The Rise of Digital Wallets

8th May, 2023

Author: Paolo Montessori, CEO

Category: Industries

The Soaring Popularity of Digital Wallets

It’s no surprise that the days of carrying a physical wallet for cash payments are long gone. The rise of cashless transactions has led people to embrace digital wallets on a massive scale. In fact, it is estimated that by 2026, the number of digital wallet users worldwide will reach an astounding 5.2 billion.

But what drove this significant shift towards digital wallets?
Also known as e-wallets, digital wallets offer numerous advantages over traditional wallets. They leverage cutting-edge technologies, introducing new use cases that captivate users on a daily basis.

In this post, we delve deeper into the world of digital wallets, exploring the reasons behind their immense popularity.

What Is a Digital Wallet?

Digital wallets, for those unfamiliar, are online applications or services that facilitate electronic payments. They offer a convenient one-stop solution for all your payment needs, surpassing the limitations of a physical wallet. With digital wallets, you can pay for various services, including e-commerce purchases, utility bills, travel expenses, and even gift cards.

The integration of digital wallets into our daily lives is remarkable. Whether you want to book an Uber or order food delivery, chances are the app will support popular digital wallets in your region for seamless payments.

There are three main categories of digital wallets:

  • Closed Wallets: These wallets are designed for payments exclusively within a specific app or company. Users can only use the closed wallet to pay for goods and services offered by that particular company and cannot make payments to other platforms.
  • Semi-Closed Wallets: Semi-closed wallets are more versatile and allow users to make payments for both online and offline purchases with various merchants. However, these merchants need to register with the developer or issuer of the e-wallet to accept payments.
  • Open Wallets: Issued by financial institutions like banks, open wallets serve broader purposes. Users can not only make online transactions but also withdraw cash from ATMs using these wallets.

The Popularity of Digital Wallets

Digital wallets have seen a surge in popularity, driven by several compelling reasons:

  • Convenience: Digital wallets store all your financial information, making cashless transactions seamless. Their mobile application format makes them incredibly convenient compared to carrying a physical wallet.
  • Security: E-wallets prioritize user security. With encryption and stringent privacy protocols, financial information is stored safely, eliminating concerns about theft or misplacement.
  • User-Friendly: Digital wallets are designed to be user-friendly, catering to both tech-savvy individuals and those less familiar with technology.
  • Business Adoption: Businesses widely accept digital wallets due to their benefits, further boosting their popularity.

Digital wallets first gained traction as P2P payment apps like PayPal, enabling smooth cross-border and online transactions. In the U.S., Cash App and Venmo are two of the most popular P2P payment services for sending and receiving money. Venmo has 78 million users compared to Cash App’s 44 million, making it the more popular app. To remain competitive in this digital financial age, both companies are investing heavily in technology innovation and strategic partnerships to bolster usership rates and brand exposure.

The mobile payment sector has gained huge popularity in Asia, the most populous region of the world, and the trend shows no indications of slowing down. Major countries of the Asia Pacific region such as China, Japan, India, and Malaysia are converting into cashless economies and are evolving into the global leaders of the digital wallet market for many reasons such as government support and advocacy of cashless transactions. The most popular digital wallets services in the Asia Pacific region are WeChat, Alipay phonepe, paytm, Go-pay and Rupay.

In Africa and the Middle East, with a large unbanked population, but growing mobile phone penetration, the region presents significant growth opportunities for digital wallet providers. A large percentage of Africa’s population is unbanked, with account ownership estimated at 54% by the World Bank, and while mobile phone ownership is growing steadily, having increased by 7% since 2019, it is still at just 61%. For the Middle East, mobile phone use is much more promising, at 81%, but bank account ownership is even less mature than in Africa, at 38%. In 2007, M-Pesa led the way in improving financial accessibility in Africa by making it feasible to send transfers through standard messaging on a mobile phone. GSMA figures show that the region accounted for approximately 68% of the global mobile money transaction value in 2022.

Notable digital wallets are paving the way for the Africa and Middle east region: Vodafone Cash currently has around 10.7 million users in Egypt, OPay is thought to be Nigeria’s largest national digital wallet provider, with around 35 million users followed by Paga’s latest user base stands at 19 million, STC Pay in Saudi Arabia launched in 2018 and has a user base of 8 million and in the UAE Payit launched in 2018 with a user base of 0.5 million followed by e& money and Klip with over 1 million users.

Africa and the Middle East has been developing since the late 2000s, with a mix of provider types including mobile network operators (MNOs), banks and fintech companies. MNOs have proved important as digital wallet providers because of their ability to extend financial inclusion to the region’s population who have mobile phones but do not find traditional financial systems accessible. Non-MNO providers such as fintechs or banks, meanwhile, typically provide their service in just one country by providing a mobile application.

There has also been a proliferation in partnerships between digital wallet providers and money transfer operators that is widening the access to remittance within the Africa and Middle East region and beyond, by allowing people to more easily receive and send money abroad and continue to find new ways to differentiate themselves through their reach, capabilities and services.

Digital wallets offer the added advantage of facilitating cross-border transfers. However, cash transfers may still present challenges, such as delays or connectivity issues between payment institutions. Productized remittances, like those provided by Prepay Nation, address this concern.

Prepay Nation’s global B2B marketplace enables users to send cross-border transfers as airtime, data, bundles, e-gift cards, and utility payments. With a vast network covering 150+ countries and collaborations with 600+ mobile network operators and businesses, Prepay Nation delivers the convenience of prepaid products to users worldwide.

Tap into our marketplace and power up your digital wallet solution with our prepaid products for your customers. Contact us today!


Paolo Montessori,