The global mobile wallet market is gaining significant traction, especially in the wake of the COVID-19 pandemic and the need for contactless transactions. Not only do mobile payments provide safety and convenience, but they will also ignite new Europay, Mastercard, and Visa (EMV) use cases, and expand marketing potential for banks, financial services, smart card vendors, and their supply chain partners.
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- The global mobile wallet market is gaining significant traction, especially in the wake of the COVID-19 pandemic and the need for contactless transactions.
- Not only do mobile payments provide safety and convenience, but they will also ignite new Europay, Mastercard, and Visa (EMV) use cases, and expand marketing potential for banks, financial services, smart card vendors, and their supply chain partners.
- Growing at a Compound Annual Growth Rate (CAGR) of 10.6% between 2022 and 2027, the installed base for mobile wallets will increase from 3.5 billion to 5.6 billion.
- Regions like the Middle East & Africa and Latin America are expected to see the greatest growth. Mobile wallets are highly important to acquiring new banking customers in underdeveloped regions where smartphone uptake continues to grow.
- Incumbent mobile wallet providers, such as Apple Pay, Samsung Pay, and Google Pay, are facing a two-fold adversary: banks like Revolut, Monzo, and Curve, as well as payment companies like PayPal and Venmo are capitalizing on digital-first payments.
- While the COVID-19 pandemic brought spending to a halt in most regions, the United States was largely unaffected. The United States is also home to some of the most innovative tech companies in the world, which makes mobile wallet services more convenient, secure, and less time-consuming.
- Between 2022 and 2027, the total installed base for mobile wallets in North America will grow from 345.8 million to 419.8 million. Apple Pay will account for 109.2 million and PayPal will account for 73.7 million by 2027.
- Densely populated regions in China and South Korea switching to cashless societies is a major reason why the Asia-Pacific region is the largest mobile wallet market in the world. The mobile wallet installed base in the Asia-Pacific region will increase by more than 1 billion between 2022 and 2027—bringing the total to 3.1 billion. Alipay will account for a third of the market itself in the region, with WeChat Pay closely trailing.
- Europe, a largely fragmented mobile wallet market, is the second-largest opportunity thanks to the strong uptake in contactless payment, the need for enhanced security, and anticipated regulation. At the CAGR pace of 8.4%, the European mobile wallet installed base will increase from 651.7 million in 2022 to 974.7 million by 2027. Apple Pay will account for nearly half of all mobile wallet solutions alone in the region.
- Latin America is experiencing the most rapid surge in demand for mobile wallets as a payment method. Growing at a CAGR of 18%, the installed base will climb from 249.4 million in 2022 to 570.9 million in 2027—more than North America. Wallet providers PicPay, Nubank, and Mercado Pago account for nearly a third of the entire market in Latin America.
- The Middle East & Africa, while growing at a slightly lower CAGR than Latin America at 17.7%, has a larger installed base for mobile wallets. The installed base in the region will increase from 256 million in 2022 to 577.1 million by 2027. The companies MTN MoMO, M-Pesa, and Orange Money account for 82% of the total installed base here.
“A movement away from cash and migration toward cashless societies will exacerbate the need for digitized solutions, pressing the need for digital wallets with enhanced functionalities able to access a variety of end markets, including Identity (ID) and ticketing.” – Sam Gazeley, Industry Analyst at ABI Research
Key Decision Items
Prepare for Cashless Economies
In most places around the world, the COVID-19 pandemic caused surging demand for digital payments like mobile wallets as consumers and businesses turned to contactless solutions. This trend is expected to only continue in growth, so the traditional payment market business model must accommodate these monumental changes. In fact, a lot of regions like the Nordics are on track for entirely cashless societies. Many neo and challenger banks, inherently digital-first in nature, are actively rushing to adapt to this shifting landscape.
