The emergence of digital wallet capabilities is gradually reshaping the way consumers conduct transactions. Those companies who own the process through which these payments occur stand to reap major benefits should their platforms reach critical mass. This opportunity has created a broadening digital wallet landscape buzzing with energy.

While consumer adoption remains somewhat nascent, the wide field of players already appears primed for consolidation. ChangeWave’s latest survey focused on digital wallet adoption, usage trends, as well as consumer satisfaction and perceptions. It also covered P2P payment providers and the growth of the segment.

 
 

Planned Use

 
 

Despite concerted efforts from digital wallet providers to gain greater consumer penetration, including extra cashback and discounts on purchases, usage rates have historically remained stagnant at roughly 1-in-4. However, a 4-point gain during the third quarter resulted in the highest-ever September reading and up 3 points year-over-year.

 
 
 
 

Among planned users, Apple Pay (57%), up 2 points over last quarter, remains far ahead of the competition. Second is PayPal at 39%.

 
 
 
 

Current Use

 
 

Digital wallets are most frequently used at restaurants/coffee shops (46%), followed by online-only retailers (38%), and grocery (31%).

 
 
 
 

Apple Pay leads in satisfaction among current wallets users for the second consecutive quarter with 77% saying they’re very satisfied, followed by PayPal (69% very satisfied).

 
 
 
 

While Ease of Use and Secure Financial Information Storage continue to gain top marks driving use and adoption, in many ways the two categories are at odds. Easier to use wallets can lack the security scrutiny of the more secure wallets. Therefore ChangeWave contends that wallets most able to strike a balance between the two factors will outperform their competitors.

 
 
 
 

In order to reach potential users, the pursuit of stronger security should remain a top priority of digital wallet providers. However, the fact that security issues among digital wallets when compared against traditional cards remains the primary concern of potential users sheds light on a massive messaging issue.

Digital wallets have proven more secure comparatively thanks to attributes such as payment tokenization and biometrics and must be marketed as such. The ability or inability of providers to drive this point across will likely stake out winners and losers.

 
 
 
 

P2P Apps

 
 

The P2P payments space is currently dominated by two ecosystems: Paypal and large banks (Zelle). Together, Paypal (64% usage among consumers) and Paypal-owned Venmo (14%) currently enjoy the most significant consumer adoption. Zelle (19%) and P2P services provided via mobile banking applications (28%) also see a notable level of consumer adoption. Zelle in particular has shown steady quarter-over-quarter increases (10 points since December 2017).

 
 
 
 

However, while usership numbers are growing, the majority of respondents still use P2P applications sparingly.

 
 

The 451 Take

 
 

While some drivers of digital wallet usage have trended positively (albeit slowly) such as consumer confidence in financial information security, next 90-day consumer usage projections have remained stagnant at roughly 1-in-4 consumers. A 4-point rise this past quarter to 29% marks a positive deviation from this trend and denotes the highest ever September reading. This positive movement is likely to continue into the 4th quarter bolstered by heightened shopping over the holiday season.

Though this positive uptick could prove temporary, digital wallets appear primed for increased adoption moving forward. We anticipate this will be driven both by digital wallet providers offering incentive programs and improving the user experience, as well as increased merchant acceptance across brick and mortar, mobile and online storefronts.

The biggest players Apple Pay and PayPal remain on top in terms of planned and current use as well as satisfaction, however the field has become more crowded in recent years with banks and retailers joining the fray armed with their own payment apps. Google Pay, formerly Android Pay, rounds out the top three wallets.

While concerns surrounding financial data do appear to be lessening quarter-over-quarter, they remain the largest barrier to adoption and usage. This trend highlights industry-wide messaging issues on this subject. Wallet providers must reverse this sentiment in order to see widespread market penetration, while continuing incentive campaigns and highlighting ease of use.