Trends and Statistics 2023 – Forbes Advisor

Digital wallets have exploded in popularity in recent years, giving Americans a fast and convenient way to pay for purchases without rummaging through a wallet or purse for paper money or a piece of plastic.

However, for some consumers, the ease of paying for purchases digitally causes them to overspend or lose track of their spending.

A new survey by Forbes Advisor uncovers how Americans are using digital wallets. In particular, we examine how digital wallets are affecting spending habits and shaping the way Americans shop.

More Than Half of Americans Use Digital Wallet Apps and Services

When asked about their digital wallet usage, 53% of survey participants responded saying they used digital wallets more often than traditional payment methods, such as paying with cash or swiping a physical debit or credit card. This is especially true for younger consumers. Digital wallet payment trends indicate younger participants are at least twice as likely to use a digital wallet app than their older counterparts.

For consumers using digital wallet apps, 69% of respondents stated they used PayPal the most, making it the most popular option. According to our study, the next most popular mobile wallet payment options are Google Pay (56%), Apple Pay (53%) and Samsung Pay (52%). Peer-to-peer apps are also popular, with 52% of respondents indicating they use Cash App and 49% using Venmo as a digital payment method. Users primarily access digital wallets via smartphones (68%) and smartwatches (41%).

Digital wallets store bank information in one place, often for multiple accounts. When asked how many payment methods they typically keep in their digital wallets, 43% of respondents said they have two bank accounts, while 33% said they have two debit or credit cards. Middle-income earners—those earning $60,001 to $90,000—are more likely to have two or more linked bank accounts (48%) and two or more linked debit/credit cards (41%) than individuals who earn less than $30,000 annually (10% and 13%, respectively).

Digital Wallets Are Eclipsing Traditional Payment Methods

The survey’s findings align with overall trends toward greater digitization in the economy. The majority of respondents (64%) said they use digital wallets at least as much as traditional payment methods, indicating that digital wallets are becoming a preferred payment method for many consumers.

Respondents were also asked if they’d make digital wallets their primary payment method. An overwhelming 72% of respondents stated they’d consider using digital wallets as their primary payment method for shopping, while 58% would be willing to use them for travel. Responses varied by demographic, with some age groups more open to the idea than others.

Members of Generation Z—the age group between 18 and 26 years old—are the most likely to adopt digital wallets as their primary payment method for shopping (91%) and traveling (86%). In fact, 78% of Gen Zers said they’d stop shopping at a merchant that didn’t accept digital wallets. But this isn’t just a trend among digital natives. Millennials and Gen Xers are also increasingly in favor of digital wallets, with 59% of respondents between the ages of 27 and 42 and 50% of respondents between the ages of 43 and 58 using them more than traditional methods.

The Covid-19 pandemic likely accelerated the widespread adoption of digital financial tools, according to data from the World Bank. Contactless payment reduces friction for consumers, and many people used digital payment methods for the first time during the pandemic. With fewer touchpoints and faster checkouts, consumers and merchants alike are starting to view nontraditional forms of payment as equal to or more favorable than traditional payment methods.

Convenience Is King When It Comes To Making Purchases

Many consumers are drawn to digital payment methods because they are easy to use. When asked to identify the primary reason for using a digital wallet to make purchases, respondents cited convenience (41%), followed by the availability of rewards and loyalty programs (22%).

Consumers would even change their shopping habits if digital payments were not supported. Overall, 51% of respondents have stopped shopping with a merchant that didn’t accept digital wallets, with younger spenders being most likely to make this call. Of those who responded to our survey, 78% of Gen Zers, 55% of millennials and 52% of Gen Xers have stopped shopping at merchants that only accept traditional payment methods.

These findings suggest that a growing number of consumers see digital wallet payment options as a requirement rather than a preference. This is especially true for high-income earners. Participants with a household income between $90,001 and $120,000 were most likely to stop shopping with a merchant because it didn’t accept digital wallet payments (55%).

Another interesting discovery from the survey is that respondents are equally likely to use a digital wallet for small and large purchases (35%). This means consumers are inclined to use digital payment methods both when paying for a cup of coffee and when buying a new sofa. Trends indicate digital wallets are most frequently used for purchases from businesses in the following categories:

• Drugstores and pharmacies (53%)
• Department stores (50%)
• Online retailers (50%)
• Events (49%)
• Restaurants and bars (47%)

Consumer preference for digital payments is growing. Over 70% of people said they’d make digital wallets their primary method for shopping, with another 62% saying they would for travel. And digital wallets are good for more than just spending money—they can also be used to store boarding passes, concert tickets and loyalty cards.

Results from this survey suggest digital wallets are becoming an essential part of consumers’ shopping experiences and lifestyles. Spenders place a premium on convenience, even basing decisions about where to shop on the availability of digital payment methods.

Digital Wallet Usage Challenges Good Spending and Tracking Habits

While many consumers appreciate the convenience of digital wallets, this can also lead them to lose track of their spending and blow through their budgets. According to our survey, 47% of Americans say that having access to digital wallets makes them spend more than when they use physical cards or cash.

Digital overspending is more prevalent in younger generations. Over 60% of Gen Zers and 51% of millennials said they spend more money using digital wallets, followed by 41% of Gen Xers and 28% of baby boomers.

The “pain of paying,” a term coined by behavioral economists to describe the negative emotions experienced while making a purchase, can curb spending. And findings published by the Association for Consumer Research show that mobile payments are less painful than both cash and card payments, which may explain why overspending was a common issue among respondents.

