It is a digital passport to the digital world. And in that world, a card can go anywhere, but software — not so much.

As digital payments grow in popularity, this lack of cross-border interoperability has attracted attention, including that of infrastructure provider TerraPay President Ruben Salazar Genovez, who is leading a new effort to do something about it.

“We have huge respect for all the technology and the architecture and the user experience that our partners have been building in their domestic spaces,” Genovez told PYMNTS’ Karen Webster. “But the reality is that today, it’s very easy to travel with a piece of plastic, but it’s very difficult to travel with a piece of software. And so, we want to enable these wallets to be able to provide the same user experience and the same sort of payment capabilities when they travel abroad. And that is a gigantic task.”

TerraPay’s infrastructure connects more than 100 digital wallets reaching more than 2.1 billion users, and the company is leading the Wallet Interoperability Council, initially announced Aug. 20. It has partnered with five leading wallet operators — Airtel, bKash, M-PESA, Nequi and Sama Money — to facilitate seamless cross-border transactions between users in Bangladesh, Colombia, Kenya, Senegal, Tanzania and Uganda. The council seeks to address the growing demand for global wallet interoperability, enabling users to make international payments and remittances more easily.

If you think that looks like the beginning of a network for digital wallets, you’re right. Genovez told Webster that more companies from more countries and more digital wallet providers will be joining the core group soon, looking for an outcome where all participants in the digital wallet ecosystem win.

That includes interoperability on the acquiring side, allowing the acquirer to accept multiple payment brands, creating efficiencies not only for the merchant, but also for the consumer.

“We are big believers that in interoperability, everybody wins, but the biggest winner is the consumer because the consumer is using this, and the capabilities that exist in this piece of software allow them to use it everywhere,” he said. “It’s a very challenging task to go build something that the payments networks took 60 years to build. But the conditions exist, and the scale exists, to build it.”

The Container Collaboration

Genovez referred to digital wallets as “containers,” a term that includes the need for document storage and payment options. He said he envisions a future where “in the same digital container, you have all your financial tools. You may have a card credential, you may have your bank account, you may have your store value funds directly in the same container.”

Rather than look at the council strictly as a revenue opportunity for his company, Genovez emphasized the collaborative nature of the initiative. The consortium approach is designed to be inclusive.

“We are not being very prescriptive from TerraPay’s point of view in terms of the technology,” Genovez said. “We’re starting with the consumer pain points.”

Those pain points have led council members to grapple with how to provide the same user experience and payment capabilities when their customers travel abroad. Additionally, they face the complex task of ensuring compliance with local regulations and international laws in cross-border environments.

Noting that the council has already met several times, Genovez said it is starting by understanding the different technologies that exist at each wallet operator and working to establish a standard language for how to process all types of transactions. There are also legal and regulatory hurdles that each wallet operator will need to overcome to operate across borders, which is part of early and ongoing discussions.

The real challenge is to ensure a seamless user experience for consumers, both when they travel abroad and when they send money between wallets across borders, he said. That will require more due diligence around clearing, settlement and the overall operating model for the council.

Furthermore, Genovez predicted the emergence of “smart wallets” within the next couple of years. These wallets will incorporate artificial intelligence to provide personalized financial advice.

“They will be able to tell you in this merchant, you should use this credential, or you should use this payment method because you’re getting the best out of these financial transactions,” he said.

Influence on Competition

According to Genovez, the council’s work is expected to impact the competitive landscape of digital finance. Enabling domestic wallets to operate across borders could challenge existing Big Tech wallets that dominate cross-border transactions.

Genovez said he sees this as part of a broader trend.

“The expansion of network optionality is growing exponentially during the next five to 10 years,” he said. “And we want to be there from the wallet’s point of view and facilitate this type of connectivity for the wallet containers that are out there.”

The initiative could also accelerate financial inclusion. Genovez estimated that of the 2.1 billion to 2.5 billion wallets TerraPay serves, roughly 600 million to 700 million individuals lack any connectivity to the financial world or the digital world outside of their digital wallets.

“We will see more and more wallets coming directly to SMBs, and it will empower them to participate in the digital economy,” he said. “It is fragmented, and it is the early days, but in the same way that there is a significant number of consumers that are not connected to a payment ecosystem, there is an area of big development and big thinking almost everywhere about how you are going to bring more merchants into digital commerce.”

