Thanks to the proliferation of smartphones (and a hyperconnected Gen Z), digital wallets are officially the most popular way to make a payment.
That’s true both in America and around the world—whether you’re buying a coffee, ordering from Amazon, or sending money to loved ones.
The only question is: where do we go from here?
Today, we will examine the evolution of digital wallets, along with the global adoption of digital wallets, and the technology’s core benefits and anticipated trends.
Digital Wallets Explained
We all know about cash and credit cards.
But what are digital wallets?
Simply put, they are your cash and credit cards in digital form, like an electronic version of your physical wallet.
Therefore, digital wallets (also known as e-wallets) can be utilized via your smartphone, smartwatch, tablet, and computer devices.
Whether you’re shopping online or in-person, you can easily navigate checkouts with the tap of a button—or by simply hovering your device over the payment terminal.
This contactless process is powered by near field communication (NFC), a technology leveraged by all major digital wallet vendors (including Apple Pay and Google Pay).
As you may suspect, this payment method took the stage right when the world needed it most.
The Evolution of Digital Wallets
Centuries from now, historians will write about the world in two parts: life before the 2020 pandemic, and life after it.
While COVID-19 changed lives in many indescribable ways, dynamic shifts in technology offer the most tangible insights into how the economy has evolved post-2020.
Digital wallets are the fruit of that intensely disruptive season.
While they existed prior to 2020, digital wallets only had a supporting role in the global economy. As the “new kid on the block,” digital wallets slowly gained momentum and inspired pundits to question whether they would dethrone cash.
Their suspicions proved accurate.
After the world went into lockdown, digital wallet adoption skyrocketed.
Thanks to its native contactless payment technology, digital wallets became the safe option for a social-distancing world. Long after CDC and government edicts eased, however, contactless payments remained increasingly popular—offering a coup de grâce for cash.
Why did digital wallets remain on top? Because their unparalleled convenience (and impressive encryption technology) could not be ignored, as two recent studies affirm:
- In 2019, just 0.6% of total U.S. credit card spending was completed on digital wallets.
Today, that number has increased exponentially to 7.2%. - In 2020, only 24% of smartphone owners made payments with digital wallets.
In 2023, that number nearly doubled to 43% (nearly 115 million Americans).
While consumers of all generations are leveraging digital wallets, Gen Z is leading the charge in America.
According to its feisty article, “Wallets are Uncool. Go Digital,” The New York Times reports that over 80% of Gen Zers are eagerly leveraging mobile wallets in every aspect of their financial lives.
Beyond generational enthusiasm, digital wallet adoption is on the rise around the world.
In fact, digital wallet usage is the highest in China and India, where roughly 40% of consumers use their e-wallets every single day. As we will discuss in a later section, digital wallets are rapidly expanding in almost every corner of the globe.
That’s why total digital wallet transaction values eclipsed $9 trillion in 2023 and are expected to surpass $16 trillion by 2028.
With such a plurality of support, the benefits of digital wallets must be worthy of attention.
Let’s see what they bring to the table.
Key Benefits of Digital Wallets
Chances are, you already know why digital wallets are popular.
In fact, you might have already made a couple—or even a couple hundred—purchases with your smartphone.
However, if you’re unfamiliar with this emerging technology, or if you want to put it in clear terms, you came to the right place.
Here are three of the most compelling reasons to embrace digital wallets.
1. Convenience
Practically speaking, an e-wallet allows you to store multiple payment methods in one place.
That includes your essential tools, like your credit cards and debit cards, but also niche financial platforms like rewards cards and cryptocurrency apps.
Therefore, your digital wallet makes carrying physical wallets, pocketbooks, and purses optional—so long as you have your smartphone on hand.
While lightening your load, digital wallets effortlessly streamline the purchasing process. After all, you’re always just a tap, click, or touch away from completing a transaction.
2. Security
In the early days of digital wallets, consumers were concerned about security.
While those fears were understandable, they have been largely eliminated in recent years. After all, digital wallets employ state-of-the-art encryption technology that prevents bad actors from stealing your data during a transaction.
That’s why many believe digital wallets are actually safer than physical credit cards.
