The evolution in digital payments has resulted in the emergence of e-wallets – join us for a deep dive into one of the most common types of payment nowadays
The proliferation of e-wallets has intensified due to the surge of mobile payments, smartphone penetration, shift in consumer behaviour, and, sometimes, regulation. What’s more, the key to their success seems to be a combination between frictionless payments (related to customer experience), security, and the added value that a consumer would get from using the service and the innovation around these wallets. Therefore, the new possibilities provided by e-wallets are appealing for several reasons: they are easy to integrate on multiple devices; many of them can be used across channels; they have interfaces that are user-friendly; they pave the way for loyalty and marketing programmes – and all sorts of new ideas with regards to payments (eg Apple Card linked to Apple Pay). According to Juniper Leaderboard 2018, the top three e-wallets globally are PayPal, Alipay, and WeChat Pay.
Moreover, thanks to e-wallets, consumers in developing nations can participate in the global financial system, since these do not require a bank account with a physical company or branch, enabling users in rural areas to connect. In some parts of the globe, they help users accept payments for services rendered, as well as receive funds or remittances from friends and family. For example, M-Pesa, which is an e-wallet in Kenya that facilitates easy money transfers and bill payments through mobile phones, currently has 27,8 million users in a country of 45 million people. Previously, Kenyans had to use informal channels such as the services of bus drivers in order to transfer funds across the country. Today, M-Pesa is a fully-fledged financial ecosystem, and transactions via the platform represent close to 50% of Kenya’s GDP.
Taking the pulse of the e-wallets landscape
According to Juniper Research, by the end of 2019, nearly 2.1 billion consumers worldwide will be using an e-wallet to make a payment or send money. In addition, according to yStats, more than two-thirds of e-wallet users live in the Asia-Pacific area. Besides being the most numerous e-wallet users, customers located in the Asia-Pacific area are also the most active ones – due to high smartphone penetration. All across Asia, we can observe the emergence or expansion of players such as Alipay, WeChat Pay, Paytm, PhonePe, LINE Pay, Rakuten Pay, GO-PAY, and others.
Mobile payments are used every day by millions of people across Europe, and there is an abundance of choice for the European consumer – supported by banks, fintech, Big Techs, and merchants. Here, besides global brands, like Apple Pay, Google Pay, and Samsung Pay, there are many local initiatives, including Payconiq (Germany, Belgium, the Netherlands), Payback (Germany), Paylib and Lyf Pay (France), Pingit (the UK), Vipps (Norway), Swish (Sweden), MobilePay (Denmark, Finland), and OK (the Netherlands) – and by forging partnerships with retail chains, local e-wallets can offer extra value to clients (e.g. OK partnered with Dutch retailers; Lyf Pay teamed up with Carrefour).
In LATAM, there are three main types of e-wallets: contactless mobile wallets such as Apple Pay, ecommerce wallets like Visa Checkout or Amazon Cash, and stored-value wallets that allow users to ‘top up’ their feature phone mobile money accounts. Thanks to its security and value-added services (e.g. free return shipping) that connect the wallet to a larger environment for ecommerce, PayPal has been quite successful in LATAM.
In North America, the pace of progress towards contemporary technologies like e-wallets is tempered by infrastructures, habits, and preferences established over generations. Here, the typical user of mobile payment methods is between 30 and 44 years old, is college-educated, and has an above-average yearly salary. Moreover, according to Statista’s report Mobile Payment Usage in the US, in 2018 only 15.4% of mobile payment customers utilised designated e-wallets such as PayPal or Google Pay. Worldpay’s Global Payments Report 2018 presents the share of e-wallets in the payments space as follows:
North America ecommerce payment methods: credit card – 34%, e-wallet – 20%, debit card – 19%, charge & deferred debit card – 13%, bank transfer – 6%, cash on delivery – 4%, prepaid card – 3%, PrePay – 1%, other – 1%;
North America POS payment methods: credit card – 41%, debit card – 34%, cash – 16%, charge card – 4%, e-wallet – 3%, prepaid card – 2%.