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As Reuters reported Tuesday (Sept. 3), Prime Minister Paetongtarn Shinawatra said the government’s planned 450 billion baht ($13.1 billion) “digital wallet” handout will be distributed in cash, a change from the government’s flagship policy.

Initially, the government would have transferred 10,000 baht ($292) in credit to 50 million people using a smartphone app to spend in their communities within six months. The report said it’s not clear how much of the funding would not be distributed in cash. 

The stimulus, which had been the ruling Pheu Thai Party’s chief election platform, is designed to jumpstart an economy that trails other countries in the region, the report added. The Thai economy grew 2.3% in the second quarter of this year, though analysts said uncertainty around fiscal policy clouded the country’s outlook.

Reuters also noted that economists and two former central bank governors have called the handout program fiscally irresponsible. The has delayed the scheme, expected to be rolled out in the closing quarter of the year, due to funding issues, the report added.

Whatever the outcome of this issue, research by PYMNTS Intelligence has shown that Thailand’s residents are proponents of digital payments. The country led all other nations surveyed in real-time payment transactions per capita in 2022, with the payment method making up 34% of all transactions. 

“Thanks in part to the increasing popularity of the PromptPay scheme among Thai consumers, experts anticipate even more growth ahead,” PYMNTS wrote last year. “Projections suggest Thailanders will conduct 32 billion transactions via real-time payments in 2027.”

PYMNTS recently spoke with a panel of experts about the rise of digital wallets, with Jenny Cheng, vice president and general manager of Google Wallet, stressing that digital wallets are about “flexibility” and “freedom,” letting users to leave home without physical wallets while still accessing key credentials and services.

“We’re talking about convenience and safety, but ultimately this is about driving value to the user,” she told PYMNTS CEO Karen Webster.

Looking ahead, the panelists imagined a future where digital wallets grow even more deeply integrated into daily life, providing enhanced personalization and convenience.

Jack Philbin, CEO of mobile marketing agency Vibes, envisioned a future where digital wallets could revolutionize travel.

“If you have an airplane boarding pass, and you go through security. … Why not then include an offer for someone and a discount or incentive to shop at a specific brand or retailer in that airport while they wait?” he said.

The post Thailand Adds Cash Payments to $13 Billion Digital Wallet Plan appeared first on PYMNTS.com.

The impact digital wallets are having as mobile technology advances and consumer preferences shift is becoming impossible to ignore — particularly outside of the United States, where digital wallets are evolving beyond payment tools and offering a broader range of functionalities that cater to diverse needs.

“In Europe, we have been quite advanced in digitization of payments, and the usage of digital wallets has been growing rapidly,” Deniz Oran, head of payment partnership, EMEA at Google Wallet, told PYMNTS.

“The journey for many people starts with adding the payments credential, then very quickly once they’ve become accustomed to using the digital wallet, they add other credentials such as loyalty cards, boarding passes, transit and event tickets, and the list goes on,” Oran explained.

Younger generations, who tend to be digital natives, are most responsible for driving the adoption of digital wallets for both payment and non-payment use cases.

Read also: Digital Wallets Beyond Financial Transactions: A Global Perspective

Digital Wallet Adoption: A European Perspective

Oran highlighted that the adoption of digital wallets in the United Kingdom and European Union has been significant, particularly compared to other regions.

“Every day starts with the phone,” she explained. “It ends with the phone. And for younger generations, what we see is they want to be truly able to leave their physical wallet at home.”

In the U.K., for instance, there is a higher propensity to store digital credentials, such as payment cards and loyalty programs, in digital wallets. Beyond payment cards, users can now store items like car keys, corporate badges and driver’s licenses in some regions. The goal is not just to digitize these credentials but to make their digital versions more useful. Features like timely reminders and notifications are designed to integrate these credentials into users’ daily lives more seamlessly, Oran explained.

However, the actual use of these stored credentials is lower in some regions than others, highlighting key areas for growth.

Oran pointed out that this discrepancy in usage may be due to the diverse range of credentials stored in digital wallets, some of which are not used as frequently as payment cards. For example, the partnership between Google and the U.K.’s HM Revenue and Customs (HMRC) allows users to store their national insurance numbers in Google Wallet. While this is a critical credential to have on hand, it does not require frequent use.

This phenomenon illustrates the broader trend in digital wallets. As they become repositories for a wide array of credentials, usage patterns are naturally becoming more varied.

