Understanding eWallets: Demographic Adoption Factors

eWallets are a useful and convenient method of conducting transactions in our increasingly digital world.

Between mobile-friendly designs and increased support across storefronts, eWallet use is finally on the rise. By 2021, eWallet payments are expected to surpass credit cards as the most frequent type of online transaction.

Yet despite this growth, eWallets face key challenges in the years ahead. Cash and credit cards are still convenient payment methods that are often preferred by customers. Overall adoption rates continue to vary across a wide range of metrics, the most significant of which is age.

Much like mobile devices themselves, eWallets will succeed if they are embraced by a rising generation of tech-curious customers open to new ideas. By studying which age groups are friendly to eWallets, the market will be in a far better position to address their needs.

Age Groups

Without a doubt, Millennials are the largest adopters of eWallets compared to all other groups. Industry surveys often present rates of 40% to 50% or more for ages 18–34, with much of the demographic using digital payment options on a regular basis. What’s more, the adoption rate within this age group has seen remarkable short-term growth. A report from Market Force Information even noted a 20% jump from 2016 to 2017 alone.

Generation X, defined by ages 35–54, has rushed to embrace eWallets as well. While adoption rates are slightly lower than today’s Millennial generation, they still show an impressive 30–50% with comparable growth.

Baby Boomers and Seniors are more open to digital payments than you might think, but certainly have lower adoption rates. Roughly 25–30% of Boomers use eWallet and mobile payment options, with usage dropping to 5–11% for Seniors of 65 years and above. Physical payments remain the primary transaction method of choice for these age groups.

Correlation With Smartphone Adoption

As many eWallet functions are designed for mobile devices, you’ll naturally see digital payments correlate with smartphone use. For example, the Pew Research Center found that 46% of Seniors in the United States owned a smartphone, compared to 94% for Millennials aged 18–29. This trend has also been observed in other countries. Worldpay’s 2017 Global Payments Report determined that Japan has 2% eWallet engagement, which is largely attributed to the Senior demographics making up 33% of the population. Meanwhile, China has a staggering 62% eWallet engagement rate while boasting Millennial demographics in 30% of its population.

There are certainly other factors at play, especially in China, which as we’ve discussed, is heavily invested in a tech-friendly mobile economy. Yet it’s also true that Millennials and Generation X are the demographics of least resistance when it comes to digital payment services.

Reasons for Turning to eWallets

While customers tend not to rely on eWallets exclusively, there are many compelling reasons to embrace them. “[The eWallet] today is one of the fastest and most convenient method of making cashless payment both online and offline,” a study published in the Mumbai journal Anvesha reads. “This service is not only easy and simple comparatively but also provides cash back and discount offers. Not only this there is no need of any password unlike debit card, credit card or internet banking making it hassle free transactions altogether.”

Research conducted around the world suggest that convenience is the overwhelming motivator for using a digital wallet. A recent survey from Finder.com found it to be the #1 reason for consumers in the US, and a similar PayPal survey reached the same conclusion for customers in APAC. The ability to quickly make payments and money transfers from a mobile device is a core benefit that makes the service appealing compared to cash and credit cards. By the same token, some customers also appreciate carrying fewer items in their wallets, but additional research suggests that even that’s not necessarily unanimous.

What Holds Customers Back?

If eWallets are generally considered to be a convenient payment option, what’s keeping customers from adopting them more broadly? One simple reason is that many convenient options already exist — this Worldpay-published consumer survey determined that 45% of respondents consider debit and credit cards easier to use, while 31% prefer to use cash. This overlap of value points suggests convenience alone may not be enough to disrupt the current payments landscape, and that eWallets will need to find additional selling points before they can resonate at scale with modern consumers.

Another major concern is uncertainty that eWallets transactions are even secure. 39% of respondents said they didn’t think digital wallets were safe. What’s more, Finder.com reported that only 23% of customers considered “Greater Security” to be a major benefit of the service.

There is also some data suggesting that income influences payment preferences. According to the 2015 Diary of Consumer Payment Choice, 5% of customers who earn less than $25,000 will use electronic payment methods, compared to 48% using cash. After income crosses the $50,000 threshold, digital payments increase to 15% while cash plummets to 27%. For these reasons, sometimes cash and checks simply feel safer to customers. As recently as 2016, up to 58% of Millennials still preferred to be paid in cash, even if they make electronic payments elsewhere.

While customers were slow to embrace eWallets over the past decade, the prevalence of smartphones allowed this market to grow significantly. Younger demographic groups like Millennials are the driving force behind this change, and will continue to do so as they dominate the adult workforce. It’s unlikely that eWallets can replace cash and card-based payment methods in the short-term. All the same, a service that is trusted, convenient, and secure absolutely find a loyal audience.

In our next article, we’ll take a closer look at the major brands, institutions, and innovators in the eWallet space as we move towards establishing a comprehensive analysis of contemporary market opportunities.