When the digital wallet technology first emerged in the 90s, it was met with lukewarm reception – slow connectivity and low efficiency deterred the benefits of digital wallets from being effectively showcased to the world.
But how times have changed. By 2025, it is estimated that unique digital wallet users will exceed 4.4 billion. Today, 32% of digital wallet users have more than 3 wallets on their smartphones.
In the wake of new and more accessible technology as well as changing user habits, people have become unwittingly enwrapped in the use of digital wallets.
The once obscure technology has now become an everyday tool, prompting the thought, how far will it go?
Let’s dive into the digital payment trends that will continue to make waves in the coming years.
The Rise of Digital Currencies
Digital currencies are yet to be in every wallet, but many finance experts agree that some currencies, like Bitcoin and Ethereum, are gaining traction in the future of payments. Bitcoin is originally intended as a peer-to-peer payment system that does not go through any intermediaries. But with the proliferation of cryptocurrencies since Bitcoin was first introduced 12 years ago, there are now over 11,000 cryptocurrencies – many of which offers innovative payment solutions through digital wallet apps for mobile devices.
These cryptocurrencies, backed by blockchain technology, is a great example of how fintech has evolved and disrupted the sector, with faster and more cost-efficient cross-border transactions made accessible. Blockchain is immutable and transparent; it has not only proven to have diverse use-cases in the financial sectors such as banking and payments, but also in non-financial areas including supply chain management and cloud storage.
While the industry is still clouded with uncertainty, digital wallet providers will race against time and competition to create new innovations and shape future trends.
E-commerce payments
E-commerce was showing promising growth prior to the pandemic, but throughout the last 2 years, there has been a huge user jump into mobile payments as people chose to minimise close contact by taking the bulk of their shopping online.
While digital wallet adoption is on a climb across the world, the Asia Pacific is in the lead. In APAC countries, digital wallets account for 58% of regional e-commerce payments, surpassing cash at the point-of-sale. In China, digital wallets account for 48% of payment volume and 71% of e-commerce spend. According to Business Times, Southeast Asia is also a quickly digitalising market, with an anticipated 439.7 million wallets to be in use across Singapore, Vietnam, Malaysia, Philippines, and Thailand by 2025.
E-commerce and digital wallets have an interdependence; e-commerce adds value to digital wallets, while users are leaning toward digital wallets for a more accessible shopping experience. This drive both sectors in a position for growth.
QR Code Payments
The use of QR codes for making payments has been a staple in many Asian countries like China and Hong Kong. It is relied on for its speed and efficiency. All it takes is a tap and a scan and the transaction is complete.
In the U.S., Venmo uses QR codes as a payment tender. This payment system has developed an inroad that wasn’t any of the current payment schemes, such as debit or credit card. It is now used in more than 8,000 retail stores across the country and is a preferred method of payment for millennial users for its ease of use.
QR code payments gains its popularity for being a secure way to pay. Aside from being contactless, payment details are tokenised and encrypted, and personal information are out of sight.
Impact of Consumer Demand
Digital payment trends will continue to evolve as customer's expectations and needs change. With that said, fintech firms must constantly be on the lookout for changes in customer behaviours and fintech trends using it as a guide when adopting technologies in their list of offerings.
For this to work, firms must have full understanding of their customer behaviour. You need to know their habits and needs, which can only happen with constant communication, engagement, and interaction with them. This is how you can pinpoint technologies that put your customers at the center of your services and digital payment solutions.
Alipay is yet another great example of this - and probably another reason for its tremendous success as a digital payment solution. Aside from the ability to use this e-wallet for making payments on purchases, the company has integrated a variety of other finance-related services such as wealth management, insurance and credit services, and micro financing.
Specialisation in Digital Payment System
There are several entrants in the payments industry that it is quickly becoming saturated. In order to stand out, fintech firms offering digital payments need to differentiate through specialization.
What this essentially means is that firms must focus on a particular customer base or market. Apple Pay is a good example of this. It is a form of digital wallet that is designed to replace cash or physical cards. It is integrated to Apple devices and powers Apple Cash, which enables you to send and receive money.
A Future of Collaboration
There is a steady growth in the mergers and acquisitions of fintech firms. Private equity firms are seeing the value in fintechs companies while banks are also embracing fintech disruption to expand their customer-facing products and services. In other case, fintechs firms are also acquiring other fintech companies. One such example is the merger of Paypal and iZettle in 2019.
Its biggest acquisition to date, PayPal bought Swedish payments startup iZettle for $2.2 billion. It is described by PayPal Chief Operating Officer Bill Ready as a move to increase its payments presence among physical retailers.
iZettle is best known for its fintech revolutionising mobile payments through the innovation of a mini chip card reader.
Collaborations can drive client base expansion, build greater trust, give access to capital and gain know-hows. It will be a key to driving new trends and innovations in the future.
The Fintech Disruption Continues
Prior to the pandemic, digital payments were already on the rise, and with Covid-19, it accelerated the jump of users into online shopping and saw the rise in e-commerce spend and payment volume. Payment companies, such as Stripe and Plaid, saw their valuations grow by leaps and bounds.
These are sure signs that fintech is unstoppable. As digital wallet gradually becomes a norm, so will other innovations reach the masses, promoting digital adoption and financial inclusion at a greater scale. The world is only seeing its beginning.