The FCA and PSR have published a report looking at the use and impact of digital wallets.
Use of digital wallets is increasing rapidly, going from 8% in 2019 to 29% in 2023, and in 2023 around 20% of card users used a digital wallet for over 50% of their card transactions.
The regulators:
- found that consumers find they enjoy the benefits of the convenience, security and sometimes financial inclusion;
- noted concerns around the lack of competition in the markets which means there is little opportunity to expand consumer choice; and
- saw appetite from firms to extend digital wallets beyond payments into other financial services and digital identity.
The report has been shared with the CMA, which is currently investigating Apple and Google, the two largest digital wallet providers, because there is concern that the providers are steering customers towards their own wallets. These providers do not themselves hold funds but convert payment card details into a token that securely links the card’s primary account number to a virtual card on the consumer’s device.