During the next three years there will be at least 6 billion mobile wallets in hands of consumers, they come in different configurations, capabilities, functionalities and economic models. The researchers at McKinsey, Juniper, CapGemini, Accenture and others are in consensus about the critical role this digital containers play in payments and money movement.
We have come along way, from the birth of M-Pesa in Africa, to the first-generation of wallets in China, to the West response with tokenization and the provisioning of credentials. Today wallets are more sophisticated with user experiences that range from multi-currency capabilities, personal financial services, crypto, cross border remittances, domestic acceptance and rewards models embedded in the real time payment experience.
Mobile wallets are the fastest growing financial tool in hands of consumers, and ownership will change the payments and money movement landscape for all players. According to the latest report from FIS Worldpay, the share of transactions of Mobile wallet in eCommerce will reach 54% by 2026 and 43% in POS payment methods, by the same year. Wallets are the main form factor, in alternative payment methods; CapGemini is predicting that by 2027, new digital payment methods will make up approximately 30% of total global volume, with traditional payments dropping to around 70% of overall non-cash transaction volumes.
Wallets are driving a large impact in cash displacement, analysis from Accenture and FIS, forecast cash transaction value to decline to around USD 6 trillion by 2026 that will be 10% of all commerce transactions, during the same period ownership of wallets will almost duplicate to surpass the 5 billion.
In TerraPay we partner with more than 100 wallets globally and based on our own estimates the wallets participating in our money movement network are serving approximately 600 million individuals with no access to bank accounts, out of the >2.1 billion wallets in the network.
These figures are difficult to ignore, we are at the early stage of a massive reconfiguration of the ecosystem, three big market forces will propel a deeper transformation: The first one is the connectivity of these wallets to emerging Real Time Payments networks in more than 100 markets, like PIX, UPI and others; these new networks offer irrevocable funds in seconds, 24/7 and data-rich transaction, they are an efficient rail to overlay multiple financial services and fit the purpose of payments and money movement.
The second is the new consumer, digital natives Gen Zs and Millennials prefer the convenience of the wallet, specially the real time nature of the transactions, in the next few years they will be the largest workforce and the largest consumer group.
And the third one is the large number of unbanked and underserve consumers, about 1.4 billion individuals that remain excluded from traditional banking models and find in wallets the financial tool they need to participate in the digital economy. We have seen the important social and economic impact of wallets like M-PESA Africa Nequi bKash Limited Yape GCash to name a few, in serving underserved communities.
Wallets are the present and the future of payments and money movement. If you are a bank, a fintech, an investment app, a money transfer operator or a Telco, your wallet strategy will define your relevancy in this nascent ecosystem. The convergence of multiple use cases and the ability to leverage multiples networks, will define the next stage in this reconfiguration.
You have options, your strategy needs to start with your consumers and clients and define the type of experiences and use cases you want to enable, the focus on domestic and cross border environments, adding tokenized credentials, the network that will enable your financial transactions and the core value proposition of your wallet.
If cross border is an important pillar of your strategy, we are here to help, let’s have you connected to our network and join forces in shaping this new ecosystem.
I would like to hear from you, your challenges and the opportunities you are pursuing. Post your comments or drop me a line.
Sources: CapGemini, FIS WorldPay, Accenture, McKinsey, Juniper.