Holiday Shoppers Are Using Digital Wallets

While the economy is still in flux following this month’s election, consumers are projected to spend 2.5%–3.5% more this holiday season than they did last year, according to the National Retail Federation. As the busy holiday shopping season kicks off, retailers will need to meet shoppers where they are with convenient and stressless retail payment options. According to a recent McKinsey report, digital payments are becoming increasingly important as an origination point for shoppers’ decision making –and not merely just a checkout option.

So, what does this mean for retailers and the shoppers looking to spend this holiday season? To dive in deeper, we surveyed 1000 U.S.-based consumers to find out shoppers’ sentiment around digital wallets, their comfortability using the technology and their holiday shopping plans.

Check out the findings below to learn more.

Digital Wallets Are Not the Future—They’re the Now

74% of shoppers plan to utilize digital wallets this year, and that percentage increases to a whopping 92% for both millennials and Gen Z. Digital wallets are no longer a “nice to have,” but expected. 59% of gen Z and 57% of millennials are more likely to shop at a story that has an easy digital wallet interface. In fact, 70% of shoppers would still consider shopping at a store if its only payment option was via digital wallet.

This momentum is only going to continue – a new study from Juniper Research has found that total spend via digital wallets will exceed $10 trillion in 2025, up from $5.5 trillion in 2020. Over half (52%) of shoppers have no hesitations with using digital wallets. Just this month, Mastercard launched Pay Local, a global service that connects consumers and merchants by allowing consumers to make card-based payments using local digital wallets. We can expect these types of integrations and offerings to pop up more prevalently as consumer support and demand rally.

Stores Need to Support Digital Wallets This Holiday Season

An early holiday forecast predicts that purchases made through buy now, pay later (BNPL) services and digital wallets will more than triple this year. 81% plan to use digital wallets the same or more this holiday shopping season than in the year past. Merchants looking to capitalize on this surge should make sure they are offering the payment options shoppers are looking for. Major retailers like Starbucks have already seized on the trend, with the coffee giant reporting that merchant wallet transactions accounted for 30% of all purchases in the first quarter of 2024. When it comes to the most popular digital wallets this 2024 holiday shopping season, shoppers shared their favorites:

Debunking Digital Wallet Hang Ups

Those that do have hesitations around digital wallets (48%) say it (1) feels more challenging to use digital wallets versus physical cards (24%), (2) they feel like their purchase is not as well protected in digital wallets (24%), or (3) they don’t know how to use digital wallets (12%).

Let’s debunk some of the myths around digital wallets:

• 16% think digital wallets require a bank account. That’s false; digital wallets do not always require a bank account. For example, they can be used with credit cards or allow users to load funds directly into a merchant wallet.
• 22% think digital wallets make you more susceptible to identity theft. Many digital ID wallets actually provide an added layer of security that physical cards do not, with many requiring authentications like facial recognition, thumbprint technology and/or biometrics. Digital wallets also move to decentralized key management systems that keep your financial assets ultra-secure.
• 9% think digital wallets only work in person. 13% think digital wallets only work online. These are both incorrect – digital wallets can be used both in person at participating businesses and online.

How Are Shoppers Using Digital Wallets?

Beyond credit cards – which most shoppers (64%) feel comfortable storing in their digital wallet – consumers also leverage their wallets for the following:

As technology continues to mature, we can expect to see more use cases and opportunities to leverage digital wallets for better consumer experience.

It boils down to this: a business is behind if they are not offering digital payment options. The holiday season has essentially already begun – with over 31% of shoppers already begun their holiday shopping this year, and over half (52%) planning to begin holiday shopping before Thanksgiving. 81% of consumers plan to use digital wallets the same or more this holiday shopping season than in the year past, with 43% specifically planning to use them more this year. It is critical that businesses offer these additional payment options if they want to get the most from a potentially tight financial Q4.

To learn about Innova’s digital-first payment platform, please visit the InnoWallet webpage.