--- description: What is the future of digital wallets for British consumers? Our survey looks at the use of this technology and the pros and cons of choosing to go cashless. image: https://gdm-localsites-assets-gfprod.imgix.net/images/capterra/og_logo-e5a8c001ed0bd1bb922639230fcea71a.png?auto=format%2Cenhance%2Ccompress title: The future of digital wallets: Is the UK going cashless? --- # The future of digital wallets: Is the UK going cashless? Canonical: https://www.capterra.co.uk/blog/3200/is-uk-going-cashless-future-of-digital-wallets Published on 08/11/2022 | Written by Eduardo Garcia. ![The future of digital wallets: Is the UK going cashless?](https://images.ctfassets.net/63bmaubptoky/36Hihbf1Dr5hpmjA-02bvafKLNijkbcKvUPsJ7lFBak/0b309c33b3cee4c27b670c9613b6c403/The-future-of-digital-wallets-is-the-UK-going-cashless-UK-Capterra-Header.png) > Smartphones and digital wallets have introduced new ways to purchase products and services without having to use physical cards or cash. After several years in the market, how popular is this technology among UK consumers? What do they use it for? Are digital wallets going to overtake cash and debit/credit cards as the preferred method of payment? ----- ## Article Content Smartphones and digital wallets have introduced new ways to purchase products and services without having to use physical cards or cash. After several years in the market, how popular is this technology among UK consumers? What do they use it for? Are digital wallets going to overtake cash and debit/credit cards as the preferred method of payment?In this article63% of mobile phone users have used digital walletsThe majority use digital wallets as debit or credit cardsThe pros and cons of digital walletsBarriers to the adoption of digital walletsData protection is key to appeasing consumer concernsAs businesses and consumers step up their digital presence, the adoption of digital technology is causing an impact on the channels people use to buy products and services and the way they discover new brands and products. This can also influence how they carry out their payments and how sales transactions are processed.Digital wallets have gained popularity alongside smartphones and digital payments. However, is the UK going cashless? Are customers and retailers ready to go back to pre-pandemic levels of cash usage? Or, with cash predicted to account for only 6% of all payments by 2031, are these transactions going to become a rarity?  Capterra surveyed 1,004 UK smartphone owners to investigate the usage of digital wallets and gather insights into the benefits, challenges, and potential future of this method of payment and identification. The full methodology for conducting this study can be found at the bottom of this article. What is a digital wallet?When presenting our survey, we defined digital wallets as smartphone or smartwatch apps that can store payment details and different types of ID or credentials (credit card details, gift cards, tickets, driver’s licence, etc.). These allow users to pay without using a physical credit or debit card or to identify themselves to enter a place without a physical ID, credential, or ticket.63% of mobile phone users have used digital walletsDigital wallets are nothing new, but the rise in smartphone use and mobile commerce has laid out the ideal conditions for digital wallets to thrive.88% of our survey respondents said they were either fully aware of the concept and name of digital wallets or at least just the concept. That left 10% who had heard of digital wallets without fully understanding what they were and only 2% who had neither heard of the term nor the concept. While a clear majority of respondents understood what digital wallets were, the number who have actually used them was slightly lower. 63% of survey-takers have used digital wallets previously, of which 57% continue to use them. From these consistent users, 86% of respondents began using digital wallets after the outbreak of COVID-19. This may have been spurred by shops and businesses encouraging contactless payment during the pandemic due to concerns about hygiene when handling money, or the storage of the NHS COVID Pass on smartphones. Only 14% had been using digital wallets for over three years. The majority use digital wallets as debit or credit cardsWhy do consumers use digital wallets? The following infographic shows the top four responses of the survey-takers who say they still use digital wallets today.Our survey indicates that digital wallets are primarily used as a substitute for debit and credit cards to make payments. However, the use of these wallets to withdraw money from ATMs is less frequent, with only 9% of respondents using them in cashpoints. Other uses include the storage on smartphones of transport tickets and event tickets, which can often be misplaced. These can usually be stored as QR codes so that users can access and carry them on their devices instead of printing out tickets. Loyalty programmes are also popular in the UK, with 70% of Britons enrolled in some sort of loyalty programme. However, many loyalty programmes require consumers to carry a card with them and physical cards can often be lost or left behind, preventing consumers from enjoying discounts. It makes sense then that a third of those who currently use digital wallets use them to store their loyalty cards. The pros and cons of digital walletsWe have seen that there is increasing interest within the UK to use digital wallets for different reasons. However, we wanted to delve further and learn about the advantages and disadvantages of this technology for our respondents. 82% of current digital wallet users are satisfied with them In order to understand why consumers who are still using digital wallets have continued to do so, we asked them to rate their overall usage experience on a scale of one to ten, with one being ‘extremely dissatisfied’ and ten being ‘extremely satisfied. 82% of respondents ranked their level of satisfaction as between seven and ten, with only 1% rating it as between one and three. To determine why the majority of these survey-takers were so satisfied, we asked them what they felt were the advantages of using digital wallets instead of traditional methods. Along with convenience, a lower risk of losing wallets, and trackability, fraud reduction due to encrypted information is also highlighted as a benefit. Secure digital wallets require a number of security measures to protect sensitive data from being intercepted. In particular, encryption technology, which converts normal data or ‘plaintext’ into random characters or ‘ciphertext’ that can only be read by those with a special key, can add an extra level of security to purchase processes. Digital wallets still have their disadvantagesEven though these consumers are generally happy using digital wallets, they still find some disadvantages in these methods in comparison to more traditional ones. Some of the disadvantages of digital wallets are linked to the inconveniences that come with using technology: a need to keep mobile devices charged in order to access them — while traditional methods generally work at all times — and a reluctance to be increasingly dependent on devices. Half of our respondents who currently use digital wallets were concerned about sensitive information being compromised in case their smartphone falls into the wrong hands, even though authentication methods are required to access many digital wallets. Finally, 26% of these respondents found that digital wallets were still not accepted as a source of identification or means of payment in some places and considered this a setback in the use of these methods.  