For the first time last year, more than half of U.S. consumers, or 51%, said they had recently used a digital wallet, according to new data from J.D. Power. That's up from 45% in 2021, and the market could get a boost from Zelle's companion digital wallet
The data also indicates the entrenched popularity of the two leading digital wallet brands — PayPal and Apple Pay — could make it hard for a newcomer to get traction, J.D. Power found in a recent U.S. Retail Banking Satisfaction Study based on 20,000 consumer responses the firm collected last year.
But that doesn't mean the other wallets are out of the fight. PayPal is the most preferred U.S. digital wallet for online purchases among consumers, at 37%, according to the study, and Apple Pay came in at 25%, leaving plenty of room in the market for newcomers to find their audience. And as the last digital-wallet war demonstrated, the backing of a big brand name such as Walmart or Verizon doesn't guarantee success.
Consumers ranked their frequency of usage of Block's Cash App at 11%, followed by Venmo at 9%, Google Pay at 6% and Amazon Pay at 3%. Samsung Pay, launched in 2015, had only incremental usage, according to the study.
In terms of sheer consumer brand awareness, PayPal has the highest recognition, at 82%, followed by Apple Pay at 64% and Venmo at 60%, according to J.D. Power's data. Consumer awareness of other wallets ranked lower, with Google Pay at 53%, Cash App at 50%, Amazon Pay at 43% and Samsung Pay at 27%.
One thing the data shows is the potential for significant growth among digital wallets now that overall usage has surpassed 50%, and some of the top brands are poised to make fresh competitive moves beginning this summer.
"When you look at digital wallet brands, their popularity generally correlates with how long they've been around," said Miles Tullo, managing director of banking and payments at J.D. Power, who directs development of research reports. PayPal is the oldest digital wallet brand, beginning its evolution in the 1990s as a basic online payment option favored by eBay sellers before becoming a fully fledged digital wallet in recent years.
"Apple Pay, launched in 2014, is newer than some digital wallets but the company's huge consumer product brand awareness helped it build usage faster," Tullo said.
Despite its ubiquity, Google Pay's relatively low consumer usage compared to PayPal and Apple Pay could be due to inconsistent marketing after launching its first iteration as Google Wallet in 2011 before becoming Google Pay in 2018 after multiple rebrands, Tullo suggested. Google Wallet — a separate product from the modern Google Pay— recently
"Google Pay is widespread and it even offers a pretty robust cash-back rewards program, but these things haven't done much for them so far in terms of overall consumer recognition as a digital wallet in the U.S.," Tuller said.
Consumer payment behavior is hard to change, but once consumers build trust in a certain wallet, they tend to stick with it, according to Tuller.
This could be an advantage for Paze, operated by a coalition of the nation's largest banks via Early Warning Services, because of the existing bond of trust between consumers and banks, according to Tullo. EWS has already demonstrated its brand-building prowess with the success of
Paze aims to bring thousands of other banks and credit unions together when the digital wallet rolls out widely this fall for e-commerce purchases, emphasizing security and a streamlined approach to shopping on websites and on the apps of participating merchants without entering any card numbers.
The goal is to ultimately reach about 150 million Visa and Mastercard accounts through bank mobile wallets connected to Paze. Users may select a default card for Paze purchases, with the ability to rotate other participating banks' cards within the wallet.
"Paze will have an immediate connection to customers through their banks, but our data suggests Paze will need to do a lot to win consumer usage. It must demonstrate some kind of value that goes above and beyond just being another way to pay. Paze will need to offer both consumers and merchants something different, touting rewards or security or some other combination as a differentiator," Tullo said.
One of Early Warning's primary motivations in developing Paze may be regaining control over how banks' payment cards are used within other digital wallets, particularly Apple Pay, Tullo said. The Cupertino, California-based tech giant reportedly requires banks to pay 10 to 15 basis points for every credit card transaction processed through Apple Pay.
"Paze gives the banks the opportunity to not have to pay Apple every time somebody transactions online using Apple Pay. And launching their own digital wallet is their way to get back into the center of the transaction," Tullo said.
The last war
This won't be the first time a range of mobile wallets battled for dominance. A decade ago, banks competed against a consortium of retailers, a separate consortium of telcos, and individual tech giants to be the top payments brand.
All of their efforts were hampered by Apple, which denied access to the secure element of its iPhone handsets for contactless payments. Apple would use this technology for its own Apple Pay, a late but forceful entrant to the fight.
The displaced and defeated mobile wallets include
CurrentC dates to 2012, and was meant as a way for retailers to regain some pricing control over digital payments. It had the support of major brands such as Walmart, Best Buy and Rite Aid, and routed payments by ACH to keep costs low. Its biggest issue was timing—Apple Pay's launch stole its spotlight, in part by winning over many of the retailers that had backed CurrentC.
Softcard's failure was largely a branding snafu. The telcos originally called their wallet ISIS before the name became toxic, and their marketing efforts after the rebrand included bizarre choices such as the use of a puppet designed to look like a living point-of-sale terminal. And despite the telcos' own dominance, they never succeeded in getting Apple to agree to support their wallet on iPhones, thus limiting Softcard's reach.
A similar telco-backed wallet called
Other major banks, such as Bank of America, chose to sit out the first mobile wallet war altogether. Bank of America saw more value in investing in individual services such as card-linked offers and making them available to all customers rather than confining them to a mobile wallet app. BofA is among the seven largest U.S. banks participating in Paze's pilot.
Analysts are taking a wait-and-see approach in handicapping Paze's odds of gaining broad consumer adoption. The biggest unknown is what it will take to motivate consumers to use Paze's checkout approach versus other, more familiar options, and what incentives merchants might demand, analysts at Autonomous wrote in a March report to investors.
"It's possible that Paze will try to attract merchants by offering a liability-shift for transactions (i.e., for fraudulent transactions, the chargeback liability shifts to the issuers from the merchants), which is something we've seen in the rest of the world but not the U.S.—except for Mastercard and Amex providing it for Apple-tokenized transactions," the report said.
The analysts concluded that if consumers drag their feet in adopting Paze, the vast majority of merchants will have little reason to add another checkout feature to their websites and the concept will face "the classic chicken-and-egg problem in the world of payments."
Daniel Wolfe contributed reporting for this story.
