Digital wallets
Cardflo provides comprehensive support for a range of digital wallets. Offering these payment methods caters to modern consumer preferences for speed and security, reducing checkout friction.
Integrating diverse digital wallets helps expand your customer reach and improve conversion rates by allowing customers to pay how they prefer.
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The overview
Digital wallets serve as software-based containers that store a user’s payment credentials, including debit and credit cards, alongside local payment methods. In the payments stack, these wallets act as an abstraction layer between the consumer and the underlying issuer.
When a customer selects a digital wallet at checkout, the transaction typically employs device-level security such as biometrics or passkeys to authenticate the user. The wallet provider communicates with the gateway and acquirer to facilitate an authorisation request.
This process often utilises tokenisation, where the primary account number is replaced by a device-specific token to minimise the risk of sensitive data exposure.
By integrating these methods via a PSP or payment orchestrator, merchants can accept various domestic and international schemes through a single interface, ensuring compliance with Strong Customer Authentication mandates while reducing the manual entry of card details.
How it works
Credential storage and tokenisation
The user adds a payment card to their digital wallet, which then requests a virtual token from the card scheme and issuer.
This process replaces the actual card number with a device-specific identifier, ensuring that the merchant never handles the original sensitive data during the transaction cycle.
Customer authentication and intent
At the point of sale, the customer selects the wallet as their preferred method. The wallet application prompts the user for biometric verification or a passcode.
This step fulfills the requirements for Strong Customer Authentication under PSD2 regulations, providing a secure method to verify the cardholder's intent.
Encrypted payload transmission
Once authorised by the user, the wallet generates a secure, encrypted payload containing the payment token and a one-time security cryptogram.
The gateway receives this information and routes it to the acquirer, who then passes it through the card schemes to the relevant issuing bank for validation.
Authorisation and settlement
The issuer verifies the token and cryptogram against their records to approve the transaction. Upon approval, the gateway receives an authorisation code.
The funds are then processed through the standard clearing and settlement pipeline, eventually reaching the merchant's account according to their agreed payout schedule.
Why it matters
Reduction in checkout friction
Digital wallets significantly decrease the number of steps required to complete a purchase, particularly on mobile devices. Because payment information and shipping addresses are stored within the wallet, the need for manual data entry is eliminated.
This reduction in friction is directly linked to lower cart abandonment rates in mobile commerce environments, as users can finalise transactions with minimal interaction.
Enhanced security and compliance
By leveraging biometric authentication and network tokens, digital wallets mitigate the risk of fraudulent activities and friendly fraud. The use of dynamic cryptograms for each transaction ensures that intercepted data cannot be reused for subsequent purchases.
Furthermore, the inherent support for two-factor authentication assists merchants in meeting regulatory standards for technical security without imposing additional hurdles on the customer.
Increased authorisation success
Transactions processed through established digital wallets often exhibit higher authorisation rates compared to traditional card-not-present transactions. The verified nature of the payment, combined with the presence of cryptograms, provides issuers with greater confidence in the legitimacy of the request.
This leads to fewer false declines and a more stable revenue stream for merchants operating across diverse geographical regions.
Use cases
Mobile commerce applications
Retailers with native mobile applications can implement digital wallets to provide a one-tap checkout experience, which is essential for capturing impulsive or time-sensitive purchases.
Subscription and recurring billing
Merchants can use wallet tokens for Merchant Initiated Transactions, allowing for seamless monthly billing while maintaining the security benefits of a tokenised payment environment.
Cross-border retail
Businesses expanding into international markets can adopt regional digital wallets to gain trust and relevance among local consumers who favour these methods over traditional credit cards.
In-person contactless payments
Brick-and-mortar stores can accept digital wallets through NFC-enabled terminals, providing a hygienic and rapid payment alternative that mirrors the online checkout experience.
By the numbers
This represents a typical industry range for merchants who add digital wallets to their mobile checkout, specifically by reducing abandonment associated with manual form entry.
Industry averages suggest that biometric wallet authentication can be completed significantly faster than manual 3DS challenges, which often require SMS codes or app switching.
