Hi welcome to healthcare magic forum,
It may be due to either infection,trauma,
allergy,any local reaction,bacterial, viral,fungal.etc, now the important part is to get it diagnosed that can be done by local examination and culture from the exudate of patch followed by treatment.
Now you have told that it is decreasing in size,healing with scab formation so need not to worry,keep noting that any swelling occurring in inguinal region(
lymph node) if it occurs than you need to see a doctor, and medication.Besides checking your wife also if she feels any trouble in her vagina in the form of ulcer,swelling, discharge,etc.
hope you understand the situation.
Thanks.