The use of mobile wallets (also referred to as digital wallets) is a growing trend that has only increased due to the pandemic. In general, high consumer demand is propelling these non-traditional payment methods, such as digital wallets, buy now, pay later (BNPL), peer to peer (P2P) and QR code payments. Could this unprecedented demand for new payment methods mean that mobile wallets will eclipse the need for cash forever?

Popular Payment Method

The popularity of mobile wallets can be seen in a number of different regions. A recent HPS whitepaper, ‘The Next Wave in Card Payments Technology in APAC’, showed that by next year, digital wallets usage will surpass card usage in both Hong Kong and India (a 47% market share in Hong Kong and a 38% market share in India). The same study shows that in other major APAC nations, mobile wallet usage is also predicted to grow from 2019-2023, with market share set to increase by 8% points in Singapore, 7% points in Vietnam, 6% points in Indonesia and 4% points in Thailand.

These trends reflect the fact that many governments are interested in reducing the rate of cash usage within their respective countries. According to the Boku 2021 Mobile Wallets Report, Saudi Arabia’s Vision 2030 strategy aims to achieve 70% cashless payments by 2030, Japan continues to support cashless payments for tourists following the Tokyo Olympics, and India’s 2016 banknote demonetisation resulted in Paytm mobile wallet adoption doubling from 140 million to 270 million users in about a year.

What is also interesting is the different manner in which mobile wallets have developed over time in different parts of the world. In North America and Western Europe, card-based wallets are predominant, with the likes of Apple Pay, Google Pay and Samsung Pay all connected to an underlying credit card function. For the rest of the world, stored value wallets take prominence. Stored wallets can be funded directly from a bank, and digital cash can be converted back into bank notes via a multitude of methods. Because stored value wallets use QR codes at the point of sale, there have been recent regulatory moves to promote national standards for QR codes. In February 2020, for example, HPS rolled out a QR-based National Payment System in Saudi Arabia in partnership with SAMA (Saudi Arabia Monetary Authority).

Benefits of Mobile Wallets: the smoothest way to pay

The popularity of mobile wallets is not surprising, given the number of different benefits for customers, merchants, agents, and distributors alike. Digital wallets can remove friction caused by new European multi-factor authentication rules introduced in 2021, known as Strong Customer Authentication (SCA). Issuers, in particular, recognise the value of incorporating third-party wallets to address payment fraud and reduce SCA friction, according to the HPS OMDIA study, ‘Modernising issuers in a digital-first world’.

The untapping of data through the digitisation of payments and mobile wallets can also be hugely beneficial. Businesses can benefit from newfound access to valuable customer data, which can be used to improve marketing messaging and enhance customer services. Further, digital wallets represent one solution for both in-store and online payments, rather than having two separate methods for each. This means that a single deep pool of customer data can be uncovered, providing insights into their customers’ behaviour, thereby giving retailers an edge.

Increased initiatives

Because of the popularity of mobile wallets, and the fact they provide consumers with a safe and convenient way to pay, it is likely that governments will increasingly back mobile wallet initiatives, such as QR code standardisation. Retailers can then benefit, not only from the removal of friction from card payments, but from the opportunity of gleaning invaluable insights from customer data.

Overall, the pandemic simply accelerated the already existing trend towards uptake of mobile wallets. While the introduction of a cashless society and further promotion of digital wallets is an area for national governments to decide upon - on a technology and popularity front at least, there’s no stopping them.

To know more about how to provide an own-branded and personalised mobile payment wallet through HPS PowerCARD-Wallet solution, please contact sales@hps-worldwide.com.