The Turned-on Wallet

With cards as the foundation, digital wallets are poised to capture more transaction share. Here’s what that means for merchants and acquirers.

Digital wallets have been around in the U.S. market for about 10 years, yet they still may not be used by everyone for in-store and online purchases. But ignoring their use—or not anticipating their increased use—could be problematic for many.

Last year, digital wallets comprised 39% of U.S. e-commerce transaction value and 16% of transactions completed at the point of sale, according to the 2025 edition of the Worldpay Global Payments Report, now in its 10th year. By 2030, Worldpay forecasts U.S. digital wallets will account for 52% of e-commerce and 30% of point-of-sale transactions.

Preparing for this growth will take planning and preparation.

“There’s plenty of room for digital wallets to grow. With payment fraud and scams-related losses continuing to increase, digital wallets’ advanced security features, such as encryption and tokenization, safeguard user information and reduce the risk of fraud,” says Guru Sahajpal, assistant vice president of banking and financial services at Cognizant Technology Solutions Corp., a Teaneck, N.J.-based technology-consulting and -outsourcing provider.

Jason Pavona, Worldpay general manager for North America, says the same. “There’s plenty of room to move,” Pavona notes. One factor for that view is that some of the arguments that might have impeded digital wallet adoption in the past, such as unfamiliarity or concerns about security, have dissipated among many consumers.

“A lot of the problems that were causing adoption issues with wallets have moved away,” he says. Wallets have gained consumer and merchant trust, and consumers became used to them as a contactless payment tool during the Covid-19 pandemic a few years ago.

“The fact is we all have a phone sitting in our hands all the time when we’re shopping, right?” Pavona says. This enables wallets to move to the right side of trust, he says.

Growing Adoption

The chief benefits of digital wallets include ease of use and the reduction of friction in the checkout, whether in-store or online.

“Digital wallets are growing in popularity because they take some of the friction out of point-of-sale and online payments. This is particularly helpful for in-app and mobile Web purchases, where a face scan or fingerprint is much simpler than entering card details on a tiny keyboard,” says Seth Perlman, global head of product at i2c Inc., a Redwood City, Calif.-based payments provider.

“For merchants,” Perlman continues, “digital wallets can remove obstacles that increase the risk of consumers abandoning an online shopping cart or having to walk away from the checkout lane because they left their card at home. Every transaction that doesn’t happen is a lost sale for the merchant, and digital wallets help avoid those lost sales.”

Other data points, too, show growth in digital-wallet use. “Consumer adoption of digital wallets is growing, albeit more slowly than one might expect,” says Sean Gelles, senior director of payments intelligence at J.D. Power. “J.D. Power consumer payments data shows significant growth in consumer adoption of digital wallets, increasing by 4 percentage points from Q4 2023 to Q4 2024, from 48% to 52%.”

“At J.D. Power,” Gelles adds, “we believe this growth can and will continue, provided the industry takes action to overcome obstacles related to consumer awareness of the benefits of digital-wallet technology.”

Merchant preparation for digital-wallet acceptance in store was greatly aided by the EMV conversion, in which merchants were equipped with NFC-capable point-of-sale terminals. These devices are a favored wireless-connection utility for wallets such as Apple Pay, Google Pay, and Samsung Pay.

Ten years ago, these devices were primarily intended to enable contactless card acceptance. But mobile payments made with NFC-enabled digital wallets bloomed along with with contactless cards during the Covid-19 pandemic.

‘A Powerful Signal’

Digital wallets should now be on the list of a merchant’s accepted payments methods, says Don Apgar, director of merchant payments at Javelin Strategy & Research. “In the retail environment, tap-and-go is the same whether it’s with a wallet or a card,” Apgar tells Digital Transactions.

The more challenging scenario, he adds, is online acceptance. “The key is the online stuff. You have to unlock your digital wallet to pay with it,” he says.

Reducing the friction in using a digital wallet online isn’t necessarily the burden of the wallet provider, suggests Adam Gray, chief transformation officer at Stax Payments Inc., an Orlando, Fla.-based payments provider.

“The friction isn’t in the tech. It’s in the experience,” Gray says. “A significant blocker is uncertainty: if consumers have to ask, “Do you accept this?” they’re likely to revert to a physical card, he adds.

Consumer education about digital wallets is critical. Many consumers don’t realize how secure digital wallets are, observers say. Merchants and providers must communicate the benefits of biometric security, limited data exposure, and fraud protection. This will help consumers shop with digital wallets with ease and confidence, they say.

That assertion is echoed by Gelles. “While users of digital wallets cite security as the third-most-important reason for using them, following speed and ease of use, those who don’t use digital wallets cite security concerns as the primary reason for not using them,” he says.

“This,” he continues, “should serve as a powerful signal to digital-wallet providers to actively promote the security benefits of digital wallets, stressing how they protect consumer account information and provide added security against fraud.”

Other factors, such as the nonpayment uses of a digital wallet, also may encourage digital wallet use. “There are nonpayment uses that need to come on to give people a reason who haven’t adopted to adopt,” says Christopher Miller, Javelin lead analyst, emerging payments.

That reason could be more states offering digital-wallet provisioning of driver’s licenses or wallets providing more visibility into the user’s full financial holdings, something general-purposes digital wallets do a meager job of now. Though, many Discover cardholders can view transaction and balance information in Apple Wallet now thanks to recent API access Apple has enabled, as has Google Pay.

A High Bar

Several primary factors, however, will aid digital-wallet adoption, says Adam Neiberg, global banking senior marketing manager at SAS, a Cary, N.C.-based data advisory firm. They are ubiquity, trust and security, education and ease of use.

“Widespread digital-wallet adoption requires infrastructure that allows consumers to use their digital wallets everywhere, without worry. Digital-wallet ubiquity is a prerequisite for the seamlessness and convenience consumers expect,” Neiberg says.

On trust and security, digital wallets benefit from tokenization, he says. “When a customer swipes their digital wallet at checkout, the actual card number is never shared with the merchant. By comparison, with physical credit cards, customers are susceptible to risks like card skimming, stolen card numbers, and hacked merchant systems.”

Convenience, the third factor, is not just about an easy-to-use wallet but rather about banks pushing to get their cards into the digital top-of-wallet space.

“Banks must ask themselves, what are we doing to onboard customers and make it easy for them to enable our card[s] in their digital wallets? From better processes to promotions, banks must consider what will make the switch worthwhile for their clients,” Neiberg says.

Banks, too, have a role to play. “Not only can banks make inroads with digital wallets—they absolutely should, and in many ways, they’re in a prime position to lead in this space,” says Jeff Hallenbeck, head of payments at Forter, a New York City-based digital-commerce trust platform.

“For one,” he continues, “banks already have a massive customer portfolio that they can tap into, including rich customer data, history, and, typically, a variety of payment methods.” These, he says, include checking, savings, and credit and debit cards.

“Where banks have struggled, though, is on the user experience.,” he goes on. “Consumers have come to expect digital wallets that feel fluid, modern, and built for mobile, so the bar banks need to meet in order to gain user adoption is quite high.”

A Changed Game

Bank and fintech competition for digital-wallet status likely will heat up, especially as incentives are offered and more consumers adopt the technology.

Worldpay, in its report, forecasts that U.S. digital-wallet spending will grow at an 11% compound annual growth rate for e-commerce and at 14% for POS transactions from 2024 to 2030.

As Pavona says, “We’ve come a long way from people thinking of wallets as being an anonymous transaction…I think now we’ve gotten to a point where the ease of use and the efficiency of them has changed the game and that will continue to drive that growth.”