Digital wallets (DW) are now the number 1 payment method globally. What’s behind their dominance and what are the implications? Let’s take a look.
The numbers are revealing (sources: Juniper Research, 2024 Worldpay Global Payments Report):
— The number of DW users will exceed 5.2 bn globally in 2026 (+53% vs 2022)
— DW are the fastest growing payment method globally with $14 tn of total consumer spend in 2023 ($25 tn by 2027)
— 50% e-com global share ($3.1 tn)
— 30% POS global share ($10.8 tn)
But why have DWs become so popular?
Because they have democratized access to #payments, for very different audiences around the globe, bringing along unique benefits:
— Financial inclusion for huge populations (i.e. Africa, Asia) that didn’t have other alternatives (there are still 1.7 bn unbanked adults today)
— Convenience in the form of user experience, speed, easy onboarding and simple authentication
— Low-cost monetization opportunities and higher sales conversion for players across the value chain (providers, merchants, banks, platforms, fintechs)
It was exactly due to their versatile nature that DWs were championed to the fore via very different players:
— Bigtechs like Apple, Google and Samsung that wanted to build on their huge user base
— #ecommerce platforms like Amazon, Mercado Pago or Rakuten looking to boost their business and create new growth opportunities
— Banks looking to compete with new value-chain challengers (fintechs, platforms) on their own (front-end) customer-facing game
— #fintech players and Super Apps that used DW as a tool of expansion and market share consolidation
— Telecoms seeking to enable e-money access without the need for a bank account
No surprise that DWs are core to the #strategy of most major tech and payment players across the globe. These are some of the use cases showcasing why:
1. Central storage place for all kinds of cards (debit, credit, prepaid, gift, etc)
2. SuperApp rails
3. Instant payouts for gig economy workers (i.e. Uber)
4. Rails for multi-currency conversion and remittances
5. Storing, buying and selling crypto currencies
6. Savings and investment
7. Loyalty and reward programs (i.e. points, discounts, coupons)
8. Personalized (i.e. location-based) marketing capabilities
9. Event ticketing
10. Promotions and mass personalization
11. Gaming (virtual currency storage, payments, etc)
Remarks and #trends going forward:
— Although DWs were originally built with an e-commerce perspective in mind, it was the in-store space that in many geographies propelled them to the fore via technologies such as QR codes (Asia) or NFC (US, Europe)
— Cards are both a DW competitor and enabler
— QR codes will become the most popular DW transaction type by 2026 and will be driving POS DW adoption, especially via loyalty and personalization features
Opinions: my own, Graphic sources: 2024 WorldPay Global Payments Report, FXC Intelligence
