55% of US Consumers Poised to Adopt Digital Wallets for Cross-Border Payments

There’s a shift in how consumers and small businesses are conducting cross-border transactions, according to the PYMNTS Intelligence report “Global Money Movement: How Digital Wallets Are Transforming Cross-Border Payments,” a collaboration with TerraPay.

The report, based on surveys of over 2,600 consumers and nearly 400 small business leaders across Saudi Arabia, Singapore, the United Kingdom and the United States, indicated a preference for digital wallets when sending and receiving money across borders. This preference was particularly pronounced among consumers, with 42% citing digital wallets as their top choice, outpacing traditional methods like bank account transfers and money transfer services. The primary drivers behind this adoption included the perceived speed and increasing trust associated with digital wallets.

However, the burgeoning popularity of digital wallets in cross-border payments presents opportunities and challenges for banks. While consumers and businesses embrace the convenience offered by digital wallets, the report found interoperability issues that hinder seamless transactions across different platforms and countries.

While most financial institutions anticipate an increase in cross-border digital wallet use, their current enablement lags behind traditional payment methods. The study also uncovered a divide in how banks view FinTechs, with some seeing them as competitors while a growing number recognize the potential for partnerships to enhance their cross-border payment capabilities and expand their reach.

Key data points from the report underscore these trends:

Consumers favor digital wallets for cross-border payments. More than 4 in 10 consumers surveyed identified digital wallets as their most preferred method for international money transfers, more than any other payment type. In the U.S., this figure reached 44%.

Financial institutions are exploring FinTech partnerships for innovation. Sixty-two percent of U.S. and U.K. banks that are innovating or planning to innovate in cross-border payments intend to do so by partnering with FinTech companies. The main driver for these partnerships is the need for faster payment processing.

Nearly half of consumers who do not use digital wallets for cross-border payments are very or extremely likely to start using them to send money to family or friends in the next year. Among U.S. consumers, 55% plan to adopt digital wallets to send or receive cross-border payments.

Beyond these key findings, the report delved into other critical aspects of the evolving cross-border payments ecosystem. It examined the dominance of remittances as the most common type of consumer cross-border payment and the increasing use of digital wallets for these peer-to-peer transactions.

The study also analyzed the reasons consumers choose specific digital wallets, with trust and speed emerging as the leading factors. Furthermore, it explored the differences in digital wallet adoption and preference across the surveyed countries and various demographic groups, highlighting the higher adoption rates among digitally savvy consumers and younger generations.

The report also touched on the perceived advantages and disadvantages of different cross-border payment methods, with 39% of U.S. digital wallet users reporting no disadvantages to the method. Finally, it examined the expectations of consumers and financial institutions for an increase in the volume and value of cross-border payments, signaling a continued dynamism in this segment of the financial services industry.