Digital wallets have revolutionized the payment space in recent years. They provide an easy, contactless and secure way to make purchases and transfer money through the convenience of smartphones.
The method is the fastest-growing payment option in the United States, which is especially true among younger consumers. Most Americans say they use digital wallets more often than traditional payment methods. Even more intriguingly, consumers who use this payment method tend to spend more than nonusers. According to a new Worldpay report, the payment method will overtake debit cards in transaction value in North America for in-store payments by 2027.
Digital wallets’ popularity and payment values make them a priority tool for businesses to incorporate into their payment suites. However, merchants have some catching up to do to keep pace with this unstoppable trend. Some notable stumbling blocks — including perceptions about security, complexity and legacy technology — are still holding many back.
The “Money Mobility Tracker®” examines the meteoric rise of digital wallets. It also looks at how payment providers can help small merchants overcome concerns about security, complexity and technology to offer this payment method to their customers.
Growth in digital wallet use is outpacing that of all other payment methods in the U.S. The share of users has climbed 12 percentage points since 2023 alone. The main growth driver is convenience — which is also fueling greater spending with digital wallets than other payment methods.
Digital wallets are rapidly gaining popularity. The payment method is projected to overtake debit cards in transaction value at the point of sale (POS) in North America by 2027. According to a recent Worldpay report, use will more than double from 15% to 31% of POS transaction value between 2023 and 2027. At the same time, debit card use will decline from 28% to 23% during the same period. But this trend is not limited to North America. Digital wallets are expected to account for nearly half of global POS transaction value by 2027. This share was 30% in 2023.
Convenience drives the rise of digital wallets, with 41% of users citing it as their primary reason for adoption. Interestingly, consumers using these wallets tend to spend more than nonusers. Forty-seven percent of Americans report increased spending when using the method compared to traditional payment methods. Younger generations and high-income earners significantly drive adoption, making it an attractive proposition for merchants seeking to boost sales.
To learn more, visit the Tracker’s Spending Soars section.
Despite high consumer demand, less than 60% of small businesses accept digital wallets. This is due to concerns about technology upgrades and perceived fraud risks. This reluctance presents an opportunity for new market entrants, as more than half of all users, including 78% of Generation Z, would stop patronizing merchants that do not accept this payment method. Payment providers can address these concerns by highlighting the enhanced security features of digital wallets and emphasizing ease of implementation.
Integrating digital wallet acceptance is typically quick and affordable, even for small businesses. Most payment providers or credit card processors support this payment method, often requiring only a card-reader upgrade. For businesses not accepting credit cards, mobile card processors like Square and PayPal offer solutions with minimal upfront costs. By adopting digital wallets, merchants can meet growing consumer preferences and potentially expand their customer base.
To learn more, visit the Tracker’s Overcoming Hurdles section.
Using digital wallets for payments alone may soon be passé as demand grows for new and expanded money movement options and features.
According to PYMNTS Intelligence research, consumers show high interest in pursuing additional money mobility uses for digital wallets. Although 35% of consumers still think they would use the method primarily for making purchases, 45% are most interested in using the tools to move money in new ways, such as through account-to-account transfers or recurring payments.
Consumers are so enamored of digital wallets that more than half are interested in leveraging them for uses beyond financial. These wallets have the capacity to provide features such as document storage for driver’s licenses, passports and event tickets. While 51% of consumers show at least some interest in using digital wallets’ other features, interest rises to 78% among Gen Z and 75% among millennial consumers. Also, interest in utilizing these wallets in new ways rises with income, culminating at 59% among consumers who annually earn more than $100,000.
To learn more, visit the Tracker’s The New All-in-One Accessory section.
The “Money Mobility Tracker®,” a collaboration with Ingo Payments, examines the meteoric rise of digital wallets and how payment providers can help small merchants overcome concerns about security, complexity and technology to offer this payment method to their customers.
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