Barriers to the adoption of digital walletsWhile many consumers have embraced the adoption of digital wallets, there are those who have tried the technology and not been convinced, consumers who are interested but have yet to use these methods, and people who have no interest in using these wallets. We wanted to understand what was preventing these respondents from using these technologies.6% of digital wallet users have stopped using themWhile still a small percentage, the fact that 6% of survey-takers had started to use digital wallets only to stop doing so raised the question: why did they quit using digital wallets?The main reason these respondents had decided to stop using these wallets was that they simply preferred using physical cards (70%). However, security issues were also fairly prominent in the survey replies. Around one in five respondents who had stopped using digital wallets had concerns about data protection or were reluctant to store sensitive information on smartphones in case they were stolen. For all the antivirus and cybersecurity software available, some consumers are still wary of the possible risks of including sensitive information on their phones or sharing their information with third parties. It is important that consumers are aware of their data protection rights and that the platforms using digital wallets comply with data protection standards. How can digital wallets be made more secure?Most digital wallets have some form of encryption to protect data. However, cybercriminals are getting smarter and may seek ways to exploit this technology. What measures can be taken to provide stronger security and protection, beyond the use of security apps, to safeguard data stores on mobile phones?Ensure that digital wallet accessibility includes two-factor or multi-factor authentication to validate and verify user identity via diverse methods such as facial recognition or fingerprint scans for increased securityEnable consumers to download the digital wallet from an official app or storeDeploy transaction monitoring to prevent suspicious or fraudulent transactionsProvide assistance to any consumer who reports suspicious activities or chargesLimit the number of logins and authentication attempts to protect consumers19% of consumers would be interested in trying digital wallets for the first timeAlthough the use of digital wallets has increased since COVID-19 began, over a third (37%) of our survey-takers have not used them yet, even though around half of these (19% of all respondents) are interested in doing so.The main reason why respondents interested in using digital wallets hadn’t tried them was that they felt they hadn’t needed to do so yet (56%). However, many also shared similar concerns to those expressed by consumers who had stopped using digital wallets. Nearly half (46%) cited a reluctance to store sensitive information in case their smartphones were stolen, and 40% said data protection concerns were a key cause for delaying their use of digital wallets. Additionally, the technology itself proved a stumbling block to more than one in five of these respondents (22%), who said they didn’t know how to configure digital wallets on their smartphones. 18% of consumers do not want to use digital walletsThe risks of sharing sensitive information proved to be the biggest barrier to adoption for the 18% of survey participants who said they are not interested in using digital wallets. We found that three of their top four reasons for not using digital wallets are similar to those who would be interested in using these payment methods at some stage.However, while 22% of respondents who were open to using digital wallets were set back by not knowing to configure these technologies, this was not the case with respondents who did not want to use digital wallets. Only 7% thought that digital wallets were too complex to configure, and it was the dependence on technology that proved a concern for 31%.Data protection is key to appeasing consumer concernsAlthough the Post Office handled a record £3.5bn in cash for customers in August, almost half of the UK’s bank branches have closed, and some reports suggest that the UK is on course to becoming a cashless economy. Credit and debit cards are just part of the process. Our survey shows that more than half of respondents use digital wallets, and a clear majority are satisfied with them. However, there is a repetitive concern on all fronts, be it current users, past users, or consumers unwilling to use these technologies: privacy and security related to financial and personal data. Digital wallets could well end up becoming rich marketing platforms, but data collection and user privacy are an increasing concern for consumers. Businesses taking advantage of this technology —for example, to offer loyalty programmes— must ensure the privacy of customer data and compliance with the General Data Protection Regulation (GDPR).SMEs should offer multiple payment options Our survey indicates that digital wallets function as debit or credit cards for the majority of their users, although a quarter of users found they couldn’t always use them as a method of payment or ID. SMEs should consider offering third-party wallets as one of multiple payment options in their checkout process to ensure that customers’ preferred payment methods are available.In addition, with technology, such as near field communication (NFC) allowing merchants to accept cashless payments from NFC-enabled smartphones, SMEs do not need to invest in costly point of sale (POS) hardware to provide secure and convenient ways to manage in-person transactions and meet customer needs. The second part of our survey will look deeper into digital wallets as payment methods to understand consumer habits and concerns with these technologies. Looking for POS systems software? Check out our catalogue. ## Disclaimer > Methodology:  To collect this data, Capterra interviewed 1,004 consumers in September 2022. The surveyed candidates had to fulfil the following criteria: UK residentBetween the ages of 18 and 75Owns a smartphoneUnderstands the definition of a digital wallet ## About the author ### