Digital wallet transactions are set to overtake card transactions and other payments in the UK within 10 years, according to new research by FreedomPay and Retail Economics.
The research revealed that the share of digital wallet payments will likely more than double by 2032/33, accounting for 39.7% of all transactions, valued at £210bn.
Currently, 17% of retail, leisure and hospitality spending is made through digital wallets, amounting to £72.5bn.
Traditional payment methods of cash and card are expected to decline. While card use will account for only just less than digital wallets by 2032/33, it is forecast to drop from a 55.7% share currently to 39.6%. Cash use will decline from 18.8% to 9.4% within the same timeframe.
The value of digital wallet use is set to surge by 76.3% in the next five years, well ahead of the rate of other payment methods, such as transactions through loyalty points and buy now, pay later schemes.
The research also shows the wealthiest 20% of shoppers spend nearly five times the amount by value than the poorest group, which is ultimately driving the rise in digital wallet transactions.
Digital wallets do run the risk of excluding the most vulnerable as one in six respondents said they have no intentions of using them in the next five years. A quarter of respondents said they had no or unreliable mobile data access.
FreedomPay president Chris Kronenthal said: “This research is a clear indication that the world of payments is changing rapidly and the merchant needs to adapt to meet the needs of the evolving payment-tech landscape.
“It’s no surprise that physical forms of payments, such as cash and plastic, will be surpassed by digital wallets in the years to come and it’s imperative that businesses re-evaluate their commerce capabilities.”
Retail Economics chief executive Richard Lim said: “Digital wallets are poised to become the primary mode of payments, eclipsing the use of physical cards and cash.
“Shoppers love the convenience they offer, helping to provide a more seamless journey that blends physical and digital together while incorporating the benefits of more personalised offers and loyalty schemes.
“While younger, more affluent shoppers have been at the forefront of this transformation, the industry must ensure that the benefits of digital wallets are accessible to all, irrespective of age or financial status.
“Fundamental to this is building trust in digital wallets and bridging knowledge gaps to avoid leaving vulnerable customers behind.”
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