More than one in two people will use a mobile wallet by 2025, as cash is increasingly getting displaced, finds a new study from mobile payments company, Boku in partnership with digital technology analyst house Juniper Research. At the end of 2020, there were over 2.8 billion mobile wallets in use. That number is projected to increase by nearly 74% to reach 4.8 billion mobile wallets in use by the end of 2025 – nearly 60% of the world’s population.
The study finds that Southeast Asia is the fastest growing mobile wallet region. Mobile wallet use will grow by 311% between 2020-2025, reaching up 439.7 million wallets in use across Indonesia, India, Malaysia, the Philippines, Singapore, Thailand and Vietnam from 141.1 million in 2020. The rise in e-Commerce and dominance of super-apps in these markets are driving accelerated mobile wallet adoption.
According to the study, while China continues to be the largest mobile wallet region in the world with 1.34bn users in 2020, Japan, Korea and Taiwan are set for hyper-growth. Market saturation is resulting in slowing growth in China with a CAGR of just 2.2% per year. Meanwhile, markets including Japan, Korea and Taiwan will continue to see accelerated adoption of mobile wallets with 98.4% market penetration by 2025.
The second biggest mobile wallet market, Africa & Middle East, is set to grow by 147% between 2020-2025. This is driven by expanded usage of mobile money services such as M-Pesa which are increasingly offering additional services such as access to eCommerce.
Latin American growth is being supercharged by eCommerce, said the study as this region is set to increase mobile wallet use by 166% between 2020-2025. Long held back by consumers’ preference for cash-based payments and comparatively lower smartphone penetration, this is fast changing, and the region’s eCommerce growth is supercharging mobile wallet use.
However, the study shows a relatively sluggish growth in Western Europe and North America. With 65% growth in Western Europe and 50% in North America by 2025, these regions will see the least amount of mobile wallet growth in the next five years. However, markets such as the UK are seeing a rise in card-based mobile wallets due to the adoption of contactless spurred on by the pandemic and shift towards cashlessness.
“While mobile wallets are being used on a global basis, we see two distinct types being used today. One is card-based mobile wallets, like Apple Pay and Google Pay, which provide an easier way to pay with cards people already have. The other is stored value mobile wallets, like AliPay and GrabPay, that enable consumers to transact with digital cash and are popular in emerging markets with fast-growing e-Commerce sectors,” said Adam Lee, Chief Product Officer at Boku.
The markets that are set to grow the fastest are those with the lowest levels of card penetration, stored value wallets are thriving. In North America and Western Europe, which are dominated by card-based mobile wallets, we are seeing the slowest growth in mobile wallet adoption, as the technology provides merely incremental benefit.”
“We are seeing clear bifurcation in the market between card-based mobile wallets in developed markets and stored value mobile wallets that are ubiquitous in Asia and rapidly growing in all emerging markets,” said Lee.
Consumers in high growth markets such as India and Indonesia use an average of 2.74 wallets. This means that not only do merchants need to accept wallets but they need to ensure broad coverage across each target market.
Research co-author Nick Maynard explained, “In developed markets, mobile wallets facilitate card payments, but in emerging markets, wallets in places have bypassed cards entirely. Wallet providers in developed markets need to focus on building acceptance and analytics features, in order to boost their appeal in a card-centric environment.”
“We are witnessing a paradigm shift in payments driven by mobile wallets. Mobile wallets have lowered the barrier to making digital payments and in parallel ushered billions of new consumers into eCommerce. These consumers are not in North America or Western Europe, they are in emerging markets, and while they don’t have credit cards, they overwhelmingly have mobile wallets,” said Jon Prideaux, CEO at Boku.
The research also found that QR code payments will account for 40% of all digital wallet transactions globally in 2025; a fall from 47% of transactions in 2020. QR code payments are presently playing a leading role, due to their ease of use and acceptance, which makes them a critically important area for wallet use. However, over the next five years, the evolution of features such as card acceptance via NFC smartphones will begin to close the ease of acceptance gap.