At the same time, one of the critical challenges in the widespread adoption of digital wallets is ensuring consistent and reliable connectivity. As Oran noted, internet access is not always guaranteed, particularly in areas with varying levels of infrastructure across the EU. However, Google Wallet has worked to address this challenge by enabling a limited number of transactions without internet connectivity using NFC technology. This is particularly useful in transit systems, where underground stations may lack internet access.

See also: Consumers Are Using Digital Wallets for More Than Payments — Here’s How

The Future of Digital Wallets: Beyond Transactions

Interoperability is another issue digital wallets must overcome for widespread adoption. This is especially true across the EU, where diverse regulatory landscapes and local payment methods can complicate seamless use across borders.

“Payments are a local business,” noted Oran.

She stressed that Google is committed to supporting as many diverse payment methods as possible, working closely with the ecosystem to ensure that its digital wallet remains functional across different regions. This commitment to openness and interoperability is crucial for creating a frictionless user experience, a core value that aligns with Google’s overall approach to product development.

“Especially with digital wallets, not having walled gardens is something we care a lot about,” said Oran.

As digital wallets become more integral to daily life, the need for robust security and privacy measures becomes even more critical. In regions like the U.K. and the EU, where regulations such as General Data Protection Regulation (GDPR) are stringent, balancing convenience with security is a complex task.

“The user experience journey is at the core of digital wallets, and at the same time, safety and security are what’s needed for user trust,” Oran explained. “One cannot come at the cost of the other, so security and privacy needs to be built into every part of the wallet … especially when you think about the payments piece, which is the foundational layer, the security is really built in there because the payments are based on tokenization.”

Looking ahead, she suggested that the future of digital wallets lies in expanding their use cases beyond transactions. As more non-transactional credentials are integrated into digital wallets, they will likely lead to increased usage for payment transactions. The relationship is symbiotic, as the more functionalities a digital wallet offers, the more indispensable it becomes in users’ lives, driving further adoption and innovation.

In Germany, for example, Google partnered with a local company to enable the storage of a digital QR code for restroom access at highway rest stops — a uniquely local use case that highlights the potential for digital wallets to integrate seamlessly into everyday life. This kind of innovation meets specific regional needs and demonstrates the versatility of digital wallets.

The post What the US Can Learn From Europe’s Digital Wallet Renaissance appeared first on PYMNTS.com.

As CNBC reported Sunday (Sept. 1), this shift follows a tough stretch for plastic hotel key cards, thanks to health concerns during the pandemic and cybersecurity worries more recently. 

That’s led Google and Apple to begin offering hotels the ability to allow guests to save their room keys to their digital wallets, letting them enter their rooms just by tapping their phones against a reader next to the door handle.   

And the Hilton hotel chain, meanwhile, offers the Honors app, which lets guests check in and use a room key through their smartphone. 

Eli Fuchs, regional director of operations at Valor Hospitality Partners, which counts Hilton and Holiday Inn Express hotels among its portfolio members, told CNBC that digital is the next phase in hotel room door technology.

“Traditional hotel room keys are staring down the end of their existence,” Fuchs said.

However, some security experts caution that even the newer lock methods aren’t foolproof.

Lee Clark, cyberthreat intelligence production manager at Retail and Hospitality Information Sharing and Analysis Center, told CNBC that while threats can be mitigated by security protocols like multifactor authentication (MFA), guests may not want to deal with extra steps.

Clark added it’s unlikely that all hotels will replace all key cards with digital keys in the short term. Aside from the costs, some guests might rather have a key card, or may not have a mobile device compatible with digital lock systems.

“Transitioning to digital and keyless lock systems carries a significant cost in equipment, installation, maintenance and security,” Clark said.

As PYMNTS wrote earlier this year, while a majority of consumers use digital wallets for shopping, a considerable number turn to them for other things. 

For example, research by PYMNTS Intelligence — from the study “Digital Wallets Beyond Financial Transactions: A Global Perspective” — finds that 29% of consumers would use the technology for age or identity verification; 28% to store and access rewards, discounts or coupons; 25% to store and access event tickets. Another 24% said they use digital wallets to store and access financial documents or information.

“Data suggests that familiarity with digital wallets is the key bridge to cross for engaging new users, and even a portion of those skeptical today could become the digital wallet users of tomorrow,” PYMNTS wrote in the study.

