Consumers are Happier with Digital Wallets vs. Legacy Payment Providers

A shift in personal finance is underway, and consumers are the ultimate winners. Not to beat a dead horse...we've discussed Digital Wallets numerous times in the past month... but PayPal and Square are two major trailblazers to watch, and both are defining the future of finance vs. traditional peers. This chart reveals a clear line in the sand for digital wallet platforms vs. legacy payment providers.

What is driving success and future growth for these platforms?

1. Ecosystem Vision
2. Macro Trend Leverage

Last week we explored how PayPal was making inroads into Square's ecosystem dominance thanks to improvements in its Venmo platform.

Now, we're unpacking the major trends driving digital wallet usage higher, including a shift to Buy Now Pay Later (BNPL) services vs. traditional credit cards. Digital Wallet usage mentions are at all-time highs and have increased +196% YoY.

These digital ecosystems offer many traditional services like direct deposit and debit card functionality... and now they're tapping into a major emerging market.

Consumer mentions of utilizing a BNPL service to finance a purchase are trending +31% higher YoY (the shaded blue bar on the chart above). Meanwhile, consumers are increasingly talking about canceling credit cards.
PayPal offers a Pay in 4 option on its namesake platform and has expressed plans to expand BNPL functionality to Venmo in 2020. But so far BNPL functionality on Venmo remains to be seen. However, it's clear the company is serious about the service. Last month PayPal announced plans to purchase Japanese BNPL firm Paidy for $2.7 billion. This follows moves by Square, which is acquiring Afterpay in a $29 billion all-stock deal. As of June 30, Afterpay boasted +16 million consumers and 100,000 merchants globally. It's easy to see how this growing consumer macro trend could translate to growth for wallet platforms facilitating these types of transactions.