By Jay Dahal, co-founder of Machnet. Build your remittance and money transfer products.
So you own an online business. Maybe you’re a marketplace where people interact and bid for products or services. Or maybe you’re a website where people go to purchase the latest finds or even a by-subscription blog. If you’re running a digital business, gathering people virtually and accepting payments and you’re not offering an e-wallet feature, you could be missing out.
What is an e-wallet, and what are the benefits?
Investopedia defines an e-wallet as “a financial transaction application that runs on any connected device.” Essentially, an e-wallet stores payment information and passwords in the cloud so that customers can use their device—versus a physical card—to pay for purchases in-store or online.
There are four potential benefits of adding an e-wallet feature: increased revenue, security, customer experience and loyalty. When you embed an e-wallet feature, it can be a major subscription perk for your customers—giving them that hassle-free, all-in-one platform experience—and this can, in turn, lead to more cash coming in.
Imagine, if a person is already on your site making purchases regularly. It would be much more convenient to be able to make these purchases with cash already wired into the e-wallet than having to manually do that with every transaction. And with a balance already in their wallet, this could also encourage your customer to keep coming back since that money has already been allocated for purchases within your site. (A great example of this is Shopify and their e-wallet called “Shopify Balance.” Since its launch in 2020, a large amount of its revenue has come from its e-wallet feature.) And because the e-wallet is already within your site, you’ll have better control over the security and encryption, giving your customers more assurance that their money is indeed safe.
Another perk is that you can also get to know your customers better through data. Knowing who transacts with you, what they do and how they spend their money is gold! This lets you see patterns of behavior end-to-end and understand what matters to customers and what they spend on, and eventually, it will give you a better idea of how to serve them better.
Who is an e-wallet feature for?
An e-wallet feature can work for anyone who does business online and who already has built their own pool of customers online. You can be a marketplace, a business that started on social media, an influencer-led business or even a community of businesses—regardless of your products and services, if you function online the majority of the time, an e-wallet feature could work for you.
An e-wallet feature allows you to receive funds, hold funds, transfer funds and spend funds. This holistic approach will cover almost all of the things that any consumer would like to do via that wallet. If the wallet can be attached with the card service that’s also a plus in terms of product features.
What should you look for in an e-wallet feature?
When looking for a top-tier provider, there are a few questions you should ask:
- Do they undergo independent audits? Make sure the e-wallet service provider has independent audits such as SOC 1 and SOC 2 financial statement audits.
- How “mature” is their product? How long has it been on the market? Who are their current clients? What was their experience like?
- Does the provider’s product road map match yours? Is there enough technical flexibility to make the changes in case it doesn’t?
- Do the features on the e-wallet meet your business needs? Technical debt is hurtful so make sure that there is enough flexibility on what you can do with the wallet.
- Do they have a sandbox feature? There’s nothing better than being able to “test-drive” that feature, so always ask for one so you know what exactly to expect.
- Can they give sizable interest on the funds held in the wallet? Usually, if the provider is backed by a demand draft account, you should be able to negotiate for a better rate.
- How do they handle anti-money laundering and know your client compliance? How compliant is the company with U.S. and global regulations? This is especially important if you are operating in a cross-border space. Also, ask about the reliability, accuracy and stability of the system of the KYC and AML provider.
What should you avoid?
It is imperative to watch out for warning signs or red flags to make sure you don’t end up with a mismatched provider. If they’re not backed by a top-tier venture capitalist, start asking more questions. If they’re not maintaining anti-money laundering policies, you could be taking on a huge risk. If they do not have protocols in place to handle fraud risks, then you should reconsider. And if they can’t give you satisfactory answers to the questions above then you should look elsewhere.
Ultimately, as business owners, our goal is to provide sustainable solutions for our customers while keeping an eye out for ways we can improve. How can we make things convenient? How can we integrate our services into their lifestyles? How can we stay on top of trends? I believe integrating an e-wallet feature checks all those boxes.
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