According to a new report, consumer spending through digital wallets would hit more than $10 trillion in 2025, up from $5.5tn last year.
The rise of more than 80 per cent over the five-year period will be driven by the increased adoption of digital payments in the wake of the Covid-19 pandemic, UK-based Juniper Research said.
Contactless and e-commerce payments are expected to account for 50% of overall digital wallet spending in the next five years, compared with just under 36% last year.
Combined with increasing penetration rates, the rapid growth in the availability of digital wallets means that merchants face difficult choices. It added that choosing the correct wallet providers and the integration costs for using multiple wallets are proving to be a challenge.
“In order to support a digitally-engaged addressable market, merchants must base their payment strategies around wallet acceptance… but must also judge the right wallets to target, or they will be lumbered with increased costs and limited benefits,” said co-author of the study, Alexandria Sadler.
She added that wallets are becoming more and more capable of both “contactless and remote payments”
In order to allow payments at a point of sale, a digital wallet stores the credit and/or debit card details of users and links it to a payment gateway. Such wallets would only operate for retailers who accept them as a means of payment, like a credit card.
In 2011, with its Wallet service, Google was the first major company to introduce a mobile wallet. A variety of others, such as Samsung Pay, PayPal and Apple Pay, are now available. Many telecoms providers and banks have their own services for mobile wallets.
The Juniper report found that the increased usage of contactless mobile payments, triggered by cash issues during the Covid-19 pandemic, has led to greater use of digital wallets across the payments ecosystem.
Contactless adoption will continue to grow, with contactless payments projected to be used by over 34 percent of mobile phones in 2025, up from 11 percent in 2020, it added.
