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Digital Wallets Set to Shape ‘More Inclusive and Accessible Financial Future For All’, Says Visa

Payments are rapidly evolving across the globe, as the pendulum swings away from traditional financial institutions, and towards innovative fintechs and payments providers. Digital wallets, in particular, look set to change the global payments landscape, enhance financial inclusion, and present new opportunities for businesses, says Visa.

In its latest report, Digital wallets: In pursuit of a profitable business model‘, Visa delves into segmentation, characteristics of successful digital wallets, possible profitable business models and success factors for implementation.

Focusing on Central Europe, the Middle East, and Africa (CEMEA), the payments giant outlines how different types of digital wallets are enjoying success across different regions, and how new players could still get involved.

Walter Lironi, senior vice president, head of advisory and value-added services, CEMEA at Visa, told The Fintech Times: “Digital wallets are a transformative force in the financial landscape, offering a seamless and convenient solution for several use cases, including cross-border money movement.

Walter Lironi, senior vice president, head of advisory and value-added services, CEMEA at Visa, discusses digital wallets
Walter Lironi, senior vice president, head of advisory and value-added services, CEMEA at Visa

“By the end of 2023, an estimated 3.7 billion wallets were in use, with transactions worth $8.8trillion facilitated by mobile money. From enabling secure and contactless payments to empowering small businesses and driving financial inclusion, digital wallets unlock vast opportunities for individuals, businesses, communities, and economies.

“At Visa, we believe digital wallets will play an important role in revolutionising the way we transact, driving forward the digital economy and shaping a more inclusive and accessible financial future for all.”

At the start of 2023, digital wallets accounted for around 49 per cent of global e-commerce payments and 32 per cent of global POS payments.

Payment orchestration platform Corefy expects the use of digital wallets to grow from 18 per cent to 33 per cent in Central and Eastern Europe and the Commonwealth of Independent States.

While digital wallet adoption looks set to grow exponentially in the near future, it presents a number of barriers for new entrants. The space has seen a wide range of strategic business models, but very few have managed to achieve profitability at this current moment in time.

How can new entrants achieve profitability?

Visa explains that ‘countless wallets’ have already made it to market in CEMEA, and many have achieved have reached significant scale and encouraged adoption well. But profitability evades the vast majority, meaning new wallet providers would need to have a plan to subsidise loss-making operations, and have a strong strategy.

Visa Consulting and Analytics identified two possible routes towards profitability:

Becoming a niche payment specialist

In order to achieve this, a new player would need to identify a recurring payment need among a large number of customers, which is currently not serviced, or is serviced poorly, but existing payment methods.

Any new digital wallet that looks to capitalise on this gap in the market would need to deliver a seamless, simple payment experience combined with a world-class user interface (UI) design, as well as quickly gain trust from its target audience.

Transforming into a full-service digital bank

Visa also explains that new players could begin by offering a ‘classic’ digital payments wallet, but have plans to gradually extend its functionality to cover a full range of banking products and services, including consumer lending, credit cards, and savings and investments.

To find out more about breaking into the world of digital wallets, read Visa’s ‘Mobile Wallets are Becoming Universal‘ report.

Author

  • Tom joined The Fintech Times in 2022 as part of the operations team; later joining the editorial team as a journalist.

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