How to accept digital wallet payments and alternative payment methods

Businesses looking to maximise their revenue and conversions should accept the payment methods their customers want to use. This includes digital wallets and alternative payment methods (APMs) that are popular in the countries where you sell. The result? You could capture more sales and improve your checkout experience.

Read on to learn how to accept digital wallets and APMs and how to set them up. Also, discover how you can drive conversions and sales through a single integration with PayPal.

What is a digital wallet?

A digital wallet, also known as an e-wallet or virtual wallet, is an app that makes it easy to store and use various payment methods. Rather than holding physical cards like a physical wallet, a digital wallet stores information: credit cards, debit cards, gift cards, loyalty cards, bank accounts, insurance details, concert tickets, membership cards and more.

In addition to storing data, digital wallets make it easy to use those accounts to pay with just a tap of a button, making transactions with small businesses simple.

How do digital wallets work?

Digital wallets streamline the payment process by leveraging technologies such as:

• Near Field Communication (NFC). NFC is pivotal for in-store contactless payments, enabling two devices – like a smartphone and a payment terminal – to exchange information over a short distance, typically a few centimetres.
• Bluetooth and Magnetic Secure Transmission (MST). Some digital wallets support payments through Bluetooth, allowing for a broader range of transaction environments. Similarly, MST technology mimics the magnetic stripe on traditional payment cards, expanding the usability of digital wallets to payment terminals that do not support NFC.
• QR codes. QR codes enable direct information exchange between the digital wallet platform and the payment system through a simple scan.

Security is paramount, regardless of the transmission method. Digital wallets typically safeguard user data with encryption and employ tokenisation to generate a unique, one-time number for each transaction. Meanwhile, accessing a digital wallet may require authentication through facial recognition, fingerprint scanning, or PIN entry.

Once authenticated, users can select the digital wallet option at checkout to bypass entering card details manually when shopping online. For in-store purchases, users unlock their device, select a payment method, and position their mobile device near the payment terminal for a swift, contactless transaction.

Types of digital wallets

Popular types of digital wallets include:

• PayPal. PayPal makes it easy to store credit and debit cards, pay with QR codes, and apply credit card rewards.²
• Apple Pay. Apple Pay is built into Apple Wallet and available on eligible Apple devices.
• Google Pay. Google Pay is the in-built digital wallet for Android OS devices.
• Alipay. Alipay, a cornerstone of digital payments in China, offers services beyond transactions, including bill payments, money transfers, and financial services.

While these e-wallet examples vary in features and geographical reach, they illustrate the prevalence of digital wallets today.

Alternative payment methods (APMs)

Shoppers sometimes prefer to use a payment method that’s popular in their own country but not widely known elsewhere. Examples include:

• Pay upon Invoice – a deferred payment method popular in Germany.
• iDEAL – a bank payment method used in Netherlands.
• Trustly – another method of paying direct from the user’s bank account bank that’s used in many countries around Europe.

To help shoppers use the payment methods that are familiar and popular in their own countries, integrate them within your checkout.

For a description of the alternative payment methods supported by PayPal, along with guidance on how to integrate each one, check out our alternative payment methods page.

How do you accept digital wallet payments?

Want to make it easy for shoppers to pay with their card of choice when shopping online? Simply enable your site to accept digital wallet payments. Because customers’ payment information is saved in the digital wallet, you simplify the online checkout process.

The benefits and ease of accepting digital wallets

Offering checkout options like digital wallets provide several benefits for both merchants and shoppers, including:

• Greater speed and convenience. Digital wallets let people pay with a tap, which can streamline online checkout and reduce cart abandonment.
• Increased security. Digital wallets require authentication, such as a PIN, fingerprint, network tokenisation or face scan. This can protect customers from having their payment methods stolen while also protecting merchants against fraud.
• Being better positioned for the future. Digital wallets are becoming the payment method of choice for digital-native consumers who always have their phones close at hand. By accepting digital wallets, you can cater to millennial and Gen Z shoppers, who hold significant purchasing power.

To learn more about helping customers pay the way they prefer, wherever they are, visit business page.