However, the awareness with respect to digital payment methods already started growing steadily across the US, with Apple Pay and PayPal being the most popular e-wallets accessed in-store by US users as of December 2017. Looking towards the next five years for this market, Worldpay expects the use of cash to drop by about 5% at the POS, the majority of that spend migrating to e-wallets. In addition, the company projects e-wallet usage will more than double in POS share by 2022.
There are also e-wallets provided by banks and merchants, and the latter ones integrate payments with the entire shopping experience, showing great success among US-based customers. All of them have in common one feature: loyalty. Merchants that have their own apps have certain benefits: pre-existing permissions for engaging, known user behaviours, built-in brand trust, and smaller costs for acquiring e-wallet customers.
The ‘pays’ – global status
The expansion of e-wallets – like Alipay and WeChat Pay – has made it possible for Chinese consumers to use their mobile devices instead of their physical wallets or even their formal bank accounts. They’re using their smartphones to pay for almost everything they buy. Alipay, for example, offers almost complete coverage of online and offline shops in China, and it provides a wide range of other financial services, like money market investments, insurance, travel booking, and loans. On the other hand, WeChat Pay provides targeted marketing options for merchants and it is also widely integrated in social media hosted by WeChat.
Western countries are visited by millions of Eastern tourists and, throughout 2018 and 2019, we witnessed this trend growing stronger. In addition, a survey regarding the payment behaviour of Chinese travellers revealed that they prefer to use mobile payment methods with which they are familiar. Needless to say that the opportunity was seized by Alipay and WeChat Pay, which expanded globally and even moved beyond payments in 2018, providing users with an entire ecosystem through which they can communicate, invest, pay and get paid, borrow, and manage their financial lives from a single place.
In 2018 and 2019, Apple launched its e-wallet in new countries as well, among which Germany, Spain, Norway, Taiwan, Poland, Ireland, Australia, Italy, and the Czech Republic. What is more, a recent study found that Apple Pay has an estimated 127 million active global users. According to reports from April 2018, Google Pay has also reached 100 million installs in just a few months, and throughout 2018 and 2019 it expanded its global presence as well, rolling out in countries such as Japan, Croatia, UAE, Chile, France, Switzerland, Israel, and Germany. Following the launches in Singapore, Russia, and the US from 2017, in 2018 and 2019 Samsung Pay went live in France, Australia, Brazil, the UAE, Italy, South Africa, and Mexico as well.
The ‘pays’ dominate more than half of the global supermarket transactions, according to the latest consumer spending data from Worldpay that shows that 59% of all in-store supermarket mobile transactions are taking place worldwide via e-wallets. Confidence with mobile payments has also shown an increase, with shoppers starting to purchase higher value goods via their mobile phones and the growing number (65%) of Generation Z contributing to the increasing popularity of e-wallets as well.
Conclusion
According to Global Mobile Wallets 2019, the number of e-wallet users worldwide is expected to reach a ten-digit figure in 2019. More than two-thirds of them live in Asia-Pacific, with China alone contributing close to 50%. However, lack of trust in the security of mobile payments is one of the major barriers in some regions, such as LATAM, but despite this, the number of e-wallet users in countries such as Argentina, Brazil, and Mexico is expected to grow as well. According to Javelin, worldwide, smartphone owners who have made a purchase on a mobile browser or app but not in-store are considered the ideal target market for wallet adoption, responding more positively by approximately 10% than the average consumer to smartphone features that they would be most likely to use.
There is a market that is ready for e-wallet adoption, but identifying potential e-wallet users will only be valuable if the experience itself is compelling enough for consumers to use it (and, most importantly, to keep using it) – and for merchants to offer it.
This editorial was first published in our Payment Methods Report 2019 – Innovations in the Way We Pay, which provides a comprehensive overview of the up-to-the-minute trends, updates, and innovations in the payments space worldwide, depicting the key developments in the way people pay.
Every day we send out a free e-mail with the most important headlines of the last 24 hours.
Subscribe now