Following the swift adoption of digital financial processes in the wake of the Covid-19 pandemic, consumers across globe have rapidly embraced digital payment systems, including digital wallets, for their day-to-day activities.
According to Juniper Research, digital wallet transactions globally are predicted to exceed US$12 trillion by 2026, from just around US$7.5 trillion this year. The number of digital wallet users, currently around 3.4 billion, is expected to grow to 5.2 billion by 2026.
Several Asian countries, including the Philippines, Thailand and Vietnam, have seen rapid growth of digital wallet usage, supported by the rise of popular superapps such as Grab, GoTo and Zalo, which are deepening their penetration into consumer markets by offering a variety of financial services.
A recent survey by Visa finds that nearly 76% of people in Vietnam often use mobile wallets for their financial transactions. In the Philippines, digital wallet GCash now covers 83% of the country’s adult population. In Thailand, digital wallet True Money has become the most popular form of payment, according to IT company Rapyd.
With the growing adoption of digital wallets, financial regulators are taking steps to ensure that consumers are protected. The Reserve Bank of India (RBI), for example, said non-bank entities are not allowed to top up digital wallets with funds through credit lines.
“The RBI’s clarification that prepaid payment instruments (PPI) – a licensing category that includes e-wallet operators in India – can only be loaded via cash, bank accounts and credit cards issued by regulated entities does not prevent digital finance platforms from offering loans backed by banks and other non-bank financial companies. However, it restricts certain business models under which PPI operators had taken on customer credit risk by effectively extending unsecured personal credit, for example through ‘buy now, pay later’ schemes and ‘quasi-credit cards’,” Fitch Ratings says in a research note.
The rating agency predicts that greater fintech regulation is likely in the next 12-24 months in India, reflecting the sector’s growing presence in the financial system. Mobile wallets accounted for 25% of all point-of-sale payments in the country in 2021, according to estimates by WorldPay, from only 5% in 2019.