A new study by Capital on Tap looking into the Rise of Digital Wallets, analysing how they are becoming the main source of transactions around the world, finds that cash could be the least used method of payment by as early as 2022.
The growing adoption of digital wallets, ongoing digitalisation of services, increasing demand for smartphones and developments of new technologies like 5G or payment services like Alipay, Google Pay and Apple Pay are some of the key factors behind the rapid increase in digital payments.
The global COVID-19 pandemic will undoubtedly accelerate this process even further with people trying to avoid cash transactions and using contactless payments to minimise physical interactions.
According to the 2019 Mobile Payments Market – Growth, Trends, and Forecast (2020-2025) report by Mordor Intelligence, the most popular payment method in 2020, the debit card, will retain its position for years to come, but cash, now the second most common payment method will be overtaken by digital wallets making it the least popular by 2022.
The decreasing need for cash suggests that the cashless economy may be coming sooner than we think.
Recent years have seen a huge development in mobile payment apps. From long-established apps like PayPal, to more recent ones like Google Pay, Apple Pay or Samsung Pay to local players like Alipay or WeChat, users now have a whole array of payment apps helping them to make purchases online or via their devices in a seamless and secure way.
Mobile payment apps are estimated to have almost 1 billion daily active users which accounts for 12% of the global population. This number is expected to increase to over 1.3 billion in the next three years. The growing popularity is especially seen in China where the two local mobile payment app players – AliPay and WeChat have over 1 billion registered users each.
Current estimates are that 47% of all smartphone users in China are regularly using digital wallet apps making it the world’s leader in the highest adoption of mobile payments.
With a slightly different business model and designed specifically for online transactions is PayPal – one of the first digital wallet providers. PayPal was established in 1998, long before our smartphones could double as a wallet and unlike most of the mobile apps, PayPal isn’t restricted to a specific device.
Despite the rising competition from the more recent digital wallet apps, PayPal – that now supports online as well as mobile transactions – still has the biggest market share from all payment apps and its user base continues to grow each year.
The research shows that in 10 years, the company has seen a quadruple rise in its number of users, totalling over 325 million in 2020 and continuing to be a top choice of payment method when purchasing goods online.