PayPal launched the world’s first digital payment wallet in 1998. Nearly three decades later, they remain a novelty for more than half of U.S. consumers.
J.D. Power’s 2024 “Digital Wallet Satisfaction Study,” published in March 2024, found that just 48% of U.S. shoppers use digital wallets online and offline.
Separately, J.D. Power found only 57% of small and midsize U.S. merchants accept that form of payment.
U.S. Roadblocks
The reasons for slow adoption vary.
J.D. Power researchers noted that the “fragmented and far from mature” U.S. payments market has yet to offer a universal wallet that works across web, mobile, and in-store channels.
Sean Gelles, senior director of payments intelligence at J.D. Power, told Practical Ecommerce, “Digital wallets plateaued at 50% of U.S. consumers and have not changed since last year.”
In a point-of-sale survey, J.D. Power queried roughly 48,000 U.S. non-digital-wallet users from September to November 2023. Their top concerns were:
- Security (35%),
- Difficult to use (17%)
- Habit (16%)
A year later, approximately 22,000 surveyed non-digital-wallet users had nearly identical worries.
“You’d expect speed and convenience would motivate consumers to try digital wallets,” Gelles said. “But consumer attitudes have not evolved; non-users and users don’t fully understand the benefits.”
Security
Gelles was surprised by security fears, stating, “Digital wallets encrypt and tokenize account data and don’t even share it with merchants, but a third of the study’s respondents think they are insecure.”
“We need to educate the U.S. market,” Gelles stated. “Some consumers think digital wallets send their information into cyberspace. Provisioning a wallet is a sophisticated process; my bank does not give anyone my actual card information, not even the merchant.”
Difficult to use
Gelles observed that consumers with less than a year of digital wallet experience had lower satisfaction scores than longer-tenured users.
Speed and convenience are table stakes in the modern economy, Gelles added, stating most small business users believe digital wallets eliminate friction and improve conversions while reducing chargebacks and fraud.
Habit
Wallet providers can do more, Gelles said, to improve customer onboarding and support. Merchants can help customers make informed decisions in the checkout stream. “The key is knowing your customers and providing the best checkout experience possible.”
While 16% of respondents said habit was a roadblock, Gelles observed consistent factors steering customers toward digital wallets. In the 2023 point-of-sale survey, wallet users cited these benefits:
- Speed (45%)
- Ease (44%)
- Merchant acceptance (24%)
- Security (24%)
Global Acceptance
Despite slow U.S. acceptance, wallets accounted for 50% of global ecommerce-only sales in 2023, according to Worldpay’s 2024 “Global Payments Report.”
The Asia-Pacific region continues to dominate digital wallet adoption, per the Worldpay report. APAC consumers spent over $2 trillion in ecommerce in 2023, representing 70% of the region’s ecommerce transactions and over 64% of global online digital wallet spend. Worldpay researchers predicts that other regions will follow APAC’s example.
Tracy Lai agrees. She’s the founding partner of Lystar Group, a New York-based consultancy, and president of Fintech and Finance Alliance, a non-profit member organization.
According to Lai, digital wallets are a staple of daily life in Asia. “Asians are more receptive to digital wallets because they skipped the credit card adoption cycle and went straight into making cashless payments with their smartphones,” she said, noting that most people in the region were happy to trade a bit of privacy for convenience.
Today, digital wallets are a default payment method in APAC, Lai added, both for online and offline transactions. She cited a recent example at a coffee shop in Shanghai, where she was surprised to see a standalone digital wallet scanner for WeChat Pay and Alipay.
“When I asked why they didn’t have a traditional point-of-sale device, they said the scanner is more convenient and doesn’t charge transaction fees.”