High earners also spend more when using digital payment methods. According to the survey, 61% of respondents with a household income greater than $150,000 reported spending more due to having access to a digital wallet, whereas only 30% of respondents earning under $30,000 reported the same challenge. Middle-income earners—those earning $60,001 to $90,000—also indicated changing spending habits, with 44% indicating they spend more.

Further, convenience was the top reason high-income earners (making between $90,001 and $120,000) chose to use digital wallets, while the ability to track purchases was the primary reason respondents earning under $30,000 chose to use digital wallets. This suggests that low-income earners may be more likely than high-income earners to use digital payment methods to monitor their spending.

Consumers who rely on digital wallets are prone to lose track of how much they spend. A whopping 67% of Americans say they always or sometimes lose track of how much they’ve spent when using digital wallets. This includes 41% of Gen Zers who stated they always lose track of how much they spend when using a digital wallet. By comparison, Gen Xers (54%) and millennials (46%) responded that they sometimes lose track of how much they spend.

These results indicate that digital wallets are a double-edged sword for consumers. While they make their lives easier at the point of sale, convenience can result in overspending and the inability to maintain a budget, leading to long-term financial consequences.

Not Everyone Is Sold on Using Digital Wallets

Despite the popularity of digital wallets, they aren’t for everyone. At least 14% of Americans still don’t use digital wallets. When asked to select the two main reasons keeping them from using this payment method, respondents cited the difficulty of tracking money spent on digital wallets (11%) and concerns about security (10%). This suggests that consumers are aware of the impact digital wallets can have on their ability to manage their money.

Interestingly, PayPal is the most popular digital payment app, but it is also the least trusted. According to the survey, a quarter of respondents indicated they trust PayPal the least. The prevalence of phishing scams on mobile payment apps like PayPal may be a factor.

Respondents are split on the overall safety of digital wallets: 36% think they are more safe, while 30% think they are less safe. Younger generations feel safer, with Gen Zers (53%) and millennials (40%) indicating they are more safe.

While scams exist, digital payment apps generally provide greater protection against fraudulent purchases. This is because digital wallets use enhanced security measures for purchases. For instance, instead of sharing your card number directly with a merchant, a digital wallet uses a process called tokenization to mask your payment details during a transaction.

While security is a concern for many Americans, respondents suggest it isn’t a top concern. The more important issue is how digital wallets fit into existing financial habits and change spending behaviors.

Budgeting and Tracking Spending in a Digital World

The data from our survey suggests that consumers both prefer using digital wallets and recognize that this payment method may cause them to lose track of their spending. This can make it hard for digital wallet users to manage budgets while making it easy for them to spend beyond their means.

Here are a few strategies to keep your spending in check when using a digital wallet.

• Create a plan for how you’ll spend your money. Just as you would set a budget for your monthly expenses, create a plan for how you’ll use your digital wallet. If you frequently use it for coffee runs and takeout, track your spending in those categories. Set up a separate checking account and fund it with only the amount of money you’ve allotted yourself. Link the debit card for that account to your digital wallet and only use it for its intended purpose.
• Set reminders and alerts when you’re at risk of going over budget. Once you have a budget in place, set reminders and create alerts to prevent yourself from spending more than you plan to. This will keep you aware of how much you spend at all times. Some digital wallets also allow you to set spending limits. Alternatively, look for a bank that supports digital wallet payments and allows you to set limits within your account.
• Schedule regular money dates with yourself to review your transactions. Aside from budgeting, set aside some time to review your transactions. Verifying that your transactions match your actual purchases can be part of your budgeting process and help you catch fraud.
• Use a budgeting tool to track your spending. If you’re not already doing so, use a budgeting app like Mint or You Need a Budget (YNAB) to review your spending. Many modern apps can sync to several external accounts and make it easier to categorize your transactions. Most budgeting tools let you create custom tags to flag transactions coming from your digital wallet.
• If you struggle with sticking to a budget, prioritize using your debit card. Digital wallets can make it easy to spend money you don’t actually have if you link too many credit cards. By only adding debit cards to your digital wallet, you’ll be limited to spending money you actually have, helping you avoid racking up debt.

Tips for Using Digital Wallets With Merchants

If you’re already using a digital wallet to pay for some of your expenses, here are some features and tricks that can help you get more bang for your buck.

• Add store loyalty cards. Digital wallets aren’t just for storing digital payments. If you’re a frequent shopper with a particular merchant, look for their loyalty program. Add it to your digital wallet so you never miss rewards, discounts or freebies.
• Earn rewards when shopping online. You can combine digital wallet apps with reward shopping portals like Rakuten. If you’re an avid online shopper, look for ways to use your digital wallet to maximize the rewards you can earn on these platforms.
• Look for digital wallet credit card rewards. Many rewards credit cards have rotating categories where you can earn more points or cash back if you spend in a featured category. Some cards offer increased rewards if you add the card to your digital wallet and use it at a point of sale.
• Keep an eye out for additional cash-back opportunities. Many digital wallet apps offer cash back for select purchases. For example, the Apple Card earns an extra 2% cash back every time you use it via Apple Pay to pay for purchases. With Venmo Offers, you earn cash back when you use the app to make a purchase with specific merchants.

Methodology

This online survey of 2,000 Americans who have a bank account was commissioned by Forbes and conducted by market research company OnePoll, in accordance with the Market Research Society’s code of conduct. Data was collected from Aug. 7 to Aug. 10, 2023. The margin of error is +/- 2.2 points with 95% confidence. This survey was overseen by the OnePoll research team, which is a member of the MRS and has a corporate membership with the American Association for Public Opinion Research (AAPOR).