The value of annual digital wallet transactions is set to increase by $4.5tn (€4.2tn) over the next four years as payment solutions such as buy-now-pay-later and cryptocurrencies surge in popularity, according to a new study from Juniper Research.
The value of payments made with digital wallets, software-based systems such as Google Pay and Apple Pay that can secure users' payment information for many accounts in one location, will rise from an expected $7.5tn (€7tn) in 2022 to $12tn (€11.2tn) in 2026 as digital payment vendors diversify their product offering to meet demand.
Juniper's Digital Wallets: Key Opportunities, Vendor Analysis and Market Forecasts 2022-26 study found that increasing merchant acceptance of digital wallets methods as e-commerce checkouts have been "a driving force" in digital wallet usage.
The research forecasts that APIs that connect financial institutions to local retailers will be key to the international growth of digital wallets for large, cross-border e-commerce merchants.
It also recommends that digital wallets vendors look to offer value-added services, such as loyalty rewards and credit, to diversify their revenue streams and capitalise on a highly active user base.
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PayPal was ranked as the leading digital wallets provider by Juniper in terms of capacity and capability, ahead of Chinese companies Alipay and WeChat, and Apple Pay and Google Pay, the providers for leading smartphone makers Apple and Android.
"The digital wallets market is heavily saturated, meaning finding a source of differentiation is critically important," said Damla Sat, co-author of the report.
"We have ranked PayPal as an established leader as it has successfully grown an expansive, differentiated offering; leveraging its strong merchant acceptance by expanding quickly into buy-now-pay-later and QR code payments, as well as signing partnerships with key merchants to scale its innovative solutions."
Swedish payments app Klarna recently entered the Irish market last November, offering buy-now-pay-later transactions in three interest-free instalments and points that can be redeemed on offers with 250,000 partner retailers, including H&M, IKEA, Expedia, Samsung and Nike.
In Ireland, the volume of digital banking payments made annually has risen 85% since 2016, with a total of 131m digital payments made in 2021, according to figures from the Banking and Payments Federation Ireland (BPFI).
Much like digital banking payments, contactless payments have also continued to rise steadily since their introduction in 2016 and now account for more than half of card payments (52%), up from 25% in 2017.
A total of 834m contactless payments worth €13.6bn were transacted in 2021, up 36.5% in terms of volume and 48.3% in value from the previous year (611m payments worth €9.2bn), and more than double the value of such payments made in 2019, prior to the pandemic.
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