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In its legal complaint filed with the country’s National Commission in Defense of Competition, MercadoLibre accused the banks of “illegally concentrating” under one payments platform, Bloomberg reported Monday (Aug. 26).

“The 36 banks that are part of the MODO wallet make up a cartel to avoid competing between its own digital wallets,” MercadoLibre said, per the report.

This filing comes about three months after banks — under their shared platform MODO — filed a legal complaint alleging anti-competitive strategies by Mercado Pago, according to the report.

MODO responded to MercadoLibre’s complaint Monday, rejecting the company’s accusations and saying that the firm is trying to block competition with complaints so it can “continue abusing its dominant position,” per the report.

In MODO’s complaint filed in May to Argentina’s National Commission in Defense of Competition, it accused MercadoLibre’s payment platform of forcing shoppers to fulfill online purchases using Mercado Pago.

“MercadoLibre’s abusive conduct, detailed in the complaint, creates negative effects for the market, disproportionately maximizing its earnings,” MODO wrote in the complaint, adding that it’s confident authorities will investigate “one or more anti-competitive practices,” forcing an “in-depth analysis of the payments and digital wallet ecosystem.”

Responding to the complaint, MercadoLibre said in May that it complies with relevant regulation and that MODO’s accusations are “absurd.”

“Perhaps banks should compete with each other, innovate, develop products and pay off balances, as banks do in the rest of Latin America, instead of colluding and blaming Mercado Pago without merit,” the company said at the time.

Mercado Pago has set its sights on expansion across Latin America, Osvaldo Giménez, president-Fintech, MercadoLibre, and CEO of Mercado Pago, told PYMNTS CEO Karen Webster in an interview posted Aug. 16.

While Brazil, Mexico and Argentina remain its largest markets, the company is making inroads in Chile and has plans for Colombia, Peru and Uruguay.

“The way we realize it works is basically pick one of these countries and launch the full suite of products there,” Giménez said. “And that typically takes a couple of years.”

The post MercadoLibre Targets Banks in Complaint With Argentina’s Competition Regulator appeared first on PYMNTS.com.

“Through its operation and partnership with MGM Resorts International and powered by Entain’s technology, this innovative feature makes BetMGM the only legalized sports betting app to allow Nevada residents and visitors to wager in the state and carry their funds to BetMGM mobile markets nationwide,” the company said in a news release Thursday (Aug. 22).

The company’s single account and wallet feature lets users sign up once in-person at an MGM Resorts property in Nevada and then use the sports betting app across all U.S. BetMGM mobile markets. New customers in Nevada can sign up by downloading the mobile app, completing verification and visiting one of BetMGM’s nine retail sportsbooks.

“When traveling to another jurisdiction, users will receive a pop-up message upon opening the app allowing them to switch to their account within the BetMGM market where they are currently located,” the release added. “Customers also can manually select their market within the app’s account tab to view their account for that state.”

Bill Hornbuckle, CEO of MGM Resorts, had hinted at the launch of the wallet during an earnings call in February, saying it was “critical to our omnichannel thesis and will fully unlock one of the key differentiators for BetMGM by fully leveraging our Las Vegas properties.”

The company’s efforts are happening amid “a digital shift … in how gamers handle payments,” as PYMNTS wrote earlier this year.

Research by PYMNTS Intelligence points to a growing demand for digital instant payment methods among gamers, challenging the long-held dominance of cash payments.

“In fact, 76% of gamers who can’t access instant payouts would if they could, prompting companies like Caesars Sportsbook to offer push-to-card instant payouts within their apps,” that report said.

“This move not only improves customer satisfaction but also fosters loyalty among gaming enthusiasts, illustrating the importance of digital payments in shaping the gaming experience.”

As noted here in a separate report, getting winnings in cash works for gamers betting in physical environments. But to attract those playing in digital environments, gaming companies need to take steps to give players more instantaneous payouts while also encouraging them to stay within in their current gaming ecosystem.

“Given that more than three-quarters of gamers want this, delivering on this preference would likely improve customer satisfaction — and possibly motivate them to play again soon,” PYMNTS wrote.

The post BetMGM Lets Nevadans Connect via Digital Nationwide Wallet appeared first on PYMNTS.com.

And while the two trends are unrelated — particularly given that paper-based payments are more of a fraud risk than their digital counterparts — a new research paper published last week (Aug. 14) finds that, across the digital wallet landscape, the two trends are increasingly butting heads.

