The turning point for digital wallets came in 2019 when, according to 2021 research from Boku and Juniper Research, they surpassed credit cards as the most widely used payment type globally. This is likely linked to the continuous development of their convenience and accessibility benefits – and general trends towards digital payments have continued to fuel digital wallet adoption.
According to Juniper Research, the value of digital wallet transactions is forecast to rise from $9tn in 2023 to more than $16tn in 20281, as more consumers and businesses discover the benefits of app-based payments and money transfers. Here are five reasons why the technology continues to be such a game-changer.
1 Consumer convenience
Digital wallets allow people to leave their physical cards at home, cutting down on the number of items they need to carry. There’s also no need to hunt for the right card or fish loose change from your pocket, every time you reach a till. Instead, the card is stored digitally in your phone and easily accessible to pay.
Nordic countries are ahead of the game in unlocking these benefits. “They are leading the way today,” says Sean Pitman, head of product strategy and commercialisation for Visa Direct Europe. “If you take Norway, for example, Vipps [a digital wallet] is used by more than 90% of the population. It’s become a way of life.”
2 Strong security
Digital wallets use a variety of security measures to protect people’s payment details. Tokenisation, for example, can help to keep sensitive information secure both online and in-store. Every time a payment is made the wallet sends a ‘token’ consisting of a string of random numbers instead of card details. This minimises the risk of fraud or theft.
The biometric security features of smartphones can also help to stop unauthorised access. This means that if someone’s device is lost or stolen, payment information and access to bank accounts may remain secure (depending on the level of security settings activated by the user, of course). In addition, many digital wallets include fraud-monitoring systems to help detect and prevent unauthorised activity.
3 Accessibility and financial inclusion
Digital wallets were originally intended to serve unbanked populations with access to smartphones. With nearly 2 billion people still lacking access to financial services, according to the World Bank, the accessibility of this technology is still one of its biggest benefits. In some markets, digital wallets are now one of the most accessible financial tools. They are often a vital entry point into the wider financial system for underbanked and unbanked populations.
“There’s been a rise of the digital wallet in countries which are traditionally underbanked and were difficult to send money to in the past,” says Pitman.
Through a combination of wallet aggregation partners and direct wallet connections, Visa Direct will enable more than 1.5 billion wallets2 across 44 countries and territories. As well as helping consumers to easily move funds cross-border, these tools support businesses that want to serve customers who don’t have access to a bricks-and-mortar bank.
4 Fast cross-border payments
Cross-border payments traditionally took days to arrive, and there was no transparency about where the money was during the transfer process. This was particularly stressful for senders and receivers of remittances – a financial lifeline to people around the world.
Waiting days or more to receive funds needed for vital medical treatments or other emergencies is a situation that no one wants. Thankfully, digital wallets now enable people to access the money they need faster than ever before.
“The diaspora in Europe who need to send money to family can send it to a digital wallet in real time3, and without the other person needing to go and collect cash, so it’s a real development in that space,” says Pitman.
Visa Direct is delivering improved cross-border payment capabilities to clients and their customers with a seamless ability to pay and get paid regardless of where they live or what wallet2 provider they use. Soon, Visa Direct will enable clients to connect to nearly 7 billion endpoints, including those 1.5 billion wallets, in more than 190 markets with payouts in more than 160 currencies
5 Future innovation
Digital wallets will continue to be a focal point for innovation. The rise of super apps in Europe, for example, could see the technology merge with a variety of other digital services such as ride-hailing, messaging and e-commerce (as seen in Asia). This would allow consumers to move around a rich ecosystem of services without needing to set up new accounts or continually enter their payment details.
Digital wallets are also increasingly used to store membership cards, gift cards, event and travel tickets – even electric vehicle key information. In future, they could even become a store of digital identity information, replacing physical forms of ID in the same way they are replacing physical payment cards today.
Accessibility and connectivity will continue to be at the core of digital wallet innovation. As digital wallet adoption rates rise across the world, a connected global payments network has never been more important.
Visa Direct aims to create a global community of digital wallet users2 by delivering improved cross-border payment capabilities to clients and their customers. The goal is to enable frictionless money movement regardless of where users are located or what wallet provider they use.
For more information about Visa Direct, the expansion of digital wallets, and how Visa can help enable your business to meet the demands of the future, go to globalclient.visa.com/digital-wallet-report
1 Case studies, comparisons, statistics, research and recommendations are provided “AS IS” and intended for informational purposes only and should not be relied upon for operational, marketing, legal, technical, tax, financial or other advice. Visa neither makes any warranty or representation as to the completeness or accuracy of the information within this document, nor assumes any liability or responsibility that may result from reliance on such information. The Information contained herein is not intended as investment or legal advice, and readers are encouraged to seek the advice of a competent professional where such advice is required.
2 Visa Direct for Wallet capability is under development and not yet commercially available.
3 Actual fund availability depends on receiving financial institution and region