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The inevitable rise and rise of the digital wallet

Although the digital wallet has existed for over 20 years now, it’s only within the last decade that they have rapidly evolved, revolutionising the way we search and pay for goods and services.

Digital wallets, also known as e-wallets, are mobile apps that store credit or debit card details in one location and allow users to make cashless purchases in-store and online using their phone or a wearable device.

They can also be used to store identification documents or digital rewards, tickets, boarding passes and room keys, completely eliminating the need to carry around wallets.

Using biometric recognition and data encryption, digital wallets are not only convenient but also give users a greater sense of control and security.

In the post we take a look at the trends within the digital payment market and the recent evolution of mobile payment apps.

Cash set to be the least common payment 

The digital payment market, which includes all consumer transactions made over the internet and on mobile devices, has been on the rise for over a decade. In 2020, there have been over 779 billion digital transactions worldwide and this number is expected to grow at a 13% rate in the coming years.

No. of annual digital payments 2017-2022Number of digital and mobile payments made around the world

The growing adoption of digital wallets, ongoing digitalisation of services, increasing demand for smartphones and developments of new technologies like 5G or payment services like Alipay, Google Pay and Apple Pay are some of the key factors behind the rapid increase in digital payments.

The global COVID-19 pandemic has undoubtedly accelerate this process even further with people trying to avoid cash transactions and using contactless payments to minimise physical interactions.

According to the 2019 Mobile Payments Market – Growth, Trends, and Forecast (2020-2025) report by Mordor Intelligence, the most popular payment method in 2020 – debit cards, will retain its’ position for years to come but cash, now the second most common payment method will be overtaken by digital wallets making it the least popular by 2022.

The decreasing need for cash suggests that the cashless economy may be coming sooner than we think.

Point of sale payment methods 2018-2022Global share of POS payment methods from 2018-2022.

A quarter of Europe’s digital payments originate from the UK

The rise in digital payments has also been very pronounced in the UK. According to data published by BuyShares, the UK is the largest digital payment market in Europe, accounting for 25% of the region’s total digital transaction value (just over $164 billion) followed closely by Germany, France and Italy.

Statista 2020 FinTech report revealed that in 2019 over 81% of UK’s citizens were using some form of online payments which is the highest share globally.

There’s also been a marked increase in the number of mobile payment app users – every year digital wallet apps gain nearly a million new users in the UK. By 2023, there will be nearly 12 million people in the UK whose primary payment method is through their phones.  Number of UK mobile payment users from 2018-2023*

It comes as no surprise that the growing popularity of mobile payments in the UK is largely driven by younger generations. 38% of 27-37-year-olds have registered for a mobile payment system, with the figure rising to 41% with 18-26-year-olds.

Registered for mobile payments by age in the UK Percentage breakdown of age groups who have registered for a mobile payment provider

12% of the world estimated to use digital wallet apps

Recent years have seen a huge development in mobile payment apps. From long-established apps like PayPal, to more recent ones like Google Pay, Apple Pay or Samsung Pay to local players like Alipay or WeChat, users now have a whole array of payment apps helping them to make purchases online or via their devices in a seamless and secure way.

Mobile payment apps are estimated to have almost 1 billion daily active users which accounts for 12% of the global population. This number is expected to increase to over 1.3 billion in the next 3 years.

The growing popularity is especially seen in China where the two local mobile payment app players – AliPay and WeChat have over 1 billion registered users each.

Current estimates are that 47% of all smartphone users in China are regularly using digital wallet apps making it the world’s leader in the highest adoption of mobile payments.  Worldwide digital payments - no. of users per app           Number of users per digital payment app across the world in 2020

Outside of China, Apple Pay, Google Pay, Amazon Pay and Samsung Pay are the top providers globally with the total number of 691 million users worldwide.

The growing popularity of mobile payment apps in Europe has put two European countries – Norway and the UK as the world’s leaders for digital wallet adoption.

With 42% and 24% of their population using digital wallets, Norway and the UK may be the first countries in the region heading towards the cashless economy model.

Rank

Country % of the population using mobile and digital wallets

1

China

47%

2

Norway

42%

3

UK

24%

4

Japan

20%

5

Australia

19%

6

Colombia

19%

7

United States

17%

8

Singapore

17%

9

Canada

16%

10 Austria

16%

Paypal active users quadruple in 10 years

With a slightly different business model and designed specifically for online transactions is PayPal – one of the first digital wallet providers.

PayPal was established in 1998, long before our smartphones could double as a wallet and unlike most of the mobile apps, PayPal isn’t restricted to a specific device.

Despite the rising competition from the more recent digital wallet apps, PayPal – that now supports online as well as mobile transactions – still has the biggest market share from all payment apps and its user base continues to grow each year.

The research shows that in 10 years, the company has seen a quadruple rise in its number of users, totalling over 325 million in 2020 and continuing to be a top choice of payment method when purchasing goods online.

Number of PayPal active users worldwide            Number of registered PayPal users from 2010 to 2020

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