Why Merchants Can’t Ignore Digital Wallets—and How to Accept Them

From grocery runs to global e-commerce, digital wallets are quietly transforming how the world pays. What once felt futuristic is now expected—fast, secure, and contactless. But what’s really powering those effortless tap-and-go moments? In this blog, we decode the tech behind digital wallets and why they’re becoming the go-to payment method for customers and merchants alike.

How Digital Wallets Work: The Tech Behind It

Digital wallets may feel like magic to users, but behind the scenes, it’s a smart blend of technologies that make every tap, scan, or swipe secure and seamless. Here’s a breakdown of the core tech powering today’s most popular wallet payments—explained simply, without the jargon.

1. NFC (Near Field Communication)

This is the tech behind the famous tap-to-pay experience. Near Field Communication allows two devices—like a smartphone and a point-of-sale (POS) terminal—to securely exchange data when placed close together.

For merchants, it means customers can just tap their phone or smartwatch near the terminal to pay. The wallet transmits encrypted card info to the POS system, all in a split second. It’s fast, contactless, and built for modern checkout expectations.

2. QR Codes: Scan to Pay Made Simple

QR code payments have exploded in popularity, especially in regions with low card infrastructure. Here’s how it works: a merchant displays a QR code that contains all the necessary payment info.

The customer opens their wallet app, scans the code, and the app processes the payment automatically. It’s smooth, no hardware needed, and perfect for in-store or even remote payments like deliveries and pop-up shops.

3. MST (Magnetic Secure Transmission)

MST technology is like a bridge between the new and the old. It allows digital wallets to communicate with traditional magnetic stripe card readers—even if they don’t support NFC.

When a user holds their phone near the terminal, MST generates a magnetic signal that mimics a card swipe. For merchants, this means they can accept wallet payments without upgrading their entire hardware setup. It’s compatibility without complexity.

How Digital Wallets Work for Your Customers

From the outside, paying with a digital wallet looks effortless. But there’s powerful tech working under the hood to make it feel that way. Here’s how it works—both for your customers and behind:

1. The Customer Experience

For most shoppers, using a digital wallet feels a lot like using a credit card—just faster. At checkout, they unlock their phone, pick a saved card in their wallet app, and follow simple prompts on the payment terminal.

No swiping, no digging through wallets. Just a quick tap or scan, and they’re done.

2. NFC For Customers 

When a customer taps their phone on your payment terminal, chances are it’s powered by Near Field Communication. This tech enables two NFC-enabled devices—like a phone and your PoS system—to “talk” using short-range radio signals.

NFC powers everyday favorites like Apple Pay, Google Pay, and Samsung Pay. For customers, it’s instant and secure.

3. MST For Customers 

Some digital wallets, especially older Samsung devices, come equipped with Magnetic Secure Transmission. This clever tech simulates the magnetic stripe of a physical card, allowing the phone to “swipe” digitally—even on older card readers.

Digital Wallet Adoption Is Booming: Here’s Why

The way people pay is changing—and fast. Across the globe, digital wallets are quickly becoming the go-to choice for consumers. Here’s a breakdown of why the shift is happening and why merchants can’t afford to ignore it.

1. Adoption Rates Are Climbing

Global usage of digital wallets is on a steep upward curve. According to Juniper Research, 

By 2029, adoption is expected to grow by over 15%—a massive jump from today’s usage levels.

What’s fueling this surge? Simplicity and reach. Digital wallets are now easier to accept at checkout, and they’re opening doors to financial access for those who’ve traditionally been left out.

2. People Are Stacking Wallets 

Today’s consumer doesn’t just have a digital wallet—they often have many. Recent data shows that nearly one in three mobile wallet users has three or more apps saved on their phones. Some younger users even report juggling up to nine wallets at a time.

3. One Wallet, Many Uses

Digital wallets go way beyond storing credit or debit cards. They’re becoming mini financial hubs. Customers can add loyalty cards, promo coupons, transit passes, and even event tickets—all in one place. And as online shopping grows, so does the demand for this kind of flexible, centralized payment option.

4. Security Is a Key Selling Point

Security is still a top concern for consumers—and digital wallets deliver on that front. With built-in tools like encryption, tokenization, and biometric authentication, users feel safer making payments on their phones than carrying physical cards or cash. It’s no wonder wallets are seen as the smarter, more secure choice.

Why Accepting Digital Wallets Is a Must for Merchants

If you’re still on the fence about digital wallets, it’s time to rethink. Today’s customers expect fast, secure, and convenient ways to pay—and digital wallets tick all those boxes. For merchants, saying “yes” to digital wallets isn’t just a tech upgrade—it’s a strategic business move. Here’s why:

1. Speedy Checkouts 

No one likes waiting in line. Long queues can drive customers straight to your competitors. In fact, nearly one-third of shoppers will ditch a store in search of a quicker checkout. Digital wallets help speed things up by reducing tap-to-pay time—meaning you serve more customers with less friction.

2. Fewer Errors, Fewer Headaches

Manual entry mistakes can be costly—whether it’s overcharging a customer or shorting your own till. With digital payments, especially when integrated with your PoS system, the chances of human error go way down. It’s faster, cleaner, and more accurate.

3. More Secure Than Cash 

Digital wallets come packed with built-in protections like encryption and authentication. That means less risk for you as a merchant and more peace of mind for your customers. No physical card swipes. No handling cash. Just safer transactions, start to finish.

4. Connects You with Digital-First Shoppers

Millennials and Gen Z expect tech-driven experiences—and that includes how they pay. If you’re still relying on traditional payment methods, you might be turning them away without even realizing it. Offering digital wallets shows you’re keeping up—and makes your business more appealing to the next-gen consumer

Why It’s Time to Embrace Digital Wallets—And the Right Platform to Do It

The future of payments is already in your customers’ hands—literally. Digital wallets are transforming how people shop, pay, and interact with merchants, combining speed, convenience, and security like never before. With rising adoption rates, growing consumer expectations, and the shift toward mobile-first experiences, accepting digital wallets isn’t just a nice-to-have—it’s a must.

Ready to build or upgrade your own digital wallet offering?

At Toucan Payments, we’ve built a digital wallet solution that’s:

• Fully Customizable – Tailor the user experience, features, and branding to match your business and audience.
• Data Security Compliant – Enterprise-grade encryption and compliance baked in to protect your users.
• SaaS-Based Pricing – Scale affordably with flexible, pay-as-you-grow plans.