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How Has The Cost of Living Crisis Impacted Digital Wallet Adoption?

The four years since the onset of the Covid pandemic have been marked by economic turbulence, with global markets grappling with unprecedented challenges. From supply chain disruptions to shifting consumer demands, the aftermath of the pandemic has ushered in a period of uncertainty and volatility, driving significant increases in the cost of living worldwide.

As expenses continue to rise and economic stability remains elusive for many, individuals are seeking efficient and cost-effective alternatives for their financial transactions.

One notable consequence of this crisis has been the accelerated adoption of digital wallets, heralded for their practicality and accessibility. With the adoption of digital wallets poised to accelerate, industry leaders share their insights into how they offer solutions that resonate deeply with consumers navigating tight budgets.

Fostering financial inclusion
Michael Wallis-Brown, vice president and global head of mobile financial services at Ericsson
Michael Wallis-Brown, VP  of mobile FS, Ericsson

“The cost-of-living crisis has accelerated digital wallet adoption as consumers seek efficient and cost-effective alternatives for financial transactions. This year is pivotal for the sector as the ongoing surge in payments means it is poised to surpass credit cards in online transactions. Projections indicate a remarkable 77 per cent increase in digital wallet transactions, exceeding $16trillion by 2028,” said Michael Wallis-Brown, vice president and global head of mobile financial services at Ericsson.

Characterised by their swiftness, accessibility and innovation, digital wallets offer practical solutions for managing expenses during economic challenges, explains Wallis-Brown.

“They also play a role in democratising consumer purchasing and wealth management, particularly impactful in developing markets where they reach millions of unbanked users,” he adds.

“This fosters financial inclusion by providing diverse services like peer-to-peer payments, lending, investments, savings, and buy now, pay later options.”

Preferred choice
Billy Setiawan
Billy Setiawan, product manager, PVG

Echoing Wallis-Brown’s thoughts on financial inclusion, Billy Setiawan, product manager at Indonesian fintech builder Pintar Ventura Group, says digital wallets have not only proven to be a practical solution but have become the preferred choice for many.

“The allure extends beyond mere financial savings, encompassing the appeal of seamless and rapid transactions that digital wallets offer,” he says. “As consumers navigate tighter budgets, the efficiency and cost-effectiveness of digital transactions have become pivotal. Essentially, the crisis has accelerated the shift towards a cashless society, with digital wallets emerging as reliable and accessible tools for everyday financial transactions.

“In Indonesia, grappling with cost-of-living challenges has propelled digital wallet adoption to new heights. Notably, GoPay, a leading digital wallet provider, witnessed a surge in users during economic uncertainties. By offering enticing cashback incentives and promoting their seamless transactions, GoPay became the go-to solution for many navigating tightened budgets. The crisis acted as a catalyst, hastening the shift towards digital wallets, transforming them from convenient options to essential tools for everyday financial management.

“The appeal of digital wallets during the cost-of-living crisis extends beyond just financial savings. Users appreciate the added layer of security and transparency that digital transactions provide, offering peace of mind in uncertain economic times. As traditional payment methods face challenges, digital wallets have stepped in to offer a robust and reliable alternative.

“The cost-of-living crisis has underscored the importance of financial inclusion, especially in regions where access to traditional banking is limited. Digital wallets, with their accessibility and user-friendly interfaces, have become instrumental in bridging the financial gap, ensuring that a broader segment of the population can participate in the digital economy.”

Cost-effective
Peter Wood, CTO at Spectrum Search
Peter Wood, CTO at Spectrum Search

Drawing from his expertise in cryptocurrency, Peter Wood, chief technical officer at blockchain community Spectrum Search, has observed a notable surge in digital wallet usage.

He comments: “The cost-of-living crisis has spurred a notable surge in digital wallet adoption, observed through my extensive experience in cryptocurrency and AI.

“Rising expenses and economic uncertainty drive both consumers and businesses toward efficient, secure, and cost-effective financial tools.”

Switching loyalties
Bruce Richardson Mobile Strategy Consultant, Emarsys
Bruce Richardson
mobile strategy consultant, Emarsys

A recent study of 2,000 UK consumers by customer engagement platform SAP Emarsys suggests that the cost-of-living crisis has led 56 per cent of shoppers to switch from brands they were once loyal to in order to save money. While 19 per cent of shoppers simply feel they ‘can no longer afford to be loyal’ to brands.

Bruce Richardson, mobile strategy consultant at SAP Emarsys, comments: “Many have turned to digital wallets as a result; 50 per cent of UK shoppers actually agreed that there was ‘no need for a physical wallet now that I have a mobile wallet’.

“In order to cut through these concerns, brands need to make customers feel that they’re making specific efforts to drive down cost – and to tie that sentiment back to their brand. Through digital wallets, they’re able to their customers in tackling the cost-of-living crisis – delivering personalised offers and convenient experiences directly into that shopper’s pocket.

Payment preferences
Bob Letgers
Bob Legters, SVP consumer product, Paysafe

This sentiment is underscored by Bob Legters, SVP consumer product at payments platform Paysafe, who reinforces the impact of the crisis on consumer payment preferences, noting a notable uptick in the use of digital wallets as individuals strive to manage their finances more effectively in the face of economic disruption.‌

“The cost-of-living crisis has clearly had an impact on consumer payment preferences. While our April 2023 consumer trends research found that credit and debit cards were still the most popular online payment method, local payment methods (LPMs) like digital wallets are growing in prevalence.

“In fact, 69 per cent of consumers who changed their payment habits because of the cost-of-living crisis were using digital wallets more regularly than a year prior.

“A huge part of this is consumers’ increased desire to keep a closer eye on their finances – at a time of economic disruption, it’s more important than ever to look after the pennies. Our research found that 51 per cent of consumers value the financial insights they gain from digital wallets.

“By offering these insights, digital wallets can help consumers stay on budget and make their money stretch further – a boon as discretionary spending tightens.”

Spending more time with wallets
Simas Simanauskas, ConnectPay
Simas Simanauskas, chief business officer, ConnectPay

Finally, for Simas Simanauskas, chief business officer at financial platform ConnectPay, the rise of cost-of-living has had an intriguing yet unintended consequence of driving digital wallet adoption.

“Following the rise and crash of the VC funding boom in 2021, merchants and platform operators were forced to accept that optimising costs is the most important metric, no matter if you are VC-backed or bootstrapped,” he explains.

“This meant that businesses needed to re-calibrate from focusing on UX and never-ending-beta-feature-packed products to maintaining paying customers and decreasing operational costs.

“Many businesses laid off workers. They also took notice that card payments, although very prevalent among users, were costly, too. That said, people tend to spend more with digital wallets. This means that if you can drive more spending in an environment where the cost of living keeps rising while decreasing your operational costs — then you have your golden goose.”

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