The paper, entitled “In Wallet We Trust: Bypassing the Digital Wallets Payment Security for Free Shopping,” posits that an ongoing reliance on outdated authentication methods, and the prioritizing of convenience over security, has left digital wallets vulnerable to attack and abuse by bad actors.

“The implications of these attacks are of a serious nature where the attacker can make purchases of arbitrary amounts by using the victim’s bank card, despite these cards being locked and reported to the bank as stolen by the victim,” the researchers wrote.

In an era where digital transactions are becoming the norm, the convenience of digital wallets is undeniable — and as these wallets become increasingly integral to daily transactions, their security is becoming a top priority.

By adopting emerging security imperatives like biometric authentication, tokenization, end-to-end encryption, multi-factor authentication (MFA) and AI-driven detection and prevention, digital wallet providers can build robust defenses against the growing array of cyber threats.

Read more: Debit Cards In Digital Wallets Gaining Ground Across Sectors

How Digital Wallet Providers Can Protect Users 

The convenience and efficiency offered by digital wallets are undeniable, but with this convenience comes the responsibility to safeguard sensitive financial information. After all, the ease of setting up and using these wallets, combined with the lack of stringent verification processes, has made them an attractive target for illicit activities.

Against this backdrop, end-user reliance on digital wallets is only increasing. What started as a convenient alternative to physical wallets has evolved into a key financial tool, housing sensitive data and enabling seamless transactions across various platforms.

PYMNTS Intelligence finds that digital wallet usage continues to grow across grocery, retail, restaurant and travel sectors, with debit becoming the preferred underlying payment method. In June 2024, consumers paying with digital wallets used stored debit cards in 55% of grocery transactions, as well as 52% of retail transactions, 62% of restaurant transactions and 46% of travel transactions.

As digital wallets continue to gain traction in the financial ecosystem, their security will be a critical factor in determining their long-term success.

Among the emerging security imperatives that are essential for the future of digital wallets, biometric authentication has rapidly gained traction as a reliable and secure method of verifying a user’s identity. Unlike traditional passwords or PINs, which can be easily stolen or forgotten, biometric data — such as fingerprints, facial recognition, and voice patterns — are unique to each individual, making them significantly harder to replicate or misuse.

For digital wallets, the integration of biometric authentication offers a dual advantage: it enhances security while improving user experience by streamlining access to accounts and transactions.

“If you do the facial scan immediately upfront … That means all these transactions will go through seamlessly and you no longer have to confirm your identity after the fact,” Mark Nelsen, senior vice president and global head of consumer payments at Visa, told PYMNTS.

Read more: 3 Big Ideas From PYMNTS Intelligence’s Digital Wallets UK Report

Reducing Risk in Digital Transactions

Tokenization is another powerful security measure that replaces sensitive data, such as credit card numbers, with a unique identifier or “token” that can be used in transactions without exposing the actual data. This technique minimizes the risk of data breaches, as the token itself is meaningless to unauthorized parties who may intercept it.

“We think tokenized payments have the propensity to penetrate some 70% of transactions as a whole,” Mehret Habteab, senior vice president of product and solutions at Visa Europe, told PYMNTS.

In the context of digital wallets, tokenization is particularly effective in securing payment data during transactions. When a user initiates a payment, their sensitive information is not directly transmitted. Instead, a token is generated and used to complete the transaction. This approach significantly reduces the risk of fraud, as even if a hacker gains access to the token, they cannot use it to access the user’s financial information.

And for digital wallets, other methods of end-to-end encryption that involve encrypting payment data, personal information, and other sensitive details at every stage of a transaction can help ensure that even if data is intercepted, it remains unintelligible to unauthorized parties.

Of course, sometimes the simple solutions are the most effective — and for digital wallets, MFA is particularly effective in preventing unauthorized access. Even if a hacker obtains a user’s password, they would still need the second form of authentication to gain access to the wallet. This added layer of security makes it significantly harder for cybercriminals to compromise accounts.

Looking ahead, the rise of artificial intelligence (AI) and machine learning has opened new avenues for enhancing cybersecurity in digital wallets. These technologies enable real-time threat detection and continuous monitoring, allowing digital wallet providers to proactively identify and respond to potential security risks before they escalate.

The post 5 Emerging Security Imperatives for Digital Wallets appeared first on PYMNTS.com.

