satisfaction score on a 1,000-point scale.

The rise in customer satisfaction with digital wallets is also helping increase adoption, as 48% of U.S. consumers say they have used a digital wallet in the past 90 days, a 12-point increase from 2023. J.D. Power surveyed 86,000 consumers for the study.

“Digital wallets are becoming ubiquitous, and people of all ages are becoming more comfortable with them,” says Miles Tullo, managing director for financial services at J.D. Power.

Among consumers that have used a digital wallet to pay for a transaction in the past 90 days, 40% have used PayPal, 28% have used Apple Pay, 22% have used Venmo, and 19% have used Cash App Pay. Apple Pay is the most popular digital wallet among consumers that pay for a purchase using a wallet at least five times a month, while customers that use their wallet just once a month prefer Venmo and Cash App Pay.

What makes Apple Pay popular with frequent wallet users is that it scores well across the six criteria JD Power uses to measure customer satisfaction, Tullo says. Those criteria are ease of use, the ability to review transactions, account-management capabilities, security, merchant acceptance, and customer support.

“That Apple Pay scores well across all these criteria suggests it is firing on all cylinders,” says Tullo. “The criteria we use to measure satisfaction are the criteria that consumers care most about.”

Still, the payments industry still has quite a bit of work to do with merchant acceptance, especially among small merchants. Just 57% of small businesses accept digital wallets, compared to the 94% that take credit and debit cards, and some large merchants are still not wallet-enabled in-store, according to J.D. Power’s 2024 Merchant Services Satisfaction study.

“Small businesses are where wallet adoption needs to increase,” says Tullo. “While small businesses like the technology, they often have to upgrade their [POS systems] to enable acceptance, which tends to cause them to put off adding wallets as a payment option. Small businesses tend to add new [payment options] when they start losing purchases because they don’t have a payment option in place.”

An area where digital-wallet providers can improve lies in rewards. While most providers don’t offer rewards, about 20% of consumers in the U.S. choose their payment method based on the ability to earn rewards. “This demographic thinks about earning rewards when making a purchase, and they choose payment options that earn them rewards,” Tullo says.

Still, when it comes to customer satisfaction, rewards lag the other criteria used by JD Power, Tullo adds.

Wallet providers could also stand to increase users’ perceptions of security. Tullo says that, among non-wallet users, a perceived lack of security is a big driver in their decision not to use a wallet. By contrast, wallet users rate security high on their list of reasons why they use the product.

“The perception around wallet security is an opportunity for the payments industry to focus on that in their messaging in order to drive adoption,” Tullo adds.

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