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In recent years, digital wallets have shot from the niche to the mainstream.
Digital wallets shoot to the mainstream
Their use has taken off in every region of the world, the growth trajectory remains strong, and virtually every player involved in the digital payment ecosystem needs to consider how, when and why they should engage with the world of wallets – and whether they should go so far as to launch a wallet of their own.
In new white paper, Visa Consulting & Analytics (VCA) lays out its analysis, taking stock of market developments in the CEMEA region, evaluating the strategic options open to any players that wish to enter the market or refine their existing wallet proposition, and set out a path to profitability.
The stakes are considerable. It is estimated that, by the start of 2023, digital wallets accounted for 49% of global e-commerce payments and 43% of global POS payments, accounting for around $18 trillion in consumer spending.
They are also rated as the fastest growing payment method globally, with compound annual rates through to 2026 forecast at 15% for POS and 12% for e-commerce.
As ever, the picture across the CEMEA region is diverse. There are already several digital wallet hotspots, while most other markets are rapidly playing catch-up. Across the Middle East and
Africa, for example, growth has been strongest in e-commerce, with digital wallets accounting for 26% of payments volume (compared to 13% of POS payments).
Meanwhile, in Central and Eastern Europe and the Commonwealth of Independent States, the use of digital wallets is expected to surge from around 26% of payments in 2020 to approach 30% in 2024.
Given the prominence of wallets in the payments landscape, many incumbent banks and established fintechs are facing a strategic dilemma – do they launch their own wallet or are they better stepping aside of the game.
Consequently, many intend to launch a wallet of their own or are already in the process of doing so.
The competitive landscape for wallets is varied and dynamic. In most countries, several wallets co-exist comfortably, and there’s typically ample space for new entrants.
But sometimes it’s a “winner takes all market”, with one or two dominant players creating strong network effects, and a long tail of smaller challengers that failed to take off and gain scale.
Players range from fintechs, neobanks and established banks to super apps, big tech and device manufacturers, with local and regional players leading the pack in most countries.
Another interesting thing about the market is the range of business models that have emerged. Many players have entered the market.
Each has taken a different strategic approach. But, although plenty have gathered momentum, very few have achieved profitability.
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