Think of How Mobile Payments Improve Potential in Developing Markets
Historically, underdeveloped markets like the Middle East & Africa and Latin America have lacked an adequate number of brick-and-mortar banks, creating tough barriers for citizens to become customers. However, mobile wallets and mobile money services offer a huge opportunity to acquire customers that otherwise would have been unattainable. Where underbanked regions lack in banking infrastructure and account ownership, they make up for in mobile infrastructure. Indeed, more and more citizens in underbanked regions are adopting smartphones, making digital transactions all the more important. Furthermore, digital payment services allow price-sensitive consumers to conveniently store funds and pay expenses in a low-cost, app-based manner.
Tap into a New Mobile Wallet Marketing Strategy
Considering that mobile wallets, for those who use them, are already an influential part of daily life, they make excellent candidates for an all-in-one solution for use cases beyond payments, banking, credit, investment, and insurance. For example, new mobile wallet marketing angles in the Asia-Pacific region include taxi-hailing, food delivery, hotel booking, and other transactions.
Government Identification (ID) is another marketing avenue for mobile payment players to consider. To illustrate, notable mobile Original Equipment Manufacturers (OEMs) like Apple and Google are offering digital wallets that support ID. In March 2022, Arizona became the first U.S. state where Apple users can store their driver’s license and state ID on their mobile wallet. A few more states and Puerto Rico are also going to receive the same treatment. Likewise, the Google Wallet can be used to present ID, in addition to support for payments, transit, event tickets, COVID-19 vaccination certificates, hotel check-ins, and more. These additional features enable mobile payment providers to make a much more compelling case when advertising their products in various marketing touchpoints.
Consider Tap on Phone as a Solution to Payment Acceptance Hurdles for Businesses
Tap on phone, which turns smartphones into Point of Sale (POS) terminals, knocks down barriers to payment acceptance for many small businesses. Much of the momentum for tap on phone comes from fintech (e.g., neo and challenger banks) trying to create a more open mobile payment market. This form of contactless transaction simply requires that the POS device and the payment device (smartphone or smart card) both support Near-Field Communication (NFC).
ABI Research views the growing use of tap on phone payment as a key aspect of the future of the mobile payment market because it pulls more stakeholders into the ecosystem. For example, only 1 out of 10 small-scale merchants in emerging economies accept digital payments as of 2022. That’s despite the fact they account for 40% of total income in their respective regions. Tap on phone easily and smoothly enables local shops and merchants to get up and running with convenient mobile payments. Besides helping small business owners that can’t install mobile-supported POS terminals, tap on phone serves as a solid starting point for economies with cashless aspirations (e.g., regulation) and can be an effective Plan B when the normal POS terminal is inoperable.
Assess the Potential for Mobile Proximity Payment Solutions
In many cases, mobile wallets are used for proximity payments, which is where the payer, using proximity technologies like NFC, Quick Response (QR) code, or Bluetooth, makes a transaction in the same location as the payee. ABI Research expects mobile proximity payments to experience the most impressive growth among the three types of mobile payments (the other two being mobile peer-to-peer transactions and remote Mobile Commerce (m-commerce).
At the forefront of reasons for adopting mobile proximity payments are convenience, a wider range of payment options, and increased debit and cash security. The wide-scale use of mobile proximity payments will lay the path for various other technologies and use cases to find traction in the payment market. Proximity payment solutions have strong potential for e-commerce, as repeat customers close to the store can be targeted with push notifications via beaconing technologies to activate a Global Positioning System (GPS) and geofencing. However, this kind of marketing will require incentives (e.g., coupons and loyalty programs) and careful navigation around local data regulations.
Key Market Players to Watch
- Apple Inc.
- NTT DOCOMO, Inc
- NXP Semiconductors
- Visa Inc.
Dig Deeper for the Full Picture
To learn more about how mobile wallet providers should map out product strategies and to identify promising opportunities, download ABI Research’s Mobile Payments Market: Innovation Strategies for Future Success research report.
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This content is part of the company’s Digital Payment Technologies Research Service.