The evolution of mobile wallets

By lacing the power to pay in the palm of our hands, mobile wallets have grown to become one of the world’s most popular digital payment methods. 

Highly secure and convenient, mobile wallets allow consumers to store multiple credit and debit cards on their smartphones, which they can then use to make payments in just a few taps. 

But while they’ve only seen widespread use over the last decade, their existence actually stretches back much further and is far more complex than you might think. 

In this article, we explore the evolution of the digital wallet, from the past to the present, and take a look at what the future could hold for this transformative technology.  

How did mobile wallets start?

Apple Pay might be one of the most recognizable brand names in digital wallet technology, but the concept has its roots in the early days of the internet, the 1990s. 

Back then, mobile wallets took the form of online platforms like PayPal, which stored payment credentials for use in secure electronic transactions. Some have also credited Coca-Cola’s innovative 1997 vending machine, which enabled customers to buy a soft drink via text message, as the first e-wallet. 

Even before smartphones, the Chinese company Alipay (launched in 2003) and the Kenyan company M-Pesa (launched in 2007) both offered users a way to pay through their mobile phones.

But it wasn’t until 2011, with the launch of Google Wallet (now Google Pay), that the mobile wallet took on its more familiar present-day format, enabling in-app, online and in-person contactless payments. Back then, though, this was limited to one particular phone model and bank.

Mobile wallets in the present

Today, mobile payment processing technology is available to virtually all smartphone users and, as of 2022, digital wallet payments account for nearly half of all ecommerce transaction value. 

The growth of digital wallets has been enabled by innovations like cloud technology, QR codes, Near Field Communication (NFC), and tokenization, which, together, have made paying through your smartphone both the safest and easiest option in most situations, whether online or in-store. 

It’s the cloud that makes it possible to store digital versions of our credit and debit cards on our devices; NFC enables smart devices to share information when they’re within 4cm of each other, allowing these stored credentials to be used for in-person contactless payments; likewise, QR codes make use of our device’s cameras to initiate transactions by scanning a code; and tokenization maintains the security of these mobile payments by replacing sensitive card details with a meaningless token. 

Benefits of digital wallets

The key benefits of digital wallets are:

Fast payments

Because card details are stored, consumers don’t need to enter them each time they want to make a purchase. That means they can make a digital wallet payment within a few taps. All they have to do is complete a quick authentication step, such as a face or fingerprint scan. That's a critical reason you should look for mobile compatibility as a core feature of your online payment system.

Grow sales

By giving consumers maximum convenience and as a near frictionless way to pay, digital wallets are a great way for businesses to grow sales. Digital wallets are also more likely to be authorized by issuers thanks to their embedded security features, meaning a higher percentage of transactions are successful. 

Additionally, digital wallets have the potential to generate a wealth of instantly accessible data on your customer’s behavior and preferences, which can be used to measure and improve performance and create targeted marketing campaigns, further boosting sales

Secure  

Mobile wallets are highly secure. To make the payment, the user has to first unlock their device using a password or biometric scan, which they then have to repeat for authentication. And on top of tokenization, transaction data is encrypted during digital wallet payments, meaning it cannot be read without the corresponding key. Combined, these security measures make it almost impossible for a hacker or thief to commit fraud using a digital wallet. 

What does the future look like for digital wallets?

If the current growth of digital wallets continues, it seems likely that they will become by far the most popular payment method in the world. 

Juniper Research has predicted that the transaction value of digital wallet payments will reach $16 trillion by 2028. And the Global Payments Report estimates that, by 2025, digital wallets will account for 52.5% of all transaction value.  

Another likely development, especially in Western markets, will be the growth of super apps in conjunction with mobile wallets. 

Already dominant in Asia, these multipurpose mobile platforms combine a range of services within a single app. The integration of digital wallet technology is central to these apps, making it easy for users to store payment cards for use across multiple services in one secure location. This has many positive implications for user experience, security, consumer insights, and revenue generation. 

Implement digital wallets with Checkout.com

With Checkout.com, it’s easy to implement digital wallets and start reaping the benefits of this thriving technology.   

Simply integrate with our modular platform and gain access to all the features and payment methods you need through our flexible API. You’ll also benefit from advanced fraud prevention technology and a wealth of granular data, allowing you to maintain security while optimizing your operations. 

Find out more about offering payment methods with Checkout.com or speak to one of our sales experts.