Within the payment sector, digital wallets are increasingly being offered as a new product feature and are being utilised on both ends of cross-border transactions. Different from multi-currency bank accounts, digital wallets do not have bank details linked to them and are a tool to store money. The funds can come from a bank account, a payment card, payments from other wallet holders or cash top-ups.
Very common in peer-to-peer domestic payments, this week we look at how wallets fit into the cross-border payments space.
Why wallets matter:
- Digital wallets are a bridge to those without bank accounts
According to the World Bank’s Global Findex database, 1.7 billion adults were unbanked in 2017. Opening a bank account is difficult for people who are out of the labour market or live in rural areas. Digital wallets, instead, are easy to get and can provide the unbanked or underbanked customers with a way to receive and exchange money bypassing the need for agents and banks.
- They offer a different treasury approach for businesses
Access to local payment networks is a critical point for businesses trading cross-border. Multi-currency wallets, like Airwallex‘s and WorldFirst’s, make it possible for businesses to exchange payments with foreign partners without the need to create local bank accounts globally. On the consumer side, using third-party wallets as a way to either send or receive money allows payment companies to have a larger reach of global customers and to make payments faster, more accessible and cheaper than the traditional cash and bank transfers.
- QR codes are expanding usage
In addition to facilitating online payments, digital wallets are also making point-of-sale cross-border transactions easier. Using digital wallets improves the rate of acceptance of foreign payment methods and card networks around the world. The implementation of payments through QR codes, which many wallets embed, reduces checkout experience friction.
In the near future, we expect to see many more players in the space connect into these wallets around the globe, especially in Asia and emerging markets. A smaller number of players with core customers who would really benefit from a wallet will likely follow with their own offerings too.