Why? Because your confidential information is totally hidden from prying eyes.
“Instead of sharing your card number directly with a merchant,” Forbes reports, “a digital wallet uses a process called tokenization to mask your payment details.”
Plus, if your smartphone gets stolen, criminals still need to crack your password before they can make a purchase. This gives you more than enough time to cancel your payment information.
While no financial transaction is immune to risk, digital wallets have all but closed the door on criminals.
3. Rewards
Digital wallets are more than a secure and convenient way to make payments.
In 2024, they’re also the pathway to loyalty rewards, discounts, and even cash back.
Some credit cards offer exclusive incentives if you upload them to your e-wallet. On top of that, providers like Samsung Pay (and many others) offer additional bonuses and prizes when you make purchases from select vendors.
In other words, you can “stack” rewards from both your credit card issuer and your digital wallet provider for maximum profit.
Digital wallets aren’t just convenient. They’re rewarding.
Bonus: by providing a detailed record of purchases, digital wallets can make it easier to track your spending. This can unlock meaningful budgeting opportunities for your financial freedom.
While helping organize expenses, digital wallets also enable you to receive real-time alerts of any unusual charges or activity in your account.
Digital Wallet Market Trends
The disruption is well underway.
As digital wallets flood the market, pundits envision a wholesale replacement of traditional wallets by 2030. If the compound annual growth rate (CAGR) continues, these estimates may prove accurate—if not inevitable.
In the meantime, four other trends are emerging on the horizon.
Consolidation
In 2021, 30% of consumers leveraged multiple digital wallets at once.
By 2023, however, that figure had dropped to 20%, while the number of consumers using only one digital wallet had increased 10% during the same timeframe.
In the coming years, we expect to see increased competition among digital wallet companies. This economic battle will demand greater loyalty from customers.
Integration (and Invention)
As consumers flock to digital wallets, the financial world will follow suit to meet demand. In the months and years ahead, banks and other financial institutions will rapidly integrate with existing e-wallets, and even create their own.
In 2023, for example, banks like JPMorgan Chase and Wells Fargo united to create Paze, a proprietary digital wallet meant to compete with the likes of Cash App, Apple Pay, and others.
Banks of all sizes are betting big on digital wallets, giving consumers enhanced optionality in the market.
Increased Spending
There’s a reason credit card companies and banks incentivize digital wallet adoption.
Why? Because 47% of consumers spend more money with their digital wallets than with physical credit cards and cash.
The difference is noticeable: the average retail purchase among digital wallet users is $95, while consumers using traditional payment methods spent just $81 per transaction.
In fact, the average digital wallet user spends 33% more on restaurant purchases, 17% more on retail items, and 22% more on travel than their non-digital wallet counterparts.
Global Proliferation
While Western nations enjoy digital wallets, other continents have embraced them with equal fervor.
For example, Sub-Saharan Africa (SSA) is officially the world leader in mobile banking, where over 763 million consumers utilize digital wallets—up from just 184 million in 2022.
Due to this exceptional growth, the SSA region has seen digital wallet transaction values jump to $832 billion in 2023.
Similar trends can also be spotted in Japan, where digital wallet demand is expected to maintain a 16.5% growth rate through 2032, with a valuation in excess of $55 billion.
India is also fully on board, where 55% of consumers prefer digital wallets for making retail purchases. Perhaps that’s why the e-wallet market in India is expected to surpass $5 trillion in 2027.
Everywhere you look, access to digital wallets has eliminated barriers to banking, empowered consumers, and liberated merchants.
Most importantly, digital wallets have made it easier to safely send money home to loved ones.
uLink: Connecting You Home
Digital wallets are here to stay.
As a consumer, you will have many compelling offers to consider, especially as financial institutions compete for your attention.
As always, we encourage you to research each company and choose the platform best suited to your unique lifestyle and goals.
While digital wallets can help you streamline your spending, uLink can help you support your loved ones back home.
With great exchange rates and fees starting as low as $0, you can send more money home than ever before.
All you need to do is download the uLink app—for both Android and iPhone—and you can start sending money in minutes.
Miles from home—just moments away with uLink.
