Breaking Down Borders: The Role of Digital Wallets in Cross-Border Money Movement

July 8, 2023 |
By - Ruben Salazar
3 minutes read
3 minutes read
By - Ruben Salazar

Propelled by rapidly changing consumer demands, digital wallets have emerged as one of the fastest-growing financial tools for both individuals and businesses. Considering the ubiquity of mobile phones, digital wallets offer a wide range of digital-first capabilities that bring ease of use, transparency, and an enhanced user experience. As digital wallet users keep increasing, their global numbers are anticipated to cross 5.2 billion by 2026.[1]


Comfort, Convenience, Speed and More

With more consumers getting comfortable managing payments through mobile devices and other digital-first means, the numbers for digital wallet users are likely to keep mounting.

Digitally native consumers – Millennials and Gen Z – are also aiding in this shift away from traditional money movement practices offered by banks, as they tend to embrace wallets and other digital-first platforms. Driven by their desire for instant gratification, these younger cohorts prefer the speed, simplicity and efficiency that mobile wallets offer in sending and receiving money.

Not surprisingly, 75% of surveyed Gen Z individuals use P2P payment platforms each month[2] , while 70% of them shop online via mobile-first payments [3]. Supported by pandemic-linked tailwinds, digital wallets have steered individuals away from in-person experiences and the use of cash to a range of daily touchless transactions.

Consumers use various payment modes to fund digital wallets, with bank accounts leading the charge (global average 35%), followed by debit cards (26%) and credit cards (23%). In some regions, wallets constitute one of the most accessible financial instruments for consumers.[4]


Empowering Underserved Communities and Expanding Access

Worldwide, approximately 1.8 billion people are either unserved or underserved by the financial system [5]. Even for underbanked or unbanked sections, however, wallets are gradually emerging as an empowering entry point to the financial ecosystem. People having bank accounts does not signify digital economy access. But digital wallets permit greater financial equity by helping enable unbanked people to access financial products.

Digital wallets play a key role in providing underserved communities with greater economic empowerment and financial inclusion by penetrating previously unreached regions. The spread of wallets in many markets has been possible because of better accessibility and affordability of mobile phones.

Wallets also help ensure convenience for consumers by making multiple services available on the same app. Such ‘super apps’ facilitate P2P transactions, merchant payments, food delivery, taxi services and more while allowing better user experiences compared to the apps provided by financial institutions. Moreover, these apps permit cross-border remittances.


Increasing Wallet Ownership

It comes as no surprise then that digital wallets hold high penetration levels among payment methods in some of the most populated and largest inbound remittance markets such as India, China, Philippines, Mexico, Bangladesh, Kenya, etc., representing key receiving endpoints for Visa’s cross-border solutions.

The volume of cross border money movement via wallets, is still small but rapidly growing. In 2021, cross-border transfers sent and received through digital wallets surged by 48% to touch $16 billion [6].

As the P2P and cross-border payments universe is changing and acting as a financial tool for inclusion, cross-border transfers are slowly evolving alongside consumer P2P domestic payments. As part of its initiatives to transform the next generation of global money movement, Visa has expanded Visa Direct’s reach to more than 7B+ endpoints capability, including 3B+ eligible cards, 2B+ accounts and 1.5B digital wallets .


Visa Direct Initiatives and Partnerships

Through Visa Direct, Visa is applying 60+ years of experience in payments to other areas and use cases beyond traditional card payments. This goes beyond remittances alone, as Visa Direct supports the fast delivery of funds across a wide range of use cases, including person-to-person payments, account-to-account transfers, business and government payouts to individuals or small businesses, merchant settlements and refunds .

Just as evolving consumer behaviour on domestic P2P is inclined to shift away from sharing card or account details to alias-based transfers, the same will likely happen with cross-border money movement. Since wallets represent the original alias-linked money movement ecosystem, expanding to wallets as endpoints will help reinforce Visa’s shift towards alias-based money transfers.

In this context, the partnership between Visa and TerraPay will help augment the digital wallet revolution due to the availability of more than one network partner in reaching specific wallets. It will also help in boosting Visa’s reach to 32 new wallets spanning 22 markets (nine of these being new markets) in Africa and Asia-Pacific. In a nutshell, be it funding friends or booking travel, wallets are becoming a one-stop shop for numerous goods and services, including cross-border money transfers.