Understanding eWallets: Geographic Adoption Factors

eWallets are providing consumers all over the world with an innovative, tech-forward way to conduct transactions.

Thanks to their convenient mobile integrations and empowering self-serve interfaces, eWallets have managed to capture a material share of an otherwise saturated global payment method market. Though their disruptive potential was slow to be recognized, providers are now starting to overcome some of the major hurdles that have prevented them from realizing the vision of a fully mobile financial future.

That said, there remains a wealth of untapped opportunity for eWallet providers, as well as businesses looking to leverage their functionality in products of their own. The first step towards actualizing these opportunities is to develop a thorough understanding of today’s eWallet landscape, the factors that continue to shape it, and what that means for the future of global payment methods.

Data Trust

There’s evidence to suggest that consumer trust in an eWallet provider’s ability to protect their personal data plays a major role in determining adoption rates. In a global 2017 survey of more than 6,000 consumers across 20 countries, San Francisco research firm Aite Group found that “Only in the US, India, and Thailand do consumers report at least 50% confidence that their stored data is well-protected.” According to this survey, India and Thailand are also two of the countries with the highest level of mobile wallet adoption, at 56% and 51% respectively, suggesting that winning over public opinion is at least one part of gaining traction within any given geographic market. The US, however, come in on the lower end of eWallet adoption with only 17% of those surveyed reporting use. Combined, these three figures point to a second challenge facing eWallets on the road to adoption: the presence of incumbent solutions.

Challenging The Status-Quo

For many markets, eWallets have had a harder time gaining traction due to the fact that they seek to solve a problem most customers don’t experience. The value proposition of a ubiquitously accepted, lightweight payment method has already been claimed, in most cases by card-based payment networks either provided by banks or private firms. While the technical implementation and edge-case value of both may be clear to industry insiders, from the consumer perspective there’s minimal difference between paying with their phone or a card. This would also explain why eWallets have gained so much traction in Thailand and India, where mobile phone networks, and technical culture in general, have seen much wider adoption than traditional card-based solutions or even basic financial services. Bangkok, for example, is home to 27 technology hubs including the $637 million True Digital Park. And while India still has plenty of room to grow, analysts at GSMA predict that “As devices and data services become more affordable, digital literacy improves and more locally relevant content is made available, 208 million new subscribers will be connected in the country by 2025.” As researchers at Aite Group explain, “Mobile wallet and payments adoption tends to be strongest in regions where infrastructure for other electronic payments options, particularly card payments, is less mature.” This theory is heavily supported by the Aite study’s findings as well as those of other research initiatives.

Centralized Networks

When it comes to e-commerce usage rates, eWallets enjoy the greatest engagement in countries with strong mobile footprints and centralized platform providers. According to Worldpay’s 2017 Global Payments Report, which tracks eWallet usage for online payments in countries all over the world, China came in at number one with 62% of online payments made using some form of eWallet. This can be credited, in large part, to the power of the homogenous, interoperable mobile app economies which power China’s tech-forward payment infrastructure. As business analysts from the Wharton School of the University of Pennsylvania explain, “China e-commerce giant Alibaba Group Holdings, which owns Ant Financial, and Tencent Holdings, which owns payment platform WeChat Pay, hold a combined market share of 92% of such transactions in the market of 1.4 billion people. Alipay says it processed 256,000 payment transactions per second during its peak Singles’ Day festival on November 11, 2017.” A leader in innovative financial practices, China stands in stark contrast to some of markets that have been most reluctant to move to a cashless payment environment.

Land Grabs

There’s also evidence to suggest that digital wallets struggle to take root in regions of low economic growth like Latin America, where a glut of competition has lead to a fractured payment landscape that actually slows adoption rates. A recent whitepaper by Americas Market Intelligence explains how “2015 saw the launch of at least six mobile wallets for contactless payments at brick-and-mortar merchants, involving big players such as MasterCard, Bancolombia, and BBVA Bancomer.” This flood of competitors has been largely spurred by the region’s massive unbanked population of 70% and its rising smartphone penetration, estimated to reach 57% by 2019. Combined, the two figures theoretically present a singular opportunity for providers looking to bring their solutions to market, but pundits suggest that this wealth of opportunity has actually paralyzed innovation. “Nearly every bank in the region is toiling to develop its own contactless mobile wallet for physical purchases. This is the wrong type of payment to enable,” explains Lindsay Lehr, Senior Director of Payments at AMI. “Credit cards work well in Latin America and provide miles, points and interest-free installments. Cash is accepted everywhere and presents no risk of fraud.” In a rush for proprietary market capture, providers are confounding overall growth in a costly and indefinite stalemate.

Looking Ahead

Analysts expect global eWallet adoption to reach 46% by the year 2021, up from 18% in 2016. It’s an aggressive growth projection driven largely by high-traction market forecasts, including a 29% increase in the Asia Pacific region up from 22% to 51% and a 27% increase in North America from 18% to 45%. As we’ve seen, multiple conditions will need to align before this can happen, including a marked increase in consumer trust as well as an effective disruption to existing payment methods capable of displacing existing customer payment solutions. All to suggest that now is the time for merchants of all verticals to start investing in a thorough understanding of how eWallet adoption is poised to impact their business, including the addition of powerful new opportunities that come with embracing flexible payment solutions.

In our next article, we’ll take a closer look at the demographic segments responsible for the growth of eWallets so far, as well as those that will become necessary to sustain their continued growth.