Mobile payments continue to accelerate post-pandemic

A pandemic fuelled a surge in the volume and value of mobile payments conducted using digital wallets has laid a foundation for their continued adoption even as global lockdown restrictions have eased. And that trend should drive parallel growth in other mobile payment methods such as QR codes and carrier billing as more significant numbers of consumers become progressively more comfortable using their smartphones to pay for goods and services.

Recent research illustrates the extent of the transition as people worldwide embraced digital wallets at the expense of cash and cards. The State of the Union: Global Digital Payments and Fintech Ecosystem report compiled by 451 Research and commissioned by Discover Global Network surveyed 3,869 consumers across the US, China, India, Singapore, Mexico, Brazil, Germany and the UK. 

It found that digital wallets now fund a large proportion of global consumer spending – 27% of in-store spending, 41% of ecommerce and 46% of mobile commerce (mcommerce) transactions – with combined transaction values set to exceed USD 10 trillion by 2025. They are the most frequently used digital payment service globally, with 57% of users making three or more transactions each month and 25% reporting that they use them seven or more times a month (34% in the APAC region, double the rate in the US).

Consumers seem to prefer global OEM e-wallet brands such as PayPal, Apple Pay, Google Pay and Amazon Pay. But local and regional players also see strong support, nowhere more so than China (where ‘super apps’ like Huawei Pay, Alipay and WeChat Pay dominate), India (Paytm) and Singapore (GrabPay). Even markets like the US, which have been slower to adopt digital wallets compared to other regions of the world, saw a surge of adoption since the onset of the coronavirus pandemic.

McKinsey confirms the trend, estimating that while overall payment values dropped 9% year on year in 2020 (primarily due to a 16% decline in cash transactions), the use of digital wallets accelerated in parallel. For example, the company calculates that digital wallet transactions in Australia grew by 90% between March 2020 and March 2020. By this point, 40% of combined debit and credit card contactless volumes were initiated using digital wallets. And in Indonesia, the value of e-wallet transactions grew by nearly 39% between 2019 and 2020.

Growing share of expanding m-commerce transactions

The use of digital wallets has accelerated in tandem with global mCommerce transactions, the value of which is set to expand at a compound annual growth rate (CAGR) of 17.1% between 2020 and 2025 calculates 451 Research. The company estimates that online purchases conducted on mobile devices accounted for 51% (USD 2.4 billion) of the total in 2020 the company calculated, a share which will grow to 53% (USD 2.8 trillion) this year and 64% (USD 5.2 trillion) by 2025.

Digital wallets alone accounted for almost half (46%) of global mCommerce sales in 2020, nearly USD 1.1 trillion. It’s a similar story at physical retail premises, which connect using NFC, QR codes and barcodes. Here digital wallets are estimated to have accounted for 27% of global in-store sales volume worth USD 4 trillion in 2020. 

Once they have become accustomed to the speed and convenience of using their smartphones to buy goods and services, consumers seem unlikely to abandon their newfound preference for mobile payments any time soon. 451 Research expects digital wallet ecommerce transactions will now expand at a CAGR of 22% to reach USD 2.9 trillion in 2025. Contactless payments at the till are forecast to grow at a CAGR of 11% to be worth USD 6.8 trillion by 2025, making for 37% of total in-store spend.

Digital wallets highlight mobile payment advantages

Juniper Research forecasts that transaction volumes for mobile payments will almost double from 26 billion in 2021 to 49 billion in 2023. They have become a mainstay of online and in-store transactions enabled by the faster, more reliable Internet connectivity lower-cost smartphones featuring contactless technologies like NFC. In its Contactless Payments: Trends, Opportunities and Market Forecasts 2021-2026 report, the company identified enhanced security and increasing cross-channel payment capabilities as key growth drivers. 

Undoubtedly, mobile wallets offer several advantages for consumers compared to payment card checkout models, including enhanced authentication embedded in smartphones (PINs, patterns, biometric readers, for example) and the convenience of having card details already stored on the device.

But growing adoption of those wallets is also likely to kickstart parallel growth in other forms of digital payments, including QR codes and direct carrier billing (DCB), which offer the same characteristics regarding frictionless payments, convenience, and security. With consumers having demonstrated their preference, it’s now time for merchants must now make sure their payment and customer billing infrastructure is appropriately configured to accommodate their choice of mobile payment, whatever that might be.

About Jonathan Bennett

Jonathan Bennett, Chief Commercial Officer, is responsible for all commercial activities globally at DOCOMO Digital. Jonathan has over seventeen years’ experience in the payments’ ecosystem, having held leadership positions with Cashflows, Travelex, Mastercard and Kalixa Payments Group. Jonathan brings deep expertise in the entire payments value chain and is passionate about driving innovation and best-in-class customer experience. Jonathan graduated from the Lancaster University.

About DOCOMO

DOCOMO Digital is the international payments business of NTT DOCOMO. We partner with carriers, merchants, OTT services, app stores and payment providers in both developed and emerging markets worldwide. Our robust managed services platform and coverage across carriers and the most locally relevant payment methods enable faster time-to-market, especially for streaming, gaming, ecommerce, and productivity application providers.