Digital Wallets are already changing the way the smartphone generation is making payments.
As Darren Winters points out, cash payments for goods and services for those growing up in the digital age seem as ancient as bartering.
Digital wallets are likely the future of making payments
Fintech revolution, the combination of the words financial and technology, is already transforming the payment industry.
So, the use of digital wallets is a macro trend, a pervasive and persistent shift in the direction of some phenomenon on an international level.
The preferred payment method of contactless digital payments using digital wallets and debit/credit cards with RFID chips boomed during the 2020 pandemic lockdown.
A paper released by the BIS entitled “Covid-19 accelerated the digitalization of payments,” in December 2012, underscores that the COVID-19 pandemic boosted the macro trend of digital wallet payments and contactless payments.
The pandemic also spurred the motivations of central banks to develop central bank digital currencies (CBDCs).
Cash and cards no longer make up the majority of retail transactions.
Digital wallets have now become the number one choice for online shopping

These wallets store your payment information on a device, so you do not have to carry physical cards.
The most common examples of a digital wallet payment system include Apple Pay and Google Pay.
However, there are various types and modes of digital payments.
Some include debit/credit card usage, internet banking, mobile wallets, digital payment apps, Unified Payments Interface (UPI) service, Unstructured Supplementary Service Data (USSD), Bank prepaid cards and mobile banking.
So, digital wallets are replacing last-century three-dimensional wallets containing notes and coins.
Currently, digital wallets account for half of the total e-commerce transaction value, with credit cards a distant second at 22% of the total.
Digital wallets currently account for 30% of total transaction value
But that number is projected to reach 46% by 2027.
Meanwhile, cash is forecast to decline, from 16% to 11% of transactional value.
The top payment method in 2023 was digital wallet at 50%, which is forecast to grow to 61% in 2027.
Credit Cards accounted for 22% in 2023 but will decline to 15% in 2027, according to the forecast.
Those using debit cards amount to 12% of total payment methods that year, which is also forecast to decline to 8% in 2027.
Account-to-account payment methods were amongst the least popular in 2023, amounting to 7%, and are forecast to grow slightly to 8% in 2027.
Buy Now Pay Later amounted to 5% of payment methods last year, which is expected to remain the same in 2027.
Other payment methods amounted to 3% in 2023 and are forecast to decline by 2%.
Source: Worldpay. Numbers may not sum to 100 due to rounding. *Other includes Cash on Delivery, PrePay, POS Financing, PrePaid Cards, and more.
How are digital wallets changing payments?
A recent graph from MSCI examined the booming usage of digital wallets and how investors can track the performance of fintech companies through indexes.
The MSCI and Fintech Innovation indexes include companies involved with developing new products and services due to technological innovation in the financial sector.
What is spurring digital wallet usage?
Businesses benefit from the low cost of developing digital payment systems.
Digital wallets are also eco-friendly, reducing the cost to the environment of plastic waste from having physical plastic cards with chips.
Darren Winters explains that consumers enjoy the convenience of carrying everything on their smartphones, which has become almost like another extension of the human body.
But perhaps the cost benefits to businesses and consumers are the best reason for a boom in the usage of digital wallets.
On average, the cost to obtain a digital wallet customer is $20, while it can range from $250 to $1,500 for credit cards.
Digital wallets offer consumers a variety of benefits depending on the individual wallet. Convenience, in one survey, was cited by people as the number one reason for using a digital wallet.
Main reasons for using a digital wallet
Convenience 41%
Rewards or Loyalty Program 23%
Purchase Tracking 16%
Security 14%
Efficient Checkout Process 4%
Other 3%.
Source: Forbes Advisor. Numbers may not sum to 100 due to rounding.
Notably, half of consumers said they would stop shopping with a merchant if it didn’t accept digital wallets.
Investing in fintech, companies developing the digital wallet
MSCI and Fintech Innovation Indexes include companies associated with the development of new products and services as a result of technological innovation in the financial sector.
There are two indexes within this theme:
- The MSCI ACWI IMI Fintech Innovation Index includes securities from 23 developed and 24 emerging markets.
- The MSCI World IMI Fintech Innovation 30 Index provides exposure to the top 30 global companies by market capitalization that is related to the theme.
The MSCI ACWI IMI Fintech Innovation Index comprises mainly large-cap companies in the finance or IT sectors.
For instance, Nvidia, Apple, Tencent, Mastercard and Visa are the top five constituents.
Since 2014, the index has outperformed its benchmark in eight of 11 years.
MSCI thematic indexes are rules-based, transparent, and regularly updated to take advantage of technological innovation.
Who are the best-performing ETF fintech funds involved in developing the digital wallets?
So far in 2024;
Xtrackers MSCI Fintech Innovation UCITS ETF 1C + 29,55%
Invesco KBW Nasdaq Fintech UCITS ETF Acc + 24,39%
Global X FinTech UCITS ETF USD Accumulating + 15,32%
Global X FinTech UCITS ETF USD Distributing + 12,70%
Most of the above best-performing ETF fintech funds developing the digital wallets would have returned 50% return on investment over 24 months.
Can investors afford not to be invested in the digital wallets fintech space?