Apple is working with the state of California to bring IDs to Apple Wallet “soon,” the company said in a Thursday (Aug. 15) press release.

This ID in Wallet capability is available in five states: Arizona, Maryland, Colorado, Georgia and Ohio, according to the release.

“Whether using IDs in Apple Wallet to breeze through travel, or to securely verify age or identity at businesses, California driver’s licenses and state IDs in Apple Wallet make ID presentment seamless — all with the security built into iPhone and Apple Watch,” Jennifer Bailey, vice president of Apple Pay and Apple Wallet at Apple, said in the release.

Using IDs in Apple Wallet provides an “easy, secure and private way” to present a driver’s license and state ID in person and in app, Bailey said.

When presenting their ID in Apple Wallet, users do not need to unlock, show or hand over their device, according to the release. In addition, users will review and authorize using Face ID or Touch ID before the information is shared, and only the information needed for the transaction will be presented.

The release added that the user’s ID is encrypted and stored only on their device; the information cannot be accessed by Apple or others unless the user chooses to present it; and Apple and the state-issuing authority do not know when, where or with whom the user presents their ID.

The launch of this offering will be part of the California DMV’s mobile driver’s license (mDL) pilot program, per the release.

The momentum behind mobile driver’s license proposals is gaining traction across the U.S., PYMNTS reported in April.

States, as well as the federal government, are viewing mDLs as a promising solution to combat fraud and bolster digital ID verification.

Google has been rolling out the ability to save driver’s licenses and state IDs in the Google Wallet app, and Samsung has been working with IDEMIA to bring a similar capability to Samsung Wallet.

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A recent PYMNTS Intelligence report, “Top of Wallet: Digital Wallets’ Ascent for Payments — and More,” in collaboration with Ingo Payments, explores how digital wallets became more prevalent, giving merchants both opportunities and challenges in adapting to this trend.

Soaring Popularity and Spending

Digital wallets are on track to outpace debit cards in transaction volume at physical points of sale by 2027, according to a recent Worldpay report. The report reveals that digital wallets are used by 53% of Americans and are set to dominate nearly half of all point-of-sale (POS) transactions globally by the end of the decade. The value of transactions made via digital wallets is expected to double from 15% to 31% by 2027, while debit card transaction value will decrease from 28% to 23% over the same period.

A driver behind this shift is the convenience of digital wallets, which leads to increased consumer spending. Digital wallet users, on average, spend 31% more than those using other payment methods. The trend is particularly pronounced among younger generations, with 60% of Gen Z and 51% of millennials reporting higher spending when using digital wallets. High-income earners also exhibit a propensity to spend more with digital wallets, with 61% of individuals earning over $150,000 annually indicating increased expenditure.

Merchant Adoption Lags

Despite the clear consumer preference for digital wallets, merchant adoption remains inconsistent. Only 57% of small businesses currently accept digital wallet payments, compared to nearly universal acceptance of credit and debit cards. This gap presents an opportunity for businesses that are quick to adapt. The hesitancy among merchants stems from concerns about the cost and complexity of technological upgrades, as well as fears regarding security and fraud.

A recent J.D. Power report highlights that 22% of merchants do not accept credit cards and 21% do not accept debit cards due to fraud concerns, which suggests a similar reluctance toward digital wallets. The perceived complexity of integrating digital wallets into existing POS systems is another barrier. But the report notes that upgrading to NFC-capable card readers is relatively affordable, with costs ranging from free to $500, depending on the provider.

Expanding Uses and Expectations

The functionality of digital wallets is evolving beyond simple transactions. Consumers are interested in using digital wallets for a variety of purposes, such as storing driver’s licenses, passports and event tickets. According to PYMNTS Intelligence, 45% of consumers are eager to use digital wallets for new money mobility options, including account-to-account transfers and recurring payments.

The demand for expanded features is particularly strong among younger consumers, with 66% of Gen Z indicating they would switch providers to access new features. This trend is reflected in the broader consumer base, with 37% of customers willing to change digital wallet providers for enhanced functionality. Merchants need to recognize that offering comprehensive digital wallet services can not only meet consumer expectations but prevent potential loss of business to competitors offering more advanced features.

