US Consumers Want Faster Easier Payments With Digital Wallet Use Up 32%!
The cashless revolution came late to the US but hit hard!
Digital wallet use in the US is exploding, with a 32% YoY increase, leaving cards and other apps in the dust. And it's all driven by Gen Z and millennials!
Oh, and the Fed is surprised, proving once again they are asleep at the wheel!
While digital wallets are on the rise, cards aren’t going anywhere.
Remember that in the US, digital wallets like Apple and Google Pay are card “pass-through” wallets that rely on underlying card rails.
That’s why it’s no surprise that fees charged by the payment provider are the number one pain point!
Imagine for a moment if there was a real non-card digital wallet option that made payments free, like UPI, WeChat, or Alipay!
What then?
👉TAKEAWAYS
🔹 Use of digital wallets (e.g., Apple Wallet, Google Wallet, etc.) grew 32% in 2023, compared to 8% for bank mobile apps and only 3% for other non- bank mobile apps (e.g., PayPal, Venmo, Cash App, etc.).
🔹 Use of digital wallets increased 6% for both in-person purchases and online shopping (e-commerce) as more consumers use their mobile devices to make payments.
🔹 While debit card use grew 5% and over two-thirds of consumers still use cash (76%) and credit cards (69%) for payments, notably half of Gen Z and millennial consumers reported using digital wallets (52% and 53%, respectively).
🔹 Cash, credit cards and checks used for payments all remained flat during the period.
The generational divide in payments is astounding! As a “boomer” I am absolutely stunned that so few of my generation have even used a digital wallet!
👊STRAIGHT TALK👊
I find payments in the USA amusing and infuriating all at the same time!
What is amusing is that most in the US are told that cards (credit and debit) are all you need and that “tap and pay” is the pinnacle of payment technology.
Who says this? Banks and card companies, who believe that payment innovation means making cards out of metal instead of plastic, of course!
Now, the infuriating part. Americans believe them.
Most haven’t experienced WeChat Pay, UPI, or PIX, so know no different.
As a result, US retail payments are still stuck in 1985 because the card duopoly of Mastercard and Visa essentially stalled progress.
Now, with the rapid rise of digital wallets, everyone from card companies to the Fed is shocked that young people who grew up in a digital age use and prefer digital wallets.
Why are they surprised? Young people are merely catching up with the rest of the world in what is a natural progression that has been postponed but cannot be avoided.
Now, what would happen to these young people if they had the free payments that are available in China, Brazil, India, and a host of other nations?
Would they still love their cards?
I am genuinely pleased that the US is making progress, but I find the Fed’s surprise indicative of how insular the system is.
Payment progress won’t be easy in the US. For example, the new FedNow payment system is seen as a government conspiracy, and CBDCs are a sign of the end times or a communist takeover.
But when America’s digital generations finally got a chance at digital payment, even if card-based, they went for it!
I’m proud of them!
Thoughts?
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