Unlocking Wallet Innovation to Streamline Retail Buying Experiences

Fueled by digital innovation, shifting consumer preferences, and retail investment, digital wallet usage is surging, transforming both how consumers shop for goods and how retailers engage with customers. With more demand for tightly integrated experiences, more buyers are turning to digital wallets to optimize how they shop.

To put digital wallet growth in perspective, unique digital wallet users will exceed 4.4 billion globally in 2025 and the value of digital wallet payments will exceed $12 trillion by 2026. This growth will be off of an already strong base, as 64 percent of consumers say they're currently using digital wallets online.

Originally positioned as a tool providing consumers choice, convenience and simplicity at checkout, the utility of digital wallets has progressed significantly in recent years. Now, large retailers are leveraging branded mobile apps as a focal point for customer engagement and enhanced buying experiences. And by integrating digital wallets within their apps, retailers are connecting disparate elements of their customer experience. The result is a reimagined digital wallet that's allowing businesses to create more value for customers, moving the wallet from a payment source to a dynamic financial hub, and allowing customers to earn, save and shop through a centralized location.

One key to delivering enhanced wallet experiences is having a single stored value ledger that can aggregate values and draw down balances across multiple purses, or funding sources, within the wallet. Complex conceptually, the idea of a single ledger aggregating balances across their engagements with a retailer plays out simply for a customer. Here are four ways large retailers are bringing this concept to life:

1. Rebates and rewards: Digital wallets are being used to streamline the use of rebates and rewards, providing more convenience and efficiency for consumers and retailers. For example, large retailers are leveraging wallets to automatically add applicable rebates and rewards to each customer’s wallet in real time. Think of CPG rebates or cashback earned on a purchase; to maximize wallet efficiency a retailer can make a customer’s rebate/reward available within a purse in the wallet for use on subsequent purchases. This reinforces the value the merchant is bringing to the customer and organically brings them back to the retailer for future purchases.
2. Health and wellness: Retailers issuing health/wellness cards alongside healthcare providers are integrating health/wellness accounts within their branded wallets. When a customer checks out and qualifying health/wellness items are in their basket, the wallet will deduct the funds from the customer’s health/wellness purse, such as a HSA or FSA. The remaining balance is drawn from other purses or paid via an alternate payment method.
3. Loyalty and stored value: Retailers are using multiple purses to streamline how loyalty program members manage rewards points digitally, all through a centralized stored value account. Instantly creating and accessing stored value creates a financial benefit for the customer, while also creating more commerce for the retailer.
4. Embedded financial services: Retailers are instantly issuing credit within a wallet at the point of purchase, often alongside meaningful promotions that provide significant cashback, discounts or rewards if the customer makes a purchase with a retailer's private-label card. For instance, a customer purchasing a washer/dryer could apply for a private-label credit card digitally at checkout, get instant approval, and pay with the card to receive a percentage discount off their large purchase.

In today's connected world, delighting customers across the entire digital landscape is critical. Retailers are investing in wallet experiences that strengthen customer retention and capitalize on the low-cost structure of alternative payment methods. Creating these frictionless experiences helps increase customer satisfaction and drive revenue growth.

Apps have always presented retailers with an opportunity to digitally manage customer relationships and increase brand loyalty. But now, by streamlining commerce experiences via retail-branded wallets, retailers can engage their customers through a unified digital experience. The result is an enhanced commerce experience that simplifies how customers earn, shop and save.

Scott Mackay is the vice president of Carat Connected commerce at Fiserv.