Managing business expenses with digital wallets

Payment system innovations in recent years have changed the way we do business. While cash, checks, and physical cards are still popular, most customers now prefer the security and convenience of digital payments, and business owners are joining in. 

The fact is, digital wallet adoption continues to increase on both sides of the economy, and this offers a host of advantages for businesses. Read on to learn more.

What is a digital wallet?

Digital wallets are a user-friendly payment option that can be accessed from your mobile device. Your digital wallet can store different payment methods like your debit and credit cards, and allows you to make payments with them by encrypting your card data during retail transactions and online bill payments. 

Popular examples include Apple Pay, Google Wallet, and Samsung Pay, one of which probably came pre-installed on your smartphone.

Using your business debit card or credit card with a digital wallet

Your digital wallet encrypts all of your transactions, scrambling your card information for anyone other than you, including the business or vendor you’re paying. Think of a digital wallet as a shield around your credit or debit card that blocks scammers from seeing your card information during transactions. 

Digital wallets also allow you to store multiple cards and bank accounts in one place, without having to carry around physical cards that can be misplaced or stolen. Just like your physical cards, you can link your digital wallet to your online bill payment service, adding extra security to your bill payments. 

Benefits and impact of using digital wallets for bill payments

A digital wallet simplifies the processing of business bill payments and offers better financial transaction security:

• You can electronically pay using a business credit or debit card, or directly from a business bank account.
• For record-keeping, your digital wallet logs all your transactions in one place, so you can manage expenses efficiently and avoid stressing about regulatory compliance.
• Transactions are encrypted and randomized, so only you can see your card information, protecting your business from hackers.
• NFC (“tap-to-pay”) payments are nearly instantaneous. Other types of digital payments are faster than ever.
• Employees can add their issued business credit card to their digital wallet to make secure purchases.

Consumer adoption and trends

In addition to using digital wallets for your business purchases, you should make sure you accept digital wallet payments from customers. A survey issued by Forbes Advisor issued in 2023 reported that 53% of Americans use digital wallets more than traditional payment methods, and 51% stated they would stop shopping with merchants that don’t accept digital wallets. 65% of respondents to a 2024 Capital One Shopping poll reported making a digital wallet purchase in the past month.

Digital wallet use also varies by age group. Capital One Shopping reported what percentage of each age group used digital wallets as their primary payment method in 2023:

• 91% of Generation Z adults (age 18-26 by end-of-year 2023)
• 59% of Millennials (27-42)
• 50% of Generation X (43-58) 

The Forbes Advisor survey also reported that 47% of respondents spend more money with digital wallets than traditional methods. This may mean more revenue from your customers, but to save on your own spending be sure to pair your digital wallet with an online bill pay platform that automatically categorizes expenses.

Challenges and considerations

Adoption among older customers will continue to increase, but this doesn’t mean all your employees already know how to use digital wallets. Offer instructions or training for anyone who needs help, and continue to conduct regular cybersecurity training for all employees. Encryption and randomization are powerful defensive tools, but they won’t protect you from basic cybersecurity mistakes or social engineering attacks. 

Advertising that you take digital wallet payments will make customer acquisition easier. Train your employees to offer a list of payment solutions when asked. Door and window signs displaying credit card logos can be modified to include digital wallets and contactless NFC payments.

The future of business transactions with digital wallets

Digital wallets very quickly became a new cornerstone of the modern digital economy. As adoption increases with older demographics and companies continue to integrate this technology into their services, expect digital wallets to further transform payment convenience.

• Centralizing your financial services. Digital wallets may further integrate with personal and business financial platforms, allowing you to bank, invest, send payments, and manage expenses from one place. Conversely, existing platforms will likely increase their own digital wallet integration.
• Decentralizing and streamlining international commerce. Many credit cards offer fee-free international payments. Expect some digital wallets to start offering currency conversions separate from your banking provider’s, or increased ability to trade cryptocurrency.
• Using AI to personalize your experience. AI technologies may soon be able to personalize your digital wallet experience instantly—for example reorganizing your digital wallet UI for your skills or needs, or providing spending insights based on different business goals.
• Integrating with the Internet of Things. Digital wallet technology may become integrated into other smart technologies, allowing for seamless transactions. For example, you may enable your vehicle to automatically pay for tolls or fuel, your smartwatch to automatically pay and record fare as you board public transit, or your home or office thermostat to optimize for cost and energy efficiency.