Will Digital Wallets Overtake Plastic?

June 22, 2018         By: Michael Millington

Sponsored by Discover® Global Network

The plastic payment card was once thought to be the pinnacle of consumer convenience and security. However, with 87% of all US adults now owning a smartphone or web-enabled tablet,1 consumer trends are increasingly moving towards a digital payment process. But where does that leave traditional plastic cards?

The Growth of Digital Wallets as a New Payment Method

From online shopping to social media, the growth of smartphone ownership has undoubtedly changed the way consumers interact with retailers.

The introduction of digital wallets like Apple Pay, Google Pay, and Samsung Pay has given consumers an opportunity to store multiple cards and make more secure payments with a single device.

Digital wallet adoption may have been slower than anticipated but, according to a Juniper Research study on contactless payments, mobile only transactions are projected to reach 28.6 billion by 2021, a more than tenfold increase from 2016.2

Digital payments have grown beyond the typical interactions between merchant and consumer. Peer-to-peer (P2P) money transfers via mobile messaging, for example, have added a social twist to payments. Friends can now seamlessly transfer money to one another using their debit or credit card as simply as sending a text message, even if they don’t belong to the same bank.

This streamlining of monetary interactions looks to be the natural progression of digital payments.

What are the Benefits to Digital Wallets?

They are convenientAccording to the New York Post featuring a study by Asurion, Americans check their phones 80 times per day.3 Excluding the average eight hours for sleep, this means that Americans check their phones once every twelve minutes.

Based on the frequency consumers are already using their phones, utilizing a digital wallet at checkout simply feels faster and more convenient than inserting a chip card.4 With one tap, consumers can make a payment and be on their way, helping reduce friction at checkout.

The use of a near-field communication (NFC) enabled smartwatch allows consumers to add a personal flair to the payment process. This convenience extends to much more than bank and credit cards, as prepaid cards, loyalty cards and reward cards can be utilized with the same technology.

They are more secure – Multiple levels of encryption and tokenization are used to ensure digital wallet information stays more secure.

In short, tokenization is an advanced security measure that aims to reduce credit card fraud by replacing a user’s credit card information with a randomly generated string of numbers, or a “token,” so that the true data remains hidden.

Advances in technology have produced another layer of digital payment security in the form of biometrics. Biometric authentication utilizes a person’s physical features to secure personal information. This can be seen in current mobile phones and computers with implemented iris scans, facial scans and fingerprint scans being made necessary to access information on the devices or the devices themselves.

How Prepaid is Driving the Growth of Digital Payments

Prepaid cards continue to be a driving force behind digital payment growth and adoption among consumers. In 2017, 73% of all digital payment users loaded a prepaid card into their wallet, a 9% increase over the previous year.1

According to a 2017 study by Mercator Advisory group, four out of five consumers who used a mobile device to initiate a payment also purchased a prepaid card in the same year.5

This is not surprising seeing that many retailers, such as large coffee chains and department stores, have combined the success of their prepaid offerings with a digital wallet solution, providing in-app rewards for any purchase made with a prepaid card.

In fact, two out of three smartphone owners claim they would be more likely to use a digital payment app over traditional payment methods if they were to receive better discounts or loyalty rewards. As digital payment adoption continues to grow, building a unique payment ecosystem catered to the customer experience will be a critical step for any retailer looking to increase sales and customer retention.

What Does This Mean to the Future of Payments?

With the steady increase of Americans that own and actively use a smartphone or internet-enabled tablet, mobile payments are projected to see an increase in the coming years. More people are using their smartphones to make purchases from home and on the go, which means less overall usage of physical plastic. It is clear that the future of payments will reside with the flow of mobile payments.  

The information provided herein is sponsored by Discover® Global Network. It is intended for informational purposes, and is not intended as a substitute for professional advice.


1 Mobile Payments: Greater Value Needed for Widespread Adoption, Mercator, October 2017.
2 Contactless Payments, Executive Summary & Core Findings 2017-2021, Juniper Research.
3 Americans Check Their Phones 80 Times a Day: Study, New York Post, November 2017.
4 Why Apple Pay and Other Mobile Wallets Beat Chip Cards, The New York Times, May 2016.
5 Mercator: Consumers and Prepaid: Caution Ahead, September 2017.