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Will Top of Digital Wallets Threaten Traditional Credit Card Markets?

Financial Brand | Bryan Yurcan | Jun 27, 2022

Digital wallet - Will Top of Digital Wallets Threaten Traditional Credit Card Markets?Digital wallets are an increasingly competitive space for card issuers. In fact, without 'top-of-wallet' status cardholder activity can plummet.  Not only is competition growing among card issuers to be “top of wallet” at the point of sale with these digital wallets, but because of the way consumers tend to use them — keeping fewer digital cards in their mobile wallet than they keep plastic cards in their physical wallets — the balance of power in the card business is shifting.

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Spurred on by habits created during the pandemic, consumers globally, and in the U.S. particularly, sharply increased their usage of digital wallets in the last 12 months, according to a survey from Marqeta. The payments company surveyed more than 4,000 consumers in early 2022 — 2,000 from the U.S., 1,000 from Australia, and 1,000 from the U.K. — on their usage of digital wallets, which the survey described as “a virtual wallet that stores payments information on a mobile device.”

75% of those who were surveyed globally said they have used a digital wallet within the past year. While the U.S. is slightly behind the global average, where 71% reported using a digital wallet within the last 12 months, the rate of adoption is still up from the previous year (64% in 2020).

Convenience Is a Big Plus

Ease of use is another big factor in the increased adoption of mobile wallets. Even those that may consider themselves technophobes find them simple and convenient to use. Cards certainly are not difficult to use, so the convenience bar is high. Yet, payments made with mobile wallets, when used in conjunction with facial recognition, can be very fast.

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In fact, a majority of consumers are so comfortable with using mobile wallets that they say they would be confident only taking their phone with them out shopping and leaving their physical wallet at home. 81% of people surveyed globally said they could make mobile wallet purchases everywhere they wanted to. In the U.S., more than three quarters (78%) of respondents agreed with this, up from 62% in a different Marqeta survey of U.S. consumers in 2020.

Moving Toward An ‘Everything is Currency’ Mindset

Perhaps the biggest differentiator in the quest to be top of wallet will be issuers that enable consumers to use any store of value they own to pay for purchases. This can include loyalty points and crypto holdings.  The consumer, says Mitchell, is increasingly thinking of the concept that “everything is currency” and wants a digital wallet experience that enables this.

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