Digital wallets: coming to a practice near you

Imagine this: a tech-savvy customer is presented with a bill after services have been rendered. He immediately pulls out his phone, removes the case, and hands it to you. Now what do you do?

Welcome to the world of digital wallets, a technology that enables a customer to load credit card information into an app on a smartphone, smartphone case, or key fob, and use that device to pay for purchases by tapping the credit card reader with it to transmit the information. The app generates a magnetic field that mimics the magnetic stripe on the back of a credit card. From there, it’s business as usual.

Until recently, practices didn’t need to be aware of this new technology. Customers didn’t expect most businesses to have the special card readers, called Near Field Communications (NFC) enabled readers, major players such as Apple Pay and Google Wallet require to make the technology work. But that’s not the case now.

At the Consumer Electronics Show last week in Las Vegas, Nev., the next generation of digital wallets was unveiled. One company’s product can be used with 90% of standard credit card readers. But even without this next generation of mobile wallets, that market is expected to grow.

According to a report by Strategy Analytics, global payments made via NFC-enabled phones will exceed $130 Billion by 2020 as a consequence of the launch of Apple Pay, a push by suppliers of the NFC-enabled readers, and consumer enthusiasm. Add the next generation of digital wallets to the market mix and the tsunami builds.

For practices, there’s another reason for knowing about this technology other than to meet tech-savvy customers’ needs or to position your practice as one that keeps abreast of technology. By late 2015, all U.S. businesses will be required to have card readers that work by inserting the card into a slot, rather than swiping it, a change prompted to lower the amount of credit card fraud that happens in the United States due to the old swiping method.

To prepare for this change, practices should check with their credit card processing service to insure that their next credit card reader works not only with the next generation of digital wallets but also those that require NFC-enabled readers.