Digital wallets on the rise – global, billion-dollar trend

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This is Payments & Beyond, a biweekly newsletter that will bring together news, data, reports, and insights on what's happening in the payments industry and digital commerce globally, taking a closer look at the world's fastest-growing verticals such as streaming, online games, creator's economy, SaaS & cloud, and retail.

Digital wallets on the rise – global, billion-dollar trend 

Use of digital wallets in Latin America is expected to more than triple by 2025, jumping from a market size of USD 105.9 billion in 2022 to USD 372.4 billion in 2025, according to Juniper research from Statista . The mobile wallet boom is a global trend seen in all regions, though widely led by the Far East and China, where the payment method is expected to surpass USD 5.7 trillion in market size by 2025.

The rise of digital wallets, especially in rising economies like Latin America, is the result of some factors: increasing smartphone and internet penetration, pandemic-driven digital inclusion, and the recent leap in technological innovation in the payments industry, which has brought dozens of new financial products to the market. 

In addition, digital wallets have also become an important tool for driving retention and recurrence – which explains the movement of companies whose core business is not financial services launching their own white-label digital wallets integrated with marketplaces, food delivery or ride-hailing apps.

"Wallets are more embedded in customers’ daily lives when they are part of ecosystems. This enables them to grow by extending into e-commerce, ride-hailing, food delivery, messaging, travel, and other adjacent categories," analyzed McKinsey & Company in the article "Sustaining digital payments growth: Winning models in emerging markets." 

This other paper by McKinsey & Company looked at what criteria consumers consider when choosing a wallet: they look not only for payment functionality but also for loyalty/rewards capabilities, as well as offers of a broad range of financial services, such as virtual cards or Buy-Now-Pay-Later solutions, and compatibility with their existing apps (and here the big techs' mobile wallets, such as GPay and Apple Pay, come out ahead). 

In its recent Payments 2025 & Beyond report, consulting firm PwC ranked digital wallets as one of the six macro trends that will affect the future of payments. According to the report, "convenience will drive users and usage to digital wallets as a first point of contact - and away from traditional card and banking interfaces." In addition to usability for the end user, the B2B market and the digitization of supply chains are pointed out as the next frontiers to be explored and impacted by wallets.

Wallets in América Latina

Over the last years, digital wallets have been among the top-3 payment methods in Latin American digital commerce, just behind cards and account-based transfers. Wallets are expected to represent a consistent 10% share of the volume transacted in the region's digital commerce over the next few years – growing around 20% annually through 2025, according to data from Americas Market Intelligence per EBANX's Beyond Borders study.

They are crucial to solve the challenges of recurring payments, micropayments and payouts in Latin America for consumers who don't have a credit card – while also playing an important role in digitizing cash in the region. 

Alongside that, wallets have a high loyalty score among users: at EBANX 's merchants, most online shoppers who used a digital wallet for their first purchase continue to use the payment method, with 90% of them sticking to this option throughout the months, according to internal data from 2020 to 2022.

This is especially true among digital products, which have a 94% loyalty score (meaning that 94% of users stick with wallets for their purchases throughout the months). If we consider physical product purchases, this index falls to 48% – which shows that the e-wallet experience perfectly suits recurring purchases within digital merchants.

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To keep an eye on: EBANX's expansion plans into Africa 

Less than a year ago, EBANX announced its first expansion beyond Latin America: Kenya, Nigeria, and South Africa. The choice for Africa was not by chance: the region's digital economy is expected to reach USD 180 billion by 2025 while all the main digital verticals, such as SaaS/Cloud, Gaming, and Online Retail, are growing at double-digit rates, above the global average. Now EBANX is setting an ambitious expansion plan to be in 11 African countries by the end of this year.

Paula Bellizia, President of Global Payments at EBANX, and Wiza Jalakasi, recently hired as Africa Market Development Director, had a long talk with TechCrunch about the challenges of this new phase of the company and what they expect from Africa's payments and digital commerce market. 

Why Africa?

Paula said that over the past 11 years, EBANX has worked to address the complexity of payments in Latin America, balancing local consumer habits and needs and a diverse regulatory landscape, and connecting global companies to millions of consumers through payment technology. 

Africa has interesting parallels with Latin America regarding digital commerce, payments, (high) mobile and (low) card penetration, and digital consumption habits. The chart shows that Africa is actually where Latin America was 8 years ago in digital consumption – with equivalent levels of internet users, mobile penetration, online buyers, and e-commerce volume. 

"We are a very ambitious company. When we started 11 years ago, we were also developing our operating model, and what we learned in Latin America also positions us well to deal with the complexity of other rising markets like Africa. And the EBANX that we are today sets us in a perfect place to serve our global merchants in Africa," explained Paula to TechCrunch.

The executives also looked at the challenges the company is prepared to face as it chooses to expand into a large, complex, and fragmented market such as Africa and how to connect it with businesses around the world, promoting digital inclusion and acting as a driver of the region's digital economy – Africa is forecast to have the largest number of digital buyers growth worldwide through 2025. 

"There are many considerations, especially on the operational front, when dealing with fragmented markets and economies. Africa is a big economy but not so much in the global context. When you look at some massive businesses with customers in Africa, they cannot set up infrastructure and payments to serve locally. So if we can simplify that process for them, it starts to make it a lot easier for them to begin to think about the business case for the continent", said Wiza. 

Read the full interview here

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Data and some food for thought

Internet penetration and online shoppers

Data from Insider Intelligence show that the Middle East and Africa are the regions where internet use is growing the fastest: about 80 million more people will go online at least once per month between 2023 and 2027, reaching 653.7 million connected people by 2027. The region is only behind Europe, expected to have 710.2 million connected people by 2027, and Asia-Pacific, forecasted to have impressive 2.8 billion people going online by then. When we look at the global online shopper contingent, 61% of the world's online shoppers will be in Asia-Pacific. 

How about QR Code for cross-border payments instead of cards and cash? 

The central banks of Indonesia, Singapore, Malaysia, Thailand, and the Philippines have made a deal, apparently the first of its kind, to allow residents of these countries to use QR Code payments for cross-border transactions without fees and at a better conversion rate than card payments. You can get the full story in this article by Rest of World . 

That's all folks, see ya!