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The Rise of Digital Wallets

18 April 2018

Victoria Galloway

5 minute read

Will credit cards become obsolete as digital wallets rise?

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As the global economy evolves, so do the ways in which people pay. Cash was once king, until credit and debit cards took its place. And now, digital and contactless payments are giving both cash and plastic a run for their money.

In many countries around the world, buyers have been quick to adopt alternative payment methods enticed mainly by their safety and convenience. In light of this trend, it’s natural for merchants to start wondering, “Will credit cards become obsolete?”. The short answer is, yes, but not in the near future.


Before we discuss the growth of contactless payment systems and what this means for credit and debit cards, let’s take a quick look at the most common forms of payment gaining popularity on the market today:

Direct debit and bank transfers

Funds are directly transferred from the payer’s bank account. The only difference between is while a bank transfer is initiated by the payer, the direct debit is initiated by the payee. A direct debit is most commonly used for recurring payments such as your Netflix account or gym membership.

Digital wallets

Buyers can use their bank account or other payment methods to load money into their digital wallet. They can then use these funds to pay directly using the wallet or link another payment method to their wallet. ApplePay and AliPay are examples of digital wallets.

Pre-paid methods

Consumers load funds onto a digital or physical card without the card being attached to a bank account. PostePay (popular in Italy) is an example of a reloadable prepaid card.

Post-paid cards

It’s like a credit card, but with some unique features. Buyers can purchase goods or pay bills online using a post-paid card and pay for the transaction afterwards using cash or online funds transfer at a bank, ATM, post office, or via banking portals. Qiwi (popular in Russia) is an example of a post-paid card.

For more insights on why digital wallets are an alternative payments trend you cannot ignore, read this post.


The number of unique mobile subscribers have already surpassed the 5-billion mark, according to the GSMA, which represents the worldwide mobile communications industry. That number represents nearly 70% of humans on earth. With nearly every person soon expected to have a mobile device, making contactless payments is about to become a lot easier. A few countries have already taken a firm step in this direction.

In the Netherlands, for instance, iDEAL is easily the most preferred alternative payment method among consumers. Over 90% of Dutch consumers have access to iDEAL payments thanks to these being integrated in nearly every mobile banking app and online banking portal in the country. On any given day, you’re likely to find Dutch buyers using iDEAL for a myriad of purposes such as top-ups, eCommerce, ticketing, and even charity donations.

Closer home, in China, the popularity of alternative payment methods such as Alipay and WeChat Pay is poised to completely eclipse credit and debit card usage. According to the Hurun Chinese Luxury Consumer Survey 2018, Alipay and WeChat Pay ranked as the top payment options among ultra-rich individuals rich in China.

But here’s the interesting part: Just two years ago, the same survey found that bank cards were the most preferred payment system. People are using digital wallets not just at shopping malls and fine dining restaurants, but also for more mundane purposes such as the vegetable market.

In the United States as well, digital wallets are fast closing the gap. While 26% of Americans still rely heavily on credit cards, 23% use an eWallet while just 16% said they use a debit card for payments.


Australians - known to be avid shoppers of baby and nursery, travel, and health and beauty products and services online - continue to use credit and debit cards as the primary means of payment.

It’s not all about eCommerce though; we love to ‘Tap & Go’ too! Mastercard estimates that at least 82% of Australian consumers use the tap and go payment method every week. This in turn, has resulted in a doubling of EFTPOS terminals Down Under over the past decade.

And, while credit cards are still the top payment method (37%) in Australia, digital wallets are not too far behind (22%). Debit cards, despite being used regularly by just 9% of Australians, are rising in favour thanks to their seamless integration with the Tap and Go technology.

According to the Reserve Bank of Australia, “Between 2013 and 2016, growth in the relative use of cards was strongest for lower-value transactions, with consumers increasingly using debit (and to a lesser extent credit) cards for payments of $20 or less.” This is indicative of how indispensible debit cards still remain in everyday Australian life.

If you are one of the estimated 2.24 million businesses actively trading online as of June 2017 (source: Australian Bureau of Statistics), it’s time to start looking beyond plastic. With more businesses offering integrated payment experiences and consumers trusting innovative ways to pay, omnichannel connectivity is the way ahead.


It’s more likely that cash will further go out of fashion than credit cards becoming entirely obsolete. All the same, there’s an abundance of reasons to get excited about digital wallets.

However, it’s not likely that consumers will stop using credit and debit cards in Australia, but what will change is the way these are used. The functionality of credit cards will attain a more omnipresent character as they move into digital wallets rather than being used in their physical form.

This means that merchants will have to focus on providing their customers a single experience across online, in-store, and mobile - be it for domestic payments or cross-border eCommerce payments.

As this sweeping change in payments gathers steam, Bambora can help you go beyond the credit card to reach more customers. Bambora today helps merchants collect payments in whatever method their customers choose to pay: Direct Debit, AusPost, BPAY, Apple Pay, Visa Checkout, Masterpass and more.

To know how we can help, get in touch with us today!

About the author

Victoria Galloway is Bambora APAC's Technical Copywriter, and has been writing and producing in the payments and eCommerce space for a number of years in the UK and Australia.