According to a Bloomberg article: "mobile payment adoption is expected to reach 4.8 billion by 2025". It is a promise of opening the door to greater financial equality for populations in developing countries, but also the promise of massive revenue growth, especially as a lot of mobile payment apps are being heavily integrated into other financial services. The e-revolution is on its way.
Digital Wallets: emerging as mainstream
According to the simple definition of N26, "digital wallets are online payment tools, usually in the form of an app. The wallet securely stores virtual versions of debit and credit cards, so the customer does not need to enter card details or carry a physical card at all to make payments." The Covid-19 pandemic has significantly increased the need for contactless money management and ID solutions, resulting in the growing adoption of mobile solutions in payments, banking, and other financial services categories. For the past ten years, digital wallets have transformed the way people manage every aspect of their lives. Changing rapidly but also deeply the habits, digital wallets and payment apps are on their way to becoming mainstream. According to the Payments Journal, "between February and June 2020, banking at branches declined by 12%, while mobile banking grew by 34%." The reason behind such a shift is no longer just about just "making a payment". Indeed, as stated by Jeni Mundy, Global Head Merchant Sales & Acquiring at Visa, payments are now "about creating a simple and secure experience that reflects one's brand across channels –– and provides utility to both the business and its customer."
Digital Wallets: boosting financial inclusion
Digital wallets are key to helping unbanked populations worldwide by providing an accessible alternative to traditional financial systems. Indeed, mobile wallets work like bank accounts for people who have no access to bank accounts. Thanks to mobile and digital wallets, people can make payments, store funds, and transfer money to other users' financial accounts using their fingertips. Digital Wallets have created the possibility to include within the financial system people who were excluded, but also act on reducing global poverty. In a report of the United Nations focusing on the impact of M-Pesa, a mobile phone-based money transfer service, payments and micro-financing service, we can read that "in Kenya, the expansion of mobile money (via M-Pesa) lifted two per cent of the households in the country above the poverty line."
Digital Wallets and Crypto: the new frontier
In a recent Fintech Times article, a study stated that "67% of people who own crypto say they would consider using it for purchases if it were linked to a mobile wallet." It is pretty clear that the increasing popularity of payment apps could lead consumers to start paying with crypto. Visa's head of crypto announced in 2021 7 that the payments giant partnered with about 60 leading crypto platforms to launch programs that make it easy for consumers to convert and spend digital currency at millions of merchant locations worldwide. But what about the number of merchants who would start accepting crypto payments? Some services allow merchants to get actual crypto payments and they are developing. Those services convert crypto to a stable coin for the merchant, allowing the merchant to avoid the volatility concerns in the crypto's value. Nevertheless, the diversity of the regulation across the different countries remains an issue for the merchants, as the chargeback and the speed of the transaction.
If Digital Wallets are already the new normal, the new frontier is just around the corner. It is a question of time before digital currencies overtake fiat and physical currencies. When do you place your bet?
Publié le 15 juin 2022