We have evolved, and so have our smartphones. The tools that kept us connected beyond borders now fuel commerce by facilitating financial transactions and have also become the building blocks of various economies. Today, there are about 3.9 billion smartphone users worldwide (approximately 50% of the world’s population).
Smartphone penetration has increased especially in Asia, China and India in particular. FinTech and BigTech companies have leveraged the high smartphone penetration in Asia to launch payment apps that have now become indispensable. The ease of paying bills, making online purchases, and sending money to other users drives the adoption of payment apps. The COVID-19 pandemic only strengthened the adoption by reducing the dependence on cash. Businesses that were reluctant to adopt payment apps also embraced POS machines, NFC, and QR codes, eventually strengthening the digital payments ecosystem. Digital wallets—an integral part of the financial ecosystem—enable people to send money in just a few clicks. As of today, approximately 3 billion people worldwide use mobile wallets.
FMCG giant Coca-Cola demonstrated the concept of mobile payments in 1997. Customers could pay for their purchases made using vending machines by simply sending a text message from their cell phones. This inspired several companies to explore digital wallets to enhance the financial lives of their customers. PayPal was one of the first few companies that enabled rapid global transactions using wallets. Other regional players followed suit and launched their versions of digital wallets.
Digital wallets are virtual accounts that allow users to store fiat or digital currencies, send virtual currencies to other users, pay utility bills, and complete online transactions. As they are digital, they need to be loaded with fiat or digital currencies that can be transferred from banks, debit/credit cards, prepaid cards, digital exchanges, or compatible protocols. They are accessible on desktops, cell phones, tabs, or any other digital screen. Digital wallets have evolved; users can store loyalty card points and digital coupons and link their wallets to driver licenses, loyalty cards, health passes, and identification documents. The chart given below maps the top wallets across the world.
With 1.3 billion users, Alipay leads the pack, followed by WeChat Pay (1 billion), Apple Pay (507 million), Google Pay (421 million), PayPal (416 million), Paytm (333 million), PhonePe (325 million), and MobiKwik (108 million), among others. Here are some countries that use popular payment wallet providers.
Nearly one-third of the US population uses NFC to make payments at POS locations. Apple Pay (43.9 million users), Starbucks (31.2 million users), Google Pay (25 million users), and Samsung Pay (16.3 million users) are the leading players.
Nearly 70% of the Chinese population uses mobile wallets to meet their day-to-day expenses, with QR codes being the most popular payment mode. Alipay and WeChat Pay, the two largest players, account for 90% of the total market share. During the COVID-19 pandemic, mobile payments grew multifold despite stagnant growth in mobile wallet users. In Japan, Line Pay, PayPay, and Rakuten Pay are the leading payment wallet providers. Line Pay app has 39 million users, PayPay has 36 million users, and Rakuten Pay has 28 million users.
Paytm (333 million users), PhonePe (325 million users), Google Pay (150 million users), MobiKwik (108 million users), and Amazon Pay (50 million users) are the leading wallet providers in India. Interestingly, these five leading players each have more than 10% of the mobile wallet market share. IMPS-based Unified Payments Interface (UPI) has become the most popular payment technology in India. UPI was launched by the National Payments Corporation of India (NPCI) in April 2016 and has transformed the financial lives of Indians. In October 2021, there were 4.2 billion UPI transactions with a transaction value of $103 billion. During the pandemic, PhonePe’s user base grew by nearly 40%, from 219 million (users) in June 2020 to 305 million in June 2021. Moreover, PhonePe has a 45% market share in UPI transactions today.
With 60 million users, PicPay is the fastest-growing payment app in Brazil. The pandemic led to a 50% increase in PicPay's user base in 2020. Likewise, Cambodia-based mobile wallet DaviPlata doubled its user base, from 6 million in 2020 to 12 million in 2021, because of the pandemic. Tigo Money is a mobile wallet used by 5 million people in Paraguay, Bolivia, Guatemala, Honduras and El Salvador.
Africa has the world's largest unbanked population. 57% of the African population does not have a bank account. Telecom and mobile money providers have enabled 42% of the unbanked population to have a mobile money account on their phone, allowing money transfers, online purchases, and utility bill payments without a bank account. Customers can load money into their virtual wallets with the help of local customer service agents. Leading mobile money service providers include M-Pesa (60 million users), Orange Money (60 million users), MTN Mobile Money (49 million users), and Airtel Africa (21 million users). In 2020, the number of mobile money accounts registered in Africa increased by 12% to 562 million, while the number of monthly active accounts increased by 18% to 161 million. Furthermore, total transactions reached 27.5 billion (up 15%), valued at $495 billion (up 23%).
Third-party reports have revealed some interesting stats showing that the growth in wallet payments was faster than expected, primarily due to the pandemic. The number of mobile wallet users across the world will grow from 2.7 billion in December 2020 to 4.8 billion (60% of the world's population) in 2025, registering a 74% growth. In addition, the number of mobile wallet users is projected to increase from 42.1% (1.8 billion users) of APAC's total population in 2020 to 58.6% (2.6 billion users) in 2025. Moreover, the number of people using mobile wallets to make payments rose from around 900 million to 1.48 billion from 2019 to 2020, i.e., a 40% increase. In 2020, mobile wallets accounted for 25.7% of all POS payments, and the figure is expected to jump to 33.4% in the next three years. Globally, mobile wallet payments have doubled over the past two years and are expected to reach $2.8 trillion and $4 trillion by 2021 and 2024, respectively.
Mobile wallets have and will continue to have a major impact. Though some say that the mobile wallets market is saturated, 50% of the world’s population is still untapped. New entrants offering innovative solutions and rewards can compete by ensuring location-agnostic financial services for everyone.
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