Maybe you've seen customers pay for their lattes at Starbucks using that company's mobile wallet. Or perhaps you've seen them breeze through the checkout line at Wegmans buying their groceries with Apple Pay. As customers shift from standing in line and swiping a credit card to ordering ahead and tapping a phone on a scanner, mobile wallets are leading the way. While it's hard to quantify the dollar amount transacted with mobile wallets, Parks Associates estimates that proximity payment trans­actions--which require users to tap their phone at a point-of-sale terminal--generated more than $30 billion in the U.S. in 2016, a figure that's expected to top $300 billion by 2022.

What you'll get

Fresh & Co., a healthful grab-and-go cafe chain in Manhattan, launched its mobile wallet in 2014, and the number of active users "almost doubles" every year, according to chief operating officer Alex Perez. "The first year, we signed up 8,000, year two was 16,000, and now we're at 30,000," he says. This doesn't surprise observers of this payment trend. "Across the board, consumer satisfaction is about 80 percent for mobile wallets," says Chris Tweedt, a mobile-payments analyst at Parks Associates. This is because they are more convenient than credit cards, and make it easier to manage loyalty rewards.

What's in your wallet?
The latest on this growing trend in commerce.
as many consumers use Starbucks's mobile app as Apple Pay.
Source: Parks Associates
of Starbucks's total U.S. transactions are paid for with its mobile app.
Source: Starbucks
of those in the U.S. who use a mobile app say they spend more money when they do.
Source: Parks Associates
$1 trillion
of U.S. retail sales were influenced by mobile phones in 2016.
Source: Forrester Research
of mobile wallet users report they're more likely to shop at a place that accepts them.
Source: Parks Associates

For business owners with loyal customers, mobile wallets--and especially the rewards programs often built into them--can be a powerful way to strengthen those ties, says Chris Gardner, co-founder of mobile-wallet provider Paydiant. One reason: They put location-based sales insights and marketing campaigns within easy reach.

But there's a simpler reason to consider mobile wallets: They drive sales. LevelUp provided data to Inc. showing that its merchants see 7 to 9 percent larger tickets when their customers pay with a mobile wallet. Businesses also see an additional 9 percent spike in average sales when customers show up to redeem loyalty incentives. Kari Ginal, a vice president of marketing for Argo Tea, based in Chicago, claims a return of "two to three times our investment" from reward redemptions. And your customers do not need to be physically present for your wallet to bring you major value. Fastachi, a Boston-based gourmet nut company, decided to launch its app when founder Souren Etyemezian tired of customers "skipping us" during the holiday season when they didn't have time to wait for their gift to be wrapped. But now, he says, customers can order by phone and get pinged when their purchase is ready.

What you'll spend

Offering a mobile wallet means you'll be spending money. You'll need an app, hardware, and a payment-processing solution if you decide to accept mobile payments--which Tweedt recommends, as many shoppers look for stores that support Apple Pay. Startups like LoopPay, Wallaby, and Yoyo let companies set up a mobile-wallet platform. Building a white-label app on a service like Revel can cost a flat fee of $1,000, plus monthly charges. Payment terminals--where mobile-wallet customers can tap their phone to complete their purchases--can run from $150 to $300 each.

Alex Shuck, director of marketing and analytics for LevelUp, advises small businesses with 10 to 100 locations to budget at least $20,000 to develop a custom app with the basic suite of features. Businesses with more than 100 locations, he says, may want to set aside "at least the cost of opening a new store into their mobile property as an initial investment--and half that again each year moving forward." That's why some merchants go with a simple white-label solution, or even just a loyalty program and forgo a wallet entirely. But larger merchants and those seeking a custom experience may find that additional features, like nutritional information for restaurants, are worth it. And keep payment-processing fees in mind. Amitaabh Malhotra, chief marketing officer for OmnyPay, a digital-commerce platform, says retailers using third-party wallets like Apple Pay are at the mercy of processing fees for each purchase--typically 2 to 3 percent for credit cards and less than 1 percent for debit cards. (Apple Pay charges 15 basis points to the card issuer per transaction.) With your own wallet, you can dictate what payment types you'll accept.

All that said, mobile payments in the U.S. experienced a slight dip last year. Transaction volumes are higher outside the U.S., Tweedt says. So you may be wary of investing in a technology that isn't mainstream­--or dealing with the headaches of training and testing. Adoption of mobile-wallet technology "is still pretty small" among small businesses, says Nicole Perrin, an analyst for eMarketer.

Given those factors, rather than follow in the footsteps of large retailers, which build their own custom apps, Tweedt advises launching your service on a well-known wallet like Apple Pay, Android Pay, or Samsung Pay. Apple Pay in particular is worth focusing on, he says, given its torrid growth rates.

"Merchants would be wise to adopt mobile wallets now," Tweedt says, so they don't miss out on an expected spike in usage once Apple Pay starts advertising directly to consumers, slated to happen near the end of 2018. If wallets make sense for your business and customer base, they're a great way to connect to your consumers--but, as ever, there's no substitute for a killer product or experience.