Merchants often observe a modest increase in authorisation success rates when switching from standard card-not-present entries to authenticated wallet transactions.
Related terms
Talk to our team about a live rollout on your acquiring stack.
What you get with Digital wallets
- Support for major global wallet brands and regional payment methods via a single gateway integration.
- Utilisation of network tokenisation to replace sensitive card data and reduce PCI-DSS scope for merchants.
- Integrated biometric authentication protocols including fingerprint and facial recognition for secure transaction verification.
- Automatic updates for expired or replaced cards through scheme-level account updater services within the wallet.
- Streamlined mobile checkout flows that remove the necessity for manual billing and shipping address entry.
- Full compliance with Strong Customer Authentication requirements under PSD2 and upcoming PSD3 regulatory frameworks.
- Capability to process both one-off payments and recurring Merchant Initiated Transactions using stored wallet credentials.
- Detailed reporting and reconciliation for all wallet-based transactions through a consolidated merchant dashboard.
- Reduction in chargeback risk due to the secure nature of authenticated wallet payments and cryptograms.
- Support for multi-currency settlement to facilitate easier international expansion and cross-border commerce strategies.
A short scoping call, then a written plan for your MIDs.
Questions about Digital wallets
How does digital wallet tokenisation differ from standard gateway tokenisation?
Standard gateway tokenisation involves the PSP replacing card data with a token for their specific system. Digital wallet tokenisation typically uses network tokens provided directly by the card schemes.
These network tokens are shared between the issuer, the scheme, and the wallet provider.
Because they are managed at the scheme level, they can be updated automatically if a card is lost or expires, ensuring the token remains valid without the merchant needing to request new details from the customer.
Are digital wallet transactions considered more secure than traditional card-not-present transactions?
Yes, they generally carry less risk. Each transaction is accompanied by a dynamic cryptogram and requires two-factor authentication, such as biometrics.
This satisfies the requirements for Strong Customer Authentication and reduces the likelihood of fraud.
Issuers recognise this higher level of security, which can lead to improved authorisation rates and a lower frequency of disputes compared to manually entered card details which lack these specific security layers.
What impact do digital wallets have on merchant service charges and interchange fees?
Generally, the interchange fees for digital wallet transactions are consistent with those of the underlying card used within the wallet. However, merchants should be aware that some wallet providers or payment methods may have different fee structures or additional scheme fees.
Because wallets typically facilitate secure, authenticated transactions, they can help minimise the costs associated with fraud and chargeback management, which indirectly affects the total cost of acceptance.
Do digital wallets support recurring payments and subscriptions?
Many digital wallets support recurring payments through a process known as Merchant Initiated Transactions. Once the customer performs an initial authenticated transaction and grants a mandate, the merchant can use the stored token to process subsequent payments.
However, it is important to ensure that the payment orchestration layer correctly flags these as MITs to avoid declines due to a lack of SCA on the repeat transactions.
How do digital wallets handle disputes and chargebacks?
The dispute process for a digital wallet transaction follows the standard card scheme rules for the underlying card. If a customer initiates a chargeback, the merchant will receive a notification through their acquirer or PSP.
Because wallet transactions often involve biometric authentication, defending against 'friendly fraud' may be more effective, as the merchant can provide evidence that the transaction was authorised by the legitimate user through a secure method.
Can a merchant accept digital wallets without a mobile app?
Absolutely. Digital wallets are widely supported on mobile browsers and desktop environments via web-based payment APIs.
When a customer checkouts on a website, the browser can invoke the digital wallet, allowing the user to authorise the payment on their mobile device or laptop.
This cross-device functionality ensures that the benefits of wallet payments are not limited to native applications but extend across all digital commerce channels.
What is required to integrate digital wallets into an existing checkout flow?
Integration requires a gateway or PSP that supports the specific wallet protocols. This involves adding the wallet's JavaScript library or SDK to the checkout page, mapping the wallet's response to the gateway’s API, and ensuring that the backend can handle the tokenised payment data.
Many modern payment orchestrators offer a single API that encompasses multiple wallets, simplifying the technical requirement to maintain separate integrations for each provider.
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