BankingOpen BankingConsumers driving golden era of payments with digital wallet adoption

Consumers driving golden era of payments with digital wallet adoption

Digital wallets are projected to account for £203.5bn of all e-commerce transactions and to double in transaction value at the point-of-sale (POS) by 2027 in the UK

The UK is entering a golden era of payments driven by the digital wallet boom, new findings from Worldpay, a global leader in payments technology and solutions, reveal in its Global Payments Report 2024.

The report, which provides one of the most in-depth analyses of the payments landscape across 40 countries, indicates that by 2027, digital wallets are expected to comprise half of all e-commerce spend in the UK, worth £203.5 billion.

Projections also estimate that digital wallet usage will more than double at UK point-of-sale (POS), rising from 14% to 29% of transaction value over the next three years. By 2027, this will represent £493 billion total transaction value, underscoring a seismic shift in consumer behaviour.

“Consumers are not just embracing digital wallets, they are driving a revolution in the payments landscape. The combined effect of the pandemic, alongside digital wallet technology reaching a level of maturity and implementation in recent years has driven a monumental rise in adoption both globally and locally in the UK,” says Pete Wickes, General Manager, EMEA at Worldpay.

“It is hard to deny the ease of use and convenience digital wallets provide whether shopping in-store or online. From this basis, merchants now have a huge opportunity to diversify their payment choices to meet customer needs.”

Digital wallets emerged in the late 1990s, steadily gaining in popularity from the mid-2000s, but it was the Covid-19 pandemic that provided the tipping point for adoption globally.

Now established as a ‘go-to’ payment type for UK consumers, the maturity of the technology is giving consumers the confidence to try new ways to pay. Digital wallet use in the UK is providing a welcome boost to the world’s third-largest e-commerce market, which is expected to see 7% compound annual growth (CAGR) through 2027.

Underpinning digital wallet adoption in the UK, however, is the deep connection Britons have to traditional payment methods like credit and debit cards, which 69% of consumers use to fund their wallets.

Commenting on the findings, Kate Nightingale, Consumer Psychologist and Founder of Humanising Brands said, “Adoption of new payment methods is a complex cognitive and affective decision-making process. Outside a considered evaluation of benefits, like convenience, self-expression and brand incentives, and risks such as safety and privacy concerns, the most impactful promoter of adoption is trust.

Credit and debit card usage outside of digital wallets continues to be strong. Credit and debit cards accounting for 46% of e-commerce and 74% of POS transaction value in 2023. The findings reveal how established payment preferences and behaviour is carrying over to new modalities, like digital wallets.

 However, there is a difference between initial pre-adoption trust and continuation trust. Initial trust comprises the perceived integrity, benevolence and capability of a provider. Continuation trust relies on confirmation of a customer’s expectations, ongoing satisfaction levels and the perceived usefulness of a payment method.

Social factors cannot be ignored with word-of-mouth, prevalence of the payment method in a customer’s social circles, influence by authority figures as well as the impact of partnerships and sponsorships by already trusted organisations, all shaping consumer behaviour. Those operators, merchants and financial institutions that understand how to navigate this complex behavioural matrix to drive consideration and adoption across a range of payment methods will come out on top.”

While the UK has been a leader in adopting new payment technology, account-to-account (A2A) payments have been slow to take hold. For example, A2A accounted for just 7% of e-commerce transaction value in 2023 in the UK, the lowest adoption rate across Europe, lagging behind Poland (68%), the Netherlands (64%) and Finland (33%).

A significant difference between these markets and the UK are government-backed initiatives designed to establish trust and encourage adoption, alongside supporting the development of infrastructure like real-time payments systems.

“We advocate for a varied and vibrant payments ecosystem, recognising that diversity in payment options enhances the customer experience, supports merchant growth and ultimately boosts commerce,” added Wickes. “It’s crucial for all players in the industry to come together to continue to innovate, while maintaining and building the consumer trust that has been pivotal to the seismic shift in commerce we have seen so far.”

 Further UK insights from the report reveal:

  • Buy Now, Pay Later (BNPL) accounted for 7% of e-commerce transaction value in 2023, and is expected to grow at 4% CAGR through 2027.
  • Cash made up 10% of POS transaction value in 2023, and is expected to drop to 6% by 2027, mirroring the global rate of decline at -6% CAGR through 2027.

The Global Payments Report 2024 offers a snapshot of today’s payments landscape: globally, by region and in 40 select markets. The report tracks consumer payments when shopping online and at the point of sale, identifies key payment trends, and projects future scenarios for payment method shares as well as market size.

The report’s data was collected using a survey of 46,000 consumers, secondary research, and extensive validation by payments experts from each region; the complete research methodology is published as an appendix to the report.

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