Are Digital Wallets the Future of Payments?
Say goodbye to your leather wallets and bedazzled purses; the future of the wallet is now, and it is digital.
In 2018, the average U.S. adult spent more than six hours each day on a mobile device. This lengthy and near-ubiquitous daily use of mobile devices has seen more and more people learning about and using digital wallets to make everyday purchases. It’s estimated that by 2020 almost 1 in every 2 dollars spent online will come from purchases made using mobile devices.
So what is a digital wallet? You may have heard the term before, but for the uninitiated, a digital wallet, also known as an “e-wallet,” refers to an electronic device or an online service that allows an individual to make financial transactions. A digital wallet is connected to a debit, credit, or prepaid account via smartphone or other digital device and can be used to make in-store purchases via near-field communication (NFC) or at an online store or with a digital app. Digital wallets may also store other ID documents such as a driver’s license, health card, or loyalty card.
In the past, concerns about payment safety, a shortage of in-store payment terminals, and a general lack of public awareness about the technology kept digital wallet usage reserved to a minority of consumers. However, new technology, improved security, innovation, and interest among key demographics such as millennials, is driving digital wallet adoption.
According to a report by Accenture, 56 percent of consumers in 2018 knew about digital wallet technology, up 15 percent from 2012. The same report cited millennials as more likely than other demographic groups to try new technologies, pay in-store, and be “extremely interested” in new ways to make payments, such as wearables.
Gartner Group estimates 6.4 billion connected things were in use worldwide during 2016, an increase of 30 percent from 2015. The firm expects that number to more than triple by 2020, growing to nearly 21 billion devices. According to Juniper Research, global mobile wallet spend increased 32 percent in 2017 to $1.35 trillion.
In 2018, 80 percent of merchants said they see mobile payments as a fundamental part of their business strategy. 92 percent of merchants expect to maintain or increase investment over the next 12 to 18 months. 80 percent of respondents cited consumer demand as one of the main reasons for adopting mobile payments.
According to Payments Canada and Leger Marketing, two-thirds of Canadians are looking to stop using cheques are other traditional, outdated payment methods in favour of alternative payment options such as mobile wallets. One in three Canadian smartphone users has already paid for something with a smartphone. More than 50 percent of smartphone owners don’t feel like carrying around debit cards, credit cards, or cash–and the majority of consumers expect other people to do the same. 65 percent of smartphone regular purchasers–those who make a purchase on their smartphones at least once a week–plan to manage their personal accounts and payment information in a single mobile payment system (mobile wallet) in the future.
The numbers don’t lie–the digital wallet is the future of payments. The widespread adoption of digital wallets isn’t a question of if, but when.
In our next post, we’ll explore what exactly consumers are looking for in digital wallets.
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