This means that issuers and merchants should be adapting their business practices to prioritise these payment methods and capture embrace this change. According to a recent report by Worldpay, digital wallets made up 36% of global e-commerce spend in 2018 and increased to 42% in 2019, with a further increase to 52% forecasted by 2023. The report defines these wallets as payment methods that store payment credentials to make purchases in-store or online – which can minimise the time consumers spend entering payment information – and includes options like LinkAja, WeChat Pay, and MTN Momo Money.
Digital and mobile wallets share of global spend at the physical point of sale is forecast to leap from 21.5% in 2019 to 29.6% by 2023.
– Worldpay, “2020 Global Payments Report”
Asia Pacific region – where this method of payment already accounts for 58% of e-commerce payments in 2019 and is expected to further increase to 68% by 2023 – it is also expected to gain significant market share in Europe, the Middle East and Africa (EMEA), Latin America and North America during the same period. The actual and forecasted growth illustrates the importance of e-commerce to all and makes a clear case to stakeholders that they should be adjusting their practices to accommodate this growth unless they wish to be left behind.
This online behaviour is also reflected in-store and on the street with the payment method expected to be the biggest payment by 2023. Digital and mobile wallets share of global spend at the physical point of sale is forecast to leap from 21.5% in 2019 to 29.6% by 2023 according to the Worldpay report. This would see digital wallets pass cash and debit cards to ascend to the top of the in-store payment pyramid.
Also, contactless payments, which help facilitate the adoption and usage of mobile proximity payments, including wallets, are growing in popularity (especially in light COVID-19, more on that in another blog) meaning that digital and mobile wallets are on their way to dominating in-store payments just as they do e-commerce payments.
And here is how issuers and merchants can take advantage of this data and harness digital wallets for themselves:
Digital and mobile wallets’ rise in popularity presents new challenges that issuers and merchants must account for if they want to avoid losing volume.
- Issuers have to contend with the fact that wallets make it harder to become a consumer’s primary card — but targeted rewards could help.
Many consumers likely don’t regularly change the default card in their digital and mobile wallets, meaning that issuers could have trouble getting them to make payments with their cards as the number of purchases made with wallets ticks up. To continue racking up the volume, issuers need to convince consumers to make their cards the default payment option within their wallet — and they can turn to rewards, which can influence primary card status, to do so. Chase, for example, has used wallet-specific rewards in the past, offering cashback for online and in-store purchases made through digital wallets like PayPal and mobile wallets like Apple Pay.
- To avoid losing volume and keep customers from jumping ship, merchants need to be able to accept a variety of wallets.
Merchants risk losing sales if they don’t accept consumers’ preferred wallets, as these customers may take their business to other merchants that allow them to pay how they want to. Merchants need to seek out POS technology providers, as well as gateways and processors that accept a number of wallets so that they can accept wallet payments in-store and online as the payment method gains popularity across channels. This could boost the popularity of payment solutions providers that handle both online and in-store payments, like Square and Stripe, as they’ll allow merchants to accept the same wallets across channels as omnichannel shopping grows, creating a more consistent experience for consumers.
Is your organisation ready to get on the digital wallet rocketship? Our team here at Youtap is ready to help your company take-off in 2020 with digital wallets!Learn More