Consumer spending through digital wallets will reach more than $10 trillion in 2025, up from $5.5tn last year, according to a new report.
The growth of more than 80 per cent over the five-year period will be fuelled by the increased adoption of digital payments in the wake of the Covid-19 pandemic, UK-based Juniper Research said.
It predicted that contactless and e-commerce payments will account for 50 per cent of total digital wallet spending in next five years, from just under 36 per cent last year.
The rapid growth in digital wallet availability, coupled with rising adoption rates, means merchants face difficult choices. Selecting the right wallet providers and the integration costs for using multiple wallets are proving to be a challenge, it added.
“Merchants must base their payment strategies around wallet acceptance in order to support a digitally-engaged addressable market … but must also judge the right wallets to target, or they will be lumbered with increased costs and limited benefits,” the report’s co-author, Alexandria Sadler, said.
The wallets are becoming increasingly capable of both "contactless and remote payments", she added.
A digital wallet stores users’ credit and/or debit card information and links it to a payment gateway to allow purchases at a point of sale. Like a credit card, these wallets will only work at merchants who accept them as a payment method.
Google was the first major company to launch a mobile wallet in 2011, with its Wallet service. Now there are a range of others, such as Samsung Pay, PayPal and Apple Pay. Many telecoms companies and banks have their own mobile wallet offerings.
The increased use of contactless mobile payments, prompted by concerns around cash during the Covid-19 pandemic, has led to greater use of digital wallets across the payments ecosystem, the Juniper report found.
Contactless adoption will continue to rise, with over 34 per cent of mobile handsets expected to use contactless payments in 2025, up from 11 per cent in 2020, it added.
“This growth means integrating contactless-enabled wallets within checkout processes will be critical to meeting changing user expectations.”
The UAE is among the countries leading this adoption.
Two-thirds of people expect the country to become fully cashless by 2030, according to a September poll by Standard Chartered. A report by US-based TechSci Research also found the UAE mobile wallet market is expected to grow at a compound annual rate of 24 per cent to $2.3 billion by 2022.