Digital wallets used for 29% of card transactions in 2023

The share of card transactions using a digital wallet has more than tripled in recent years, according to regulators.

Digital wallets allow people to make payments using mobile phones or other electronic devices. In the UK, the biggest digital wallets are mainly linked to debit and credit cards.

The proportion of card transactions using a digital wallet jumped from 8% in 2019 to 29% in 2023, according to the Financial Conduct Authority (FCA) and the Payment Systems Regulator (PSR).

The regulators previously published a “call for information” from businesses and other groups, to assess the impact of digital wallets.

In a feedback statement issued on Wednesday, they said that in 2023 around a fifth (20%) of card users used a digital wallet for more than 50% of their card transactions.

The statement said: “Apple Pay and Google Pay are the two largest providers of ‘pass-through’ digital wallets in the UK.

“These digital wallets allow users to make payments from a payment card, but do not hold funds themselves. They rely on converting payment card details into a ‘token’ that securely links the card’s primary account number to a virtual card on a consumer’s device.”

The statement said it is “clear” from feedback that “there is plenty of opportunity in the growth of digital wallets – with some challenges and risks”.

The regulators said those who took part in the feedback said consumers benefit from more seamless and efficient payments, including enhanced security measures and greater financial accessibility for some groups.

Firms also highlighted scope for further innovation in digital wallets, extending beyond payments into other financial services.

However, regulators said they had also heard concerns, including improvements being needed to enable competition among digital wallet providers and allowing new players to enter the market, bolstering innovation and giving consumers more choice.

There were also worries about how digital wallets might affect the financial system’s resilience, because operational failures could temporarily prevent people from making payments, both online and in-store.

This risk could increase as people potentially become more dependent on digital wallets.

The regulators have shared their findings with the Competition and Markets Authority (CMA) and they also plan to engage with the Treasury as part of a review of the Payment Services and Electronic Money Regulations.