Digital wallets are expected to surpass debit cards in transaction volume within a few years, driven by their convenience and users’ increased spending power. Merchants face challenges in adopting this technology due to security concerns and the need for system upgrades. To stay competitive, businesses must address these issues and enhance digital wallet features to meet consumer demands. As digital wallets become more popular, they will influence both payment methods and consumer engagement.

The post Big Spenders: Nearly Two-Thirds of Gen Z Spend More When Using Digital Wallets appeared first on PYMNTS.com.

In today’s operational landscape, where convenience reigns supreme and value-added services drive customer stickiness, the financial services industry faces new challenges and opportunities from the Big Tech builders of those very digital wallets.

With the news at Tuesday’s (Aug. 13) ninth annual Made by Google event that Google is introducing a new “Everything Else” Google Wallet feature for the U.S. that lets users replicate various IDs, insurance information and other passes to create a digital version that appears in Google Wallet, the demand for more comprehensive digital wallet solutions is becoming harder to ignore.

The rise of Big Tech giants like Apple and Google within the payments arena has fundamentally reshaped consumer expectations, especially regarding digital wallets and seamless payment experiences. These tech giants have set new standards for user-centric design, ease of use and rapid innovation, leaving traditional financial institutions scrambling to keep pace.

However, for smaller banks and credit unions, this shift also presents a unique opportunity to carve out a competitive moat by embracing innovation and focusing on their inherent strengths when it comes to serving their customer base.

Read more: Credit Unions vs Big Tech: Winner Gets the Customer

The Big Tech Influence: Redefining Convenience

Tech companies have long understood that convenience is a powerful driver of customer loyalty and engagement. By creating ecosystems that integrate various services, they have transformed the digital wallet from a payment tool into a hub for managing finances, loyalty programs and even identity verification.

For example, digital wallet products like Apple Pay, Google Wallet and Amazon Pay are all designed with the user in mind, offering intuitive interfaces, onboarding and transactions. This approach has resonated with consumers who increasingly demand frictionless experiences in all aspects of their digital lives.

On top of that, Big Tech’s ability to integrate digital wallets into their broader ecosystems has been a game-changer. Apple, for instance, has leveraged its ecosystem to offer a cohesive experience across devices, from iPhones to Apple Watches. This integration extends to services like Apple Card, where the digital wallet is not just a payment tool but also a gateway to financial management, rewards and more.

PYMNTS Intelligence found that digital wallets are increasingly serving purposes beyond financial transactions, including being employed for travel-related needs such as storing boarding passes. This diversification highlights the versatility and utility of digital wallets in facilitating everyday tasks beyond payments.

Still, for many traditional financial institutions, particularly smaller banks and credit unions, competing with the scale, resources and technological prowess of Big Tech can seem like a daunting task.

In the report “How Top-Performing Credit Unions Innovate to Stay Competitive,” a collaboration between PYMNTS Intelligence and Velera, we found that even among top-performing credit unions (CUs), who have relatively high scores on membership satisfaction, a majority (at 56%) view Big Tech firms as key competitors. Overall, 28% of CUs say they compete with Big Tech companies.

However, these institutions have several inherent advantages that, if leveraged correctly, can help them thrive in the digital age.

Read more: 3 Big Ideas From PYMNTS Intelligence’s Digital Wallets UK Report

Building a Competitive Moat Through Innovation

The CUs that are putting time and effort into digital/omnichannel initiatives invest 13% more in payments innovation than bottom performers and benefit from 57% lower member churn, according to PYMNTS Intelligence data.

“Digital wallets are on a hockey-stick trajectory right now,” Chuck Fagan, president and CEO of Velera — the newly rebranded PSCU/Co-op Solutions — told PYMNTS.

Trust remains a cornerstone of the banking relationship, and smaller financial institutions often enjoy a higher level of trust among their customers compared to larger banks or tech companies. By doubling down on this trust and enhancing it with digital tools, smaller institutions can create a competitive advantage.

Unlike Big Tech, smaller banks and credit unions often have deep ties to their local communities. This local knowledge can be leveraged to offer services and products tailored to the specific needs of their customers, something that global tech giants may find challenging to replicate.

Additionally, financial institutions are adept at navigating complex regulatory landscapes, a domain where Big Tech has occasionally faltered. By combining this expertise with innovative technology solutions, smaller institutions can position themselves as leaders in compliance and security, areas of increasing importance to consumers.

For all PYMNTS digital transformation coverage, subscribe to the daily Digital Transformation Newsletter.

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