The Future of Digital Wallets: Interoperability

By Yuwa Ikhinmwin, Head of Visa+ Product Strategy, Visa Direct Global Partner Solutions ,  09/18/2023

Digital wallets have become a staple in our everyday spending, with payment volume in the U.S. growing 15% from $526 billion in 2021 to roughly $606 billion in 2022.¹ With intuitive user experience flows and increased accessibility, there’s no doubt digital wallets have taken a huge role in how we send and receive money. There’s still work to be done, however, as wallet use continues to grow both in the U.S. and around the world, wallet ecosystems remain siloed. Without change, friction already experienced by users will continue on a larger scale, both domestically and across borders.

So, what can be done for digital wallets? It’s clear that a safe, secure, and cost-effective open-loop system that allows interoperability between any vendor, platform, and border both nationally and globally is vital to the future of digital wallets. While the U.S. has become a fervent adopter of digital wallets, problems with P2P fragmentations go far beyond their borders and have impacted other international markets where digital wallets have proliferated.

Domestic: Together, Everyone Wins

In a market like the U.S., where four to five P2P wallets are currently leading in the landscape, consumers are driven to negotiate amongst themselves on which app to use. Let’s say a group of friends go out for dinner and want to split the bill. The night comes down to an arbitration of who has what app and can send money where — an unnecessary complication (or at least what should be unnecessary) solely based on shared apps or platforms. With wallets interoperability, these friends could transfer money across different digital wallets and sort payments out before they leave the table.
 
Other major markets outside the U.S. have similar pain points when it comes to digital wallet variety, including markets in AP, LAC and Africa. Some have even enforced regulatory mandates, with the Reserve Bank of India requiring interoperability amongst mobile wallets in the country.²
 

Cross Border: Oh, the Places Your Wallet Can Go

In areas where only one or two digital wallets lead in the market, wallet interoperability needs arise in different ways. These markets inhabit sub-regional clusters with frequent international movement and counterparties often dispersed across multiple geographies — creating cross-border friction for domestic digital wallet users instead of choice overload.  We have observed that “cluster markets” sometimes occur across Africa, LAC, and EU economic areas, and particularly in Southeast Asia. For example, if a Singaporean travels to Malaysia and tries to split a lunch bill with a friend, lack of interoperability between their countries’ wallets prevents them from doing so.
 
Adding to the necessity for digital wallets interoperability, Juniper Research forecasts that international money transfers via digital wallets will reach $89 billion by 2028. This is up from $59 billion in 2023 and extends beyond remittance payments.³ The same interoperability opportunity exists more broadly. In several regions, governments and central banks are linking domestic RTP platforms, and a similar solution for interoperability across various wallet sub-regions is needed to create a seamless connection.
 

Safety, Security, and Scalability

At Visa, we’ve used our network strategy to create frictionless connections between banks and merchants before, and now we’ve developed Visa+ to do the same with digital wallets with the safety, security, and scalability that Visa is known for.

“Visa+ provides an interoperable platform, allowing people to send or receive funds where they want. Removing these barriers can enable digital payments to flow with less friction and further decrease the number of cash-based P2P transactions."

— Tim Astanov, Head of Commercialization, TabaPay

As much as it’s here to streamline wallet use, Visa+ can also help enhance end user privacy. By using dedicated payment credentials (or paynames), Visa+ allows customers to share far less personal data like emails, phone numbers, and other bank info for digital wallets interoperability.

Visa+ begins with a U.S. rollout of its P2P capabilities, but the possibilities go far beyond that.⁴ In the future, merchants across the globe could not only receive payments from consumers through cards, but with enablers like TabaPay and Visa+,⁴ they could make payments to creators, influencers, gig workers, marketplace sellers, and more. Our goal is to help foster a future where digital wallets provide the broadest, most seamless way to move money to other platforms anywhere in the world.

Learn how Visa+⁴ is helping facilitate this future here.

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  1. Juniper Research. April 2022. DIGITAL WALLETS Key Opportunities, Vendor Analysis and Market Forecasts 2022–2026.
  2. Entrepreneur India. October 2018. Mobile Wallet 2.0 – RBI Issues Interoperability Guidelines For the Industry. https://www.entrepreneur.com/en-in/news-and-trends/mobile-wallet-20-rbi-issues-interoperability/321883
  3. Juniper Research, July 2023. DIGITAL WALLETS Platform Analysis, Key Trends & Market Forecasts 2023–2028, Data & Forecasting.
  4. Visa+ is only available in the U.S. at the time this article was published.
  5. Actual fund availability depends on receiving financial institution and region.