Digital wallets have grown since their inception and have become one of the most popular ways to transact financially. They are the fastest-growing payment method, and according to McKinsey, digital wallet penetration stands at 89%.
According to PYMTS.com, bill pay is the most common transaction, at 49.3%. Other uses include transferring funds between accounts, peer-to-peer transfers, splitting bills or payments, storing credit and debit cards, and more.
Using a digital wallet stored on a mobile phone to pay for items when checking out at a store is common. This is a contactless payment transaction. The customer holds or taps their phone next to the card swipe machine. The payment is then securely transmitted.
If digital wallets are stored on mobile phones, how do customers pay bills, such as utility bills? These bills are paid through the provider's website or checking account draft rather than using a mobile phone. A mobile phone is a way to physically carry a digital wallet around. When paying a utility bill on a website, the provider will display the wallet name as a payment option, assuming it is offered. The customer selects that option, processing their utility payment through their digital wallet.
Real-Time Payments
Digital wallets utilize the RTP or real-time payments network. ACH payments are common for bill pay and transferring money between bank accounts. However, the ACH network settles funds only four times per day. It can take two or three days before a transfer finally shows up in the recipient's bank account. Additionally, ACH does not work at night, on the weekends, or on holidays.
In contrast, the RTP network is 24/7, and digital wallet fund transfers settle immediately.
Digital Wallet Customers Spend More
79% of Gen Z has embraced digital wallets. However, the use of digital wallets declines with each older generation, with only 26% of Baby Boomers using them.
However, digital wallet consumers spend more, with the average transaction at $95 vs. non-digital wallet consumers at $81. The average digital wallet consumer also spent more in these categories: 4%+ on groceries, 17%+ on retail, and 33%+ at restaurants. Merchants who haven't yet integrated digital wallets as a payment option may want to consider them.
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