As consumers and employees voice their frustrations with outdated systems, adopting real-time payment solutions could revolutionize the industry.

The PYMNTS Intelligence report “From Trips to Tips: How Faster Payments Can Elevate Travel and Hospitality” revealed that improved payment methods can streamline operations and enhance the experiences for customers and staff.

Meeting Consumer Expectations With Instant Payments

A shift is underway, as 74% of travelers said they regard digital wallets as essential to their experience, specifically pronounced among affluent and millennial travelers, with use rates at 83% and 82%, respectively. Customers using digital wallets spend an average of $44 per visit at restaurants, more than the $33 spent by those using traditional payment methods. This trend reflects a broader consumer preference for seamless, efficient payment solutions that enhance the overall travel experience.

The demand for instant tip payouts in the hospitality sector revealed another layer of this transformation. Nearly 82% of hospitality workers expressed a strong preference for receiving tips instantly, with 85% of those who already benefit from such systems reporting high satisfaction.

This swift access to earnings could be pivotal for attracting and retaining talent in a sector still recovering from pandemic-induced staffing shortages. Real-time payment solutions are not just about convenience; they are also a powerful tool for enhancing employee morale and operational efficiency.

Streamlining Business Travel Finances

Business travel is set for change with the introduction of instant payment options. Many employees front their travel costs, waiting for reimbursements that can lead to financial strain. According to the report, 43% of consumers now favor instant payments for business expense reimbursements, up from 40% in January 2023. This trend signifies an increasing expectation for rapid transaction processing in professional contexts.

Seventy-eight percent of employees expressed satisfaction with instant payments in business settings compared to 70% across all payment types. This escalating preference for speed in financial transactions reflects a broader cultural shift toward immediacy, and companies that adopt these technologies will likely see improvements in employee satisfaction and retention.

American Express, for example, launched an instant payment option through its Neo1 platform, allowing corporate travelers to manage expenses more efficiently. Such innovations illustrate how instant payments can modernize the business travel experience, reducing the burden of out-of-pocket costs.

Capitalizing on the Competitive Advantage of Instant Payments

While some travel and hospitality companies remain cautious about adopting new payment technologies, many are recognizing the competitive advantages that real-time payment systems can offer.

A survey of more than 10,000 hotel properties found that 71% of hoteliers said they believe guests view technology as empowering, with contactless payments being the most desired innovation. However, challenges persist, as 69% of hoteliers reported difficulties in integrating new technologies with legacy systems, leading to operational inefficiencies.

Despite these hurdles, the demand for improved payment solutions is rising.

Partnerships like that between Davidson Hospitality Group and the digital tipping platform eTip highlight how businesses can use technology to enhance both guest and employee experiences. By facilitating instant gratuity payments through QR codes, hotels not only boost staff earnings but also gain valuable insights into tipping patterns, ultimately improving guest satisfaction.

The travel and hospitality sectors are at a pivotal moment where embracing real-time payment solutions can meet modern consumer expectations and enhance overall satisfaction for guests and employees.

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But as Ralph Koker, global head of product at TerraPay, told PYMNTS for the “What’s Next in Payments: How Do You Do Digital?” series, the movement to displace cash has momentum, even if there are still pockets of resistance when it comes to cross-border transactions.

“We are creatures of habit,” he said, adding that “when you see how cash has been around for years, and we’ve never questioned, it’s because it’s trusted and because it’s ubiquitous. And for us to make the paramount change [from] cash to digital, we need to make digital just as ubiquitous as cash.”

That’s what firms like TerraPay are trying to do. The company provides a single point of connectivity for digital wallets and cards across 7.5 billion bank accounts and 40 global markets.

“The way TerraPay ‘grew up’ was through the digital wallet space,” said Koker, who added that the company encourages and enables the interconnectivity between The Clearing House’s RTP® network and bank rails, but there’s a whole ecosystem that encompasses remittances across borders. The company’s sweet spot remains with digital wallets.

Missing the Trust Factor?

The digital options, comparatively speaking, are missing the coveted trust factor. There’s a bit of a paradox here, as domestically speaking, we’re all used to using those wallets and digital channels to split the bill and send and receive money, sometimes in real time.

“But in cross border, you’re trusting somebody else to deliver hopefully cash or the equivalent of cash on the other side,” Koker said.

The tried-and-true digital methods in a domestic setting — typing in a phone number, email or another handle so that a receiver can access the money — exist internationally.

It’s incumbent on firms such as TerraPay to raise the level of awareness of those options, he said. There is still more traction on the sending side, where cash is being converted into digital payments to be transferred to their ultimate destinations. In at least some corridors and regions, such as the Asia-Pacific region, as much as 70% of all commerce is going through a digital wallet. Half of all face-to-face transactions are going through digital routes, too.

“What that tells me is that the digital receive points are there, and we are, for instance, with TerraPay connected to them to receive [the money] in real time,” Koker said.

In terms of the company’s current and future efforts, TerraPay is focused on enhancing its cross-border money movement capability by direct integration with wallets, he said. The company launched its wallet interoperability council in August. Through that council, TerraPay works with several wallet operators to facilitate interoperability rather than relying on government mandates alone.

We’re close to a future where a traveler might go to lunch with friends and split a bill.

“Imagine that we are going to the Philippines, and I come in with a U.S. wallet, and there’s somebody sitting there with a Filipino wallet, and there’s somebody sitting there with a wallet from Uganda, and we’re all having a lovely lunch, and none of us want to pay for each other,” he said. “So, we split the bill, and we can all transfer to the Filipino wallet digitally. I don’t have to go to an ATM or look at the fees or conversion rates.”

QR codes will also gain ground as merchants and wallet operators come together to facilitate commerce across borders, he said.

“Suddenly they can be on a global market platform, and payments could be done through their own instruments, and the buyer can use their own instrument to buy it,” Koker said. “And no cash changes hand.”

“The people that really need to do cross-border payments are going to get more demanding on a daily basis,” he added.

The post Cross-Border Digital Wallets as the Antidote to Cash? appeared first on PYMNTS.com.

This capability will be rolled out as part of the California DMV’s mobile driver’s license (mDL) pilot program, which launched in 2023 and is limited to 1.5 million participants, Apple said in a Thursday (Sept. 19) press release.

“Enabling California residents to seamlessly add and present their IDs with their iPhone or Apple Watch represents a significant step in replacing the physical wallet with a more secure and private digital wallet,” Jennifer Bailey, vice president of Apple Pay and Apple Wallet at Apple, said in the release.

Apple offers this “IDs in Wallet” capability in six other states: Arizona, Colorado, Georgia, Hawaii, Maryland and Ohio, according to the release.

In addition, Montana, New Mexico and West Virginia have signed on to adopt IDs in Wallet, and Japan has signed on to bring My Number Card to Wallet, which would make it the first jurisdiction outside the United States to adopt IDs in Wallet, the release said.

Users can also present their ID in Apple Wallet at select TSA checkpoints, businesses and venues; at Apple Store locations across the U.S.; and at businesses that use certain apps for in-person age verification, per the release.

“When presenting an ID in Apple Wallet, only the information needed for the transaction is presented, and the user has the opportunity to review and authorize the information being requested with Face ID or Touch ID before it is shared,” the press release said. “Users do not need to unlock, show or hand over their device to present their ID.”

Apple said in August that it was working with California to bring IDs to Apple Wallet.

Mobile driver’s license proposals have been gaining traction across the U.S., PYMNTS reported in April. States, and the federal government, view mDLs as a promising solution to combat fraud and bolster digital ID verification.

Google has been rolling out the ability to save driver’s licenses and state IDs in the Google Wallet app, and Samsung has been working with IDEMIA to bring a similar capability to Samsung Wallet.

Google Wallet is live with digital IDs in five states, including California, Alan Stapelberg, group product manager at Google Wallet, told PYMNTS in an interview posted Sept. 12.

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It is a digital passport to the digital world. And in that world, a card can go anywhere, but software — not so much.

As digital payments grow in popularity, this lack of cross-border interoperability has attracted attention, including that of infrastructure provider TerraPay President Ruben Salazar Genovez, who is leading a new effort to do something about it.

“We have huge respect for all the technology and the architecture and the user experience that our partners have been building in their domestic spaces,” Genovez told PYMNTS’ Karen Webster. “But the reality is that today, it’s very easy to travel with a piece of plastic, but it’s very difficult to travel with a piece of software. And so, we want to enable these wallets to be able to provide the same user experience and the same sort of payment capabilities when they travel abroad. And that is a gigantic task.”

TerraPay’s infrastructure connects more than 100 digital wallets reaching more than 2.1 billion users, and the company is leading the Wallet Interoperability Council, initially announced Aug. 20. It has partnered with five leading wallet operators — Airtel, bKash, M-PESA, Nequi and Sama Money — to facilitate seamless cross-border transactions between users in Bangladesh, Colombia, Kenya, Senegal, Tanzania and Uganda. The council seeks to address the growing demand for global wallet interoperability, enabling users to make international payments and remittances more easily.

If you think that looks like the beginning of a network for digital wallets, you’re right. Genovez told Webster that more companies from more countries and more digital wallet providers will be joining the core group soon, looking for an outcome where all participants in the digital wallet ecosystem win.

That includes interoperability on the acquiring side, allowing the acquirer to accept multiple payment brands, creating efficiencies not only for the merchant, but also for the consumer.

“We are big believers that in interoperability, everybody wins, but the biggest winner is the consumer because the consumer is using this, and the capabilities that exist in this piece of software allow them to use it everywhere,” he said. “It’s a very challenging task to go build something that the payments networks took 60 years to build. But the conditions exist, and the scale exists, to build it.”

The Container Collaboration

Genovez referred to digital wallets as “containers,” a term that includes the need for document storage and payment options. He said he envisions a future where “in the same digital container, you have all your financial tools. You may have a card credential, you may have your bank account, you may have your store value funds directly in the same container.”

Rather than look at the council strictly as a revenue opportunity for his company, Genovez emphasized the collaborative nature of the initiative. The consortium approach is designed to be inclusive.

“We are not being very prescriptive from TerraPay’s point of view in terms of the technology,” Genovez said. “We’re starting with the consumer pain points.”

Those pain points have led council members to grapple with how to provide the same user experience and payment capabilities when their customers travel abroad. Additionally, they face the complex task of ensuring compliance with local regulations and international laws in cross-border environments.

Noting that the council has already met several times, Genovez said it is starting by understanding the different technologies that exist at each wallet operator and working to establish a standard language for how to process all types of transactions. There are also legal and regulatory hurdles that each wallet operator will need to overcome to operate across borders, which is part of early and ongoing discussions.

The real challenge is to ensure a seamless user experience for consumers, both when they travel abroad and when they send money between wallets across borders, he said. That will require more due diligence around clearing, settlement and the overall operating model for the council.

Furthermore, Genovez predicted the emergence of “smart wallets” within the next couple of years. These wallets will incorporate artificial intelligence to provide personalized financial advice.

“They will be able to tell you in this merchant, you should use this credential, or you should use this payment method because you’re getting the best out of these financial transactions,” he said.

Influence on Competition

According to Genovez, the council’s work is expected to impact the competitive landscape of digital finance. Enabling domestic wallets to operate across borders could challenge existing Big Tech wallets that dominate cross-border transactions.

Genovez said he sees this as part of a broader trend.

“The expansion of network optionality is growing exponentially during the next five to 10 years,” he said. “And we want to be there from the wallet’s point of view and facilitate this type of connectivity for the wallet containers that are out there.”

The initiative could also accelerate financial inclusion. Genovez estimated that of the 2.1 billion to 2.5 billion wallets TerraPay serves, roughly 600 million to 700 million individuals lack any connectivity to the financial world or the digital world outside of their digital wallets.

“We will see more and more wallets coming directly to SMBs, and it will empower them to participate in the digital economy,” he said. “It is fragmented, and it is the early days, but in the same way that there is a significant number of consumers that are not connected to a payment ecosystem, there is an area of big development and big thinking almost everywhere about how you are going to bring more merchants into digital commerce.”

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As Reuters reported Tuesday (Sept. 3), Prime Minister Paetongtarn Shinawatra said the government’s planned 450 billion baht ($13.1 billion) “digital wallet” handout will be distributed in cash, a change from the government’s flagship policy.

Initially, the government would have transferred 10,000 baht ($292) in credit to 50 million people using a smartphone app to spend in their communities within six months. The report said it’s not clear how much of the funding would not be distributed in cash. 

The stimulus, which had been the ruling Pheu Thai Party’s chief election platform, is designed to jumpstart an economy that trails other countries in the region, the report added. The Thai economy grew 2.3% in the second quarter of this year, though analysts said uncertainty around fiscal policy clouded the country’s outlook.

Reuters also noted that economists and two former central bank governors have called the handout program fiscally irresponsible. The has delayed the scheme, expected to be rolled out in the closing quarter of the year, due to funding issues, the report added.

Whatever the outcome of this issue, research by PYMNTS Intelligence has shown that Thailand’s residents are proponents of digital payments. The country led all other nations surveyed in real-time payment transactions per capita in 2022, with the payment method making up 34% of all transactions. 

“Thanks in part to the increasing popularity of the PromptPay scheme among Thai consumers, experts anticipate even more growth ahead,” PYMNTS wrote last year. “Projections suggest Thailanders will conduct 32 billion transactions via real-time payments in 2027.”

PYMNTS recently spoke with a panel of experts about the rise of digital wallets, with Jenny Cheng, vice president and general manager of Google Wallet, stressing that digital wallets are about “flexibility” and “freedom,” letting users to leave home without physical wallets while still accessing key credentials and services.

“We’re talking about convenience and safety, but ultimately this is about driving value to the user,” she told PYMNTS CEO Karen Webster.

Looking ahead, the panelists imagined a future where digital wallets grow even more deeply integrated into daily life, providing enhanced personalization and convenience.

Jack Philbin, CEO of mobile marketing agency Vibes, envisioned a future where digital wallets could revolutionize travel.

“If you have an airplane boarding pass, and you go through security. … Why not then include an offer for someone and a discount or incentive to shop at a specific brand or retailer in that airport while they wait?” he said.

The post Thailand Adds Cash Payments to $13 Billion Digital Wallet Plan appeared first on PYMNTS.com.

The impact digital wallets are having as mobile technology advances and consumer preferences shift is becoming impossible to ignore — particularly outside of the United States, where digital wallets are evolving beyond payment tools and offering a broader range of functionalities that cater to diverse needs.

“In Europe, we have been quite advanced in digitization of payments, and the usage of digital wallets has been growing rapidly,” Deniz Oran, head of payment partnership, EMEA at Google Wallet, told PYMNTS.

“The journey for many people starts with adding the payments credential, then very quickly once they’ve become accustomed to using the digital wallet, they add other credentials such as loyalty cards, boarding passes, transit and event tickets, and the list goes on,” Oran explained.

Younger generations, who tend to be digital natives, are most responsible for driving the adoption of digital wallets for both payment and non-payment use cases.

Read also: Digital Wallets Beyond Financial Transactions: A Global Perspective

Digital Wallet Adoption: A European Perspective

Oran highlighted that the adoption of digital wallets in the United Kingdom and European Union has been significant, particularly compared to other regions.

“Every day starts with the phone,” she explained. “It ends with the phone. And for younger generations, what we see is they want to be truly able to leave their physical wallet at home.”

In the U.K., for instance, there is a higher propensity to store digital credentials, such as payment cards and loyalty programs, in digital wallets. Beyond payment cards, users can now store items like car keys, corporate badges and driver’s licenses in some regions. The goal is not just to digitize these credentials but to make their digital versions more useful. Features like timely reminders and notifications are designed to integrate these credentials into users’ daily lives more seamlessly, Oran explained.

However, the actual use of these stored credentials is lower in some regions than others, highlighting key areas for growth.

Oran pointed out that this discrepancy in usage may be due to the diverse range of credentials stored in digital wallets, some of which are not used as frequently as payment cards. For example, the partnership between Google and the U.K.’s HM Revenue and Customs (HMRC) allows users to store their national insurance numbers in Google Wallet. While this is a critical credential to have on hand, it does not require frequent use.

This phenomenon illustrates the broader trend in digital wallets. As they become repositories for a wide array of credentials, usage patterns are naturally becoming more varied.

At the same time, one of the critical challenges in the widespread adoption of digital wallets is ensuring consistent and reliable connectivity. As Oran noted, internet access is not always guaranteed, particularly in areas with varying levels of infrastructure across the EU. However, Google Wallet has worked to address this challenge by enabling a limited number of transactions without internet connectivity using NFC technology. This is particularly useful in transit systems, where underground stations may lack internet access.

See also: Consumers Are Using Digital Wallets for More Than Payments — Here’s How

The Future of Digital Wallets: Beyond Transactions

Interoperability is another issue digital wallets must overcome for widespread adoption. This is especially true across the EU, where diverse regulatory landscapes and local payment methods can complicate seamless use across borders.

“Payments are a local business,” noted Oran.

She stressed that Google is committed to supporting as many diverse payment methods as possible, working closely with the ecosystem to ensure that its digital wallet remains functional across different regions. This commitment to openness and interoperability is crucial for creating a frictionless user experience, a core value that aligns with Google’s overall approach to product development.

“Especially with digital wallets, not having walled gardens is something we care a lot about,” said Oran.

As digital wallets become more integral to daily life, the need for robust security and privacy measures becomes even more critical. In regions like the U.K. and the EU, where regulations such as General Data Protection Regulation (GDPR) are stringent, balancing convenience with security is a complex task.

“The user experience journey is at the core of digital wallets, and at the same time, safety and security are what’s needed for user trust,” Oran explained. “One cannot come at the cost of the other, so security and privacy needs to be built into every part of the wallet … especially when you think about the payments piece, which is the foundational layer, the security is really built in there because the payments are based on tokenization.”

Looking ahead, she suggested that the future of digital wallets lies in expanding their use cases beyond transactions. As more non-transactional credentials are integrated into digital wallets, they will likely lead to increased usage for payment transactions. The relationship is symbiotic, as the more functionalities a digital wallet offers, the more indispensable it becomes in users’ lives, driving further adoption and innovation.

In Germany, for example, Google partnered with a local company to enable the storage of a digital QR code for restroom access at highway rest stops — a uniquely local use case that highlights the potential for digital wallets to integrate seamlessly into everyday life. This kind of innovation meets specific regional needs and demonstrates the versatility of digital wallets.

The post What the US Can Learn From Europe’s Digital Wallet Renaissance appeared first on PYMNTS.com.

As CNBC reported Sunday (Sept. 1), this shift follows a tough stretch for plastic hotel key cards, thanks to health concerns during the pandemic and cybersecurity worries more recently. 

That’s led Google and Apple to begin offering hotels the ability to allow guests to save their room keys to their digital wallets, letting them enter their rooms just by tapping their phones against a reader next to the door handle.   

And the Hilton hotel chain, meanwhile, offers the Honors app, which lets guests check in and use a room key through their smartphone. 

Eli Fuchs, regional director of operations at Valor Hospitality Partners, which counts Hilton and Holiday Inn Express hotels among its portfolio members, told CNBC that digital is the next phase in hotel room door technology.

“Traditional hotel room keys are staring down the end of their existence,” Fuchs said.

However, some security experts caution that even the newer lock methods aren’t foolproof.

Lee Clark, cyberthreat intelligence production manager at Retail and Hospitality Information Sharing and Analysis Center, told CNBC that while threats can be mitigated by security protocols like multifactor authentication (MFA), guests may not want to deal with extra steps.

Clark added it’s unlikely that all hotels will replace all key cards with digital keys in the short term. Aside from the costs, some guests might rather have a key card, or may not have a mobile device compatible with digital lock systems.

“Transitioning to digital and keyless lock systems carries a significant cost in equipment, installation, maintenance and security,” Clark said.

As PYMNTS wrote earlier this year, while a majority of consumers use digital wallets for shopping, a considerable number turn to them for other things. 

For example, research by PYMNTS Intelligence — from the study “Digital Wallets Beyond Financial Transactions: A Global Perspective” — finds that 29% of consumers would use the technology for age or identity verification; 28% to store and access rewards, discounts or coupons; 25% to store and access event tickets. Another 24% said they use digital wallets to store and access financial documents or information.

“Data suggests that familiarity with digital wallets is the key bridge to cross for engaging new users, and even a portion of those skeptical today could become the digital wallet users of tomorrow,” PYMNTS wrote in the study.

The post Hotels Turn to Digital Wallets Amid Key Card Security Worries appeared first on PYMNTS.com.

In its legal complaint filed with the country’s National Commission in Defense of Competition, MercadoLibre accused the banks of “illegally concentrating” under one payments platform, Bloomberg reported Monday (Aug. 26).

“The 36 banks that are part of the MODO wallet make up a cartel to avoid competing between its own digital wallets,” MercadoLibre said, per the report.

This filing comes about three months after banks — under their shared platform MODO — filed a legal complaint alleging anti-competitive strategies by Mercado Pago, according to the report.

MODO responded to MercadoLibre’s complaint Monday, rejecting the company’s accusations and saying that the firm is trying to block competition with complaints so it can “continue abusing its dominant position,” per the report.

In MODO’s complaint filed in May to Argentina’s National Commission in Defense of Competition, it accused MercadoLibre’s payment platform of forcing shoppers to fulfill online purchases using Mercado Pago.

“MercadoLibre’s abusive conduct, detailed in the complaint, creates negative effects for the market, disproportionately maximizing its earnings,” MODO wrote in the complaint, adding that it’s confident authorities will investigate “one or more anti-competitive practices,” forcing an “in-depth analysis of the payments and digital wallet ecosystem.”

Responding to the complaint, MercadoLibre said in May that it complies with relevant regulation and that MODO’s accusations are “absurd.”

“Perhaps banks should compete with each other, innovate, develop products and pay off balances, as banks do in the rest of Latin America, instead of colluding and blaming Mercado Pago without merit,” the company said at the time.

Mercado Pago has set its sights on expansion across Latin America, Osvaldo Giménez, president-Fintech, MercadoLibre, and CEO of Mercado Pago, told PYMNTS CEO Karen Webster in an interview posted Aug. 16.

While Brazil, Mexico and Argentina remain its largest markets, the company is making inroads in Chile and has plans for Colombia, Peru and Uruguay.

“The way we realize it works is basically pick one of these countries and launch the full suite of products there,” Giménez said. “And that typically takes a couple of years.”

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“Through its operation and partnership with MGM Resorts International and powered by Entain’s technology, this innovative feature makes BetMGM the only legalized sports betting app to allow Nevada residents and visitors to wager in the state and carry their funds to BetMGM mobile markets nationwide,” the company said in a news release Thursday (Aug. 22).

The company’s single account and wallet feature lets users sign up once in-person at an MGM Resorts property in Nevada and then use the sports betting app across all U.S. BetMGM mobile markets. New customers in Nevada can sign up by downloading the mobile app, completing verification and visiting one of BetMGM’s nine retail sportsbooks.

“When traveling to another jurisdiction, users will receive a pop-up message upon opening the app allowing them to switch to their account within the BetMGM market where they are currently located,” the release added. “Customers also can manually select their market within the app’s account tab to view their account for that state.”

Bill Hornbuckle, CEO of MGM Resorts, had hinted at the launch of the wallet during an earnings call in February, saying it was “critical to our omnichannel thesis and will fully unlock one of the key differentiators for BetMGM by fully leveraging our Las Vegas properties.”

The company’s efforts are happening amid “a digital shift … in how gamers handle payments,” as PYMNTS wrote earlier this year.

Research by PYMNTS Intelligence points to a growing demand for digital instant payment methods among gamers, challenging the long-held dominance of cash payments.

“In fact, 76% of gamers who can’t access instant payouts would if they could, prompting companies like Caesars Sportsbook to offer push-to-card instant payouts within their apps,” that report said.

“This move not only improves customer satisfaction but also fosters loyalty among gaming enthusiasts, illustrating the importance of digital payments in shaping the gaming experience.”

As noted here in a separate report, getting winnings in cash works for gamers betting in physical environments. But to attract those playing in digital environments, gaming companies need to take steps to give players more instantaneous payouts while also encouraging them to stay within in their current gaming ecosystem.

“Given that more than three-quarters of gamers want this, delivering on this preference would likely improve customer satisfaction — and possibly motivate them to play again soon,” PYMNTS wrote.

The post BetMGM Lets Nevadans Connect via Digital Nationwide Wallet appeared first on PYMNTS.com.

And while the two trends are unrelated — particularly given that paper-based payments are more of a fraud risk than their digital counterparts — a new research paper published last week (Aug. 14) finds that, across the digital wallet landscape, the two trends are increasingly butting heads.

The paper, entitled “In Wallet We Trust: Bypassing the Digital Wallets Payment Security for Free Shopping,” posits that an ongoing reliance on outdated authentication methods, and the prioritizing of convenience over security, has left digital wallets vulnerable to attack and abuse by bad actors.

“The implications of these attacks are of a serious nature where the attacker can make purchases of arbitrary amounts by using the victim’s bank card, despite these cards being locked and reported to the bank as stolen by the victim,” the researchers wrote.

In an era where digital transactions are becoming the norm, the convenience of digital wallets is undeniable — and as these wallets become increasingly integral to daily transactions, their security is becoming a top priority.

By adopting emerging security imperatives like biometric authentication, tokenization, end-to-end encryption, multi-factor authentication (MFA) and AI-driven detection and prevention, digital wallet providers can build robust defenses against the growing array of cyber threats.

Read more: Debit Cards In Digital Wallets Gaining Ground Across Sectors

How Digital Wallet Providers Can Protect Users 

The convenience and efficiency offered by digital wallets are undeniable, but with this convenience comes the responsibility to safeguard sensitive financial information. After all, the ease of setting up and using these wallets, combined with the lack of stringent verification processes, has made them an attractive target for illicit activities.

Against this backdrop, end-user reliance on digital wallets is only increasing. What started as a convenient alternative to physical wallets has evolved into a key financial tool, housing sensitive data and enabling seamless transactions across various platforms.

PYMNTS Intelligence finds that digital wallet usage continues to grow across grocery, retail, restaurant and travel sectors, with debit becoming the preferred underlying payment method. In June 2024, consumers paying with digital wallets used stored debit cards in 55% of grocery transactions, as well as 52% of retail transactions, 62% of restaurant transactions and 46% of travel transactions.

As digital wallets continue to gain traction in the financial ecosystem, their security will be a critical factor in determining their long-term success.

Among the emerging security imperatives that are essential for the future of digital wallets, biometric authentication has rapidly gained traction as a reliable and secure method of verifying a user’s identity. Unlike traditional passwords or PINs, which can be easily stolen or forgotten, biometric data — such as fingerprints, facial recognition, and voice patterns — are unique to each individual, making them significantly harder to replicate or misuse.

For digital wallets, the integration of biometric authentication offers a dual advantage: it enhances security while improving user experience by streamlining access to accounts and transactions.

“If you do the facial scan immediately upfront … That means all these transactions will go through seamlessly and you no longer have to confirm your identity after the fact,” Mark Nelsen, senior vice president and global head of consumer payments at Visa, told PYMNTS.

Read more: 3 Big Ideas From PYMNTS Intelligence’s Digital Wallets UK Report

Reducing Risk in Digital Transactions

Tokenization is another powerful security measure that replaces sensitive data, such as credit card numbers, with a unique identifier or “token” that can be used in transactions without exposing the actual data. This technique minimizes the risk of data breaches, as the token itself is meaningless to unauthorized parties who may intercept it.

“We think tokenized payments have the propensity to penetrate some 70% of transactions as a whole,” Mehret Habteab, senior vice president of product and solutions at Visa Europe, told PYMNTS.

In the context of digital wallets, tokenization is particularly effective in securing payment data during transactions. When a user initiates a payment, their sensitive information is not directly transmitted. Instead, a token is generated and used to complete the transaction. This approach significantly reduces the risk of fraud, as even if a hacker gains access to the token, they cannot use it to access the user’s financial information.

And for digital wallets, other methods of end-to-end encryption that involve encrypting payment data, personal information, and other sensitive details at every stage of a transaction can help ensure that even if data is intercepted, it remains unintelligible to unauthorized parties.

Of course, sometimes the simple solutions are the most effective — and for digital wallets, MFA is particularly effective in preventing unauthorized access. Even if a hacker obtains a user’s password, they would still need the second form of authentication to gain access to the wallet. This added layer of security makes it significantly harder for cybercriminals to compromise accounts.

Looking ahead, the rise of artificial intelligence (AI) and machine learning has opened new avenues for enhancing cybersecurity in digital wallets. These technologies enable real-time threat detection and continuous monitoring, allowing digital wallet providers to proactively identify and respond to potential security risks before they escalate.

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