Zoom in: The Integration Of E-wallets To E-commerce Platforms


The last decade has experienced an upsurge in e-commerce adoption, with the e-commerce market size growing to approximately 4.9 trillion USD in 2021. This growth is expected to hit 7.4 trillion USD by 2025. Closely mirroring the growth of e-commerce and by extension facilitating e-commerce transactions are e-wallets. It is estimated that 49% of the e-commerce transactions were facilitated using digital wallets, according to Statista. Part of the reason for the adoption is the need for cashless transactions, especially during the time of the Covid – 19 pandemic.

Arcady Lapiro, the CEO and Founder of Agora Services notes that, “Society is moving to cashless much faster due to the pandemic, so people are more open to mobile wallets. They especially like those that offer special perks.” In addition, the Euromonitor International’s Voice of the Consumer survey highlights that almost two-thirds of digital consumers globally used a digital wallet to make a purchase both online and in physical stores in 2020. Clearly, e-wallets, also known as digital wallets are finding their place in many consumers’ needs.

What are e-wallets?

E-wallets are digital wallets that are pre-loaded prior to purchase. They are used to securely store and spend money; akin to just having a physical wallet. These digital wallets can be issued by banks or other licensed non-bank service providers such as e-commerce platforms. The main features of digital wallets are:

  • They are prepaid – The user has to load the wallet prior to spending, unlike a credit card or a buy now pay later option. For example, you need first to load your PayPal account prior to
  • They attract no interest – The wallets are a form of a current account. You do not earn any interest on the deposited funds.
  • They have no two-factor authentication (2FA) – Unless preferred otherwise, many e-wallets do not require the user to authorize a transaction. They offer a more seamless avenue to make payments without any security checks.
  • Are issued by both banks and non-banks – Open wallets are only issued by banks or in relation to a bank, while closed, semi-closed and semi-open wallets are issued by non-bank organizations.

Types of digital wallets

  • Open wallets – These wallets allow the user to buy goods and services, withdraw cash at banks or ATMs and transfer their funds. Cellphone providers have been able to extend this to their customer base in conjunction with banks. For example, Vodafone’s mobile operator Safaricom has partnered with NCBA bank to provide M-Pesa to offer users a digital wallet to buy and sell goods and services, as well as withdraw funds.
  • Semi-closed wallets – These wallets are used to transact among service providers who have a contractual agreement to engage. Users can buy goods and services from merchants that have agreed to accept payments from that particular wallet. A good example is India’s Paytm and MobiKwik e-wallets.
  • Closed wallets – This form of wallet is very popular on e-commerce platforms. A customer’s account is credited an amount that is pre-loaded; due to order cancellation or gift cards among other reasons. This money is used within the platform ecosystem to settle the purchase of goods and services. Some of the most popular closed wallets are found in platforms such as Jumia in the form of Jumia Pay, Uber and Bolt preloaded balances.

Zooming into closed wallets: Why platforms offer closed wallets

According to the Kepling Commerce Consumer Report of 2021, it is estimated that 70% of online customers abandon their carts at checkout. This is tragic! 37% of the shoppers attribute this to long and complex forms of payment. However, with the provision of an e-wallet check-out, the shopping experience becomes more rewarding. This is more vital for platforms whose products and services are of low volume and have higher transaction frequency. A platform that minimizes customer frictions when checking out will end up with higher sales as more customers complete the purchase process.

Platforms with e-wallets are also able to provide refunds in a simple and easy way. Upon a needed refund, the platform can credit the customer’s account with the amount and make the customer repurchase within the ecosystem. This helps the platform maintain the usability of the funds within the system.

Another way platforms benefit from providing closed wallets is the access to funds in their customers’ wallets. This is important to improve the platform’s liquidity. Customers who consistently load their wallets, and always have a balance offer the platforms funds to enhance their cash flow obligations.

Closed wallets also offer reduced interchange payouts on platforms. Accepting payments directly from the customers eliminates the 1 – 3% charge from payment networks such as Visa and Mastercard. This is a significant cost to cut, as the platforms bear the interchange fees. For companies operating on thin margins such as grocery stores, saving up to 3% from each sale will highly boost their profit margins.

One of the winners of this scenario is Starbucks. This coffee brand has over 1.5 billion USD in balances throughout the year and about 10 percent of these funds stay on the platform. Consumers are accustomed to their daily coffee fix. They order and pay online via the Starbucks app for their drinks before getting to the store to collect their drink. This app utilizes the Starbucks card. The card automatically reloads in 10+ USD increments or as needed straight from the customer’s external debit card or credit card in real-time. The balance is then reusable during the next purchase. Moreover, Starbucks extends special discounts to these customers based on their volumes of purchases.

Digital wallets provide a symbiotic relationship between the platform and the users. Users are able to shop with the utmost seamless checkout experience while the platform is able to advance itself. Not only are revenues improved but also customer retention is boosted as they are tied to the wallets in the platforms.

Stores whose digital wallets have gained traction would soon find a Buy Now Pay Later (BNPL) option to be a strong proposition. Off late, BNPL providers such as Lipa Later, Affirm and Sezzle have been in great demand – offering interest-free purchases. The lines between banking, retail and payments are blurred out. Partnerships or full-service offerings from retailers are just beyond the horizon and coming soon.

Author: Dickson Ndoro