" class="no-js "lang="en-US"> The Future of Mobile Wallets
Sunday, April 21, 2024

The Future of Mobile Wallets

Jan Marc Kuelper, SVP, Enterprise Sales, North America, Paysafe

The rise in consumer adoption of mobile wallets is at a defining moment, how should businesses respond?

The growth of mobile wallets has been a defining trend of the payments industry in recent years. . Globally, we have seen consumers adopt mobile wallets like Google Pay or Apple Pay, where a customer registers their bank card details to a smartphone which are then tokenised to create a simple and secure payment method stored within the device, as an alternative to traditional card payments for both online and in-store payments. According to one report mobile wallets usage jumped 29% in the U.S. in 2020, to 40% of all smartphone users over the age of 14. Overall, more than half of U.S. consumers are using some form of contactless payment method, which includes contactless credit and debit cards, demonstrating the deeper appetite for more seamless payment methods.

And there are unmistakeable benefits of mobile wallets that make them enticing to consumers:

  • Speed & Simplicity – Payments can be made through a single-step process that doesn’t require multi-factor authentication
  • Ease of use – Stored card details means consumers don’t need to remember long card number details, or bring a physical wallet with them when shopping in-store
  • Protection– Mobile wallets payments are verified using biometrics, which is more secure than memorising passwords. Card details are more strongly protected and unlike traditional debit and credit cards the payment method cannot be used if physically stolen

The driving forces behind consumer adoption

As well as the more obvious benefits, there are a number of influences which are propelling the growth of mobile wallets.

Worldwide adoption of smartphones

Owning a smartphone and access to the internet is the major obstruction to mass migration to mobile wallets from debit and credit cards, or (more likely in developing countries) cash. But this has become less of an issue in recent years as smartphone penetration has steadily increased, and this trend is expected to continue. Global smartphone users have increased from just 3.67 billion people in 2016 to 6.38 billion people in 2021 (80.6% of the global population, and 89.7% of all mobile phone users), and is predicted to reach 7.33 billion people by 2025.

The rise of mCommerce

Not only do more consumers around the globe now own a smartphone, they are increasingly using them as a device to access digital commerce. In the U.S. this translates into 79% of consumers using their smartphone to make at least one online purchase in the past six months. Globally, mCommerce now dominates the digital commerce landscape; the percentage of all online transactions that takes place on a mobile device has risen from just over 50% in 2016 to 72.9% in 2021. This figure values the total global mCommerce market at $3.56 trillion this year.

The effects of COVID-19

As we have seen with many pre-existing payments trends in the payments landscape, the pandemic has acted as a catalyst making the need for businesses to adapt a much more pressing Most notably for mobile wallets, rapid growth of contactless adoption as consumers and businesses veered away from using cash in the early stages of the pandemic resulted in the growth of mobile wallets and contactless cards. When we asked consumers in May 2021, 74% told us that they were now making regular contactless payments in stores. The usage of mobile wallets grew online during the pandemic as well. In the same research, a third (32%) of consumers told us that they were using digital wallets including Apple Pay and Google Pay more regularly due to the pandemic, and 23% said they used the payment method for the first time since the start of the outbreak.

The impact of the pandemic extends beyond the regions we surveyed, including Asia where mobile wallet adoption has exploded. According to research carried out earlier this year, mobile wallet penetration in Thailand is 93.7%, and other countries in the region are not far behind. To put this into perspective, the same research estimates mobile wallet adoption in the UK and U.S. is 36.5% and 42.8% respectively.

How are businesses responding?

The consumer adoption of mobile wallets must be supported by businesses buying into the trend and offering mobile wallets as a payment method in their stores and online checkouts. For businesses, there are clear benefits for meeting consumer demand:

  • Improved conversion rate
  • Quick checkout
  • Expanded payment options
  • Higher security
  • Consumer data protection
  • Global reach
  • Lower chargeback rates

And that is what we are seeing. According to our latest research Lost in Transaction: Finding competitive advantage at the checkout, businesses are optimistic into offering mobile wallets and the growth we have already seen is only going to accelerate in 2022.

We asked 900 small to medium-sized businesses (SMBs) across Europe, North America, and Latin America to tell us about their plans for developing their online checkouts in the next 12 months, and mobile wallets will play an important role in the evolution.

On the whole, 41% of online SMBs told us that they already offered mobile wallets in their online checkout, and this expansion is being driven by the U.S. (51%), UK (47%), and Germany (47%). And a further 36% of businesses told us that they are planning to integrate mobile wallets into their checkouts within the next year. Less than a quarter (23%) of all businesses currently have no plans to integrate mobile wallets into their online checkouts. Of those that already accept mobile wallets, more than half (54%) have seen an increase in the percentage of their overall checkout transactions being made via a mobile wallet.

What comes next?

Over two thirds (68%) of online SMBs say that COVID-19 has impacted the way consumers are paying, and more than half (52%) say they are actively being asked by their customers to offer more payment options. It’s therefore no surprise that 61% are accelerating their plans to improve their checkout experience, and integrating mobile wallets to meet consumer demand is going to play a huge role here. SMBs that aren’t thinking about offering mobile wallets already may find themselves becoming uncompetitive in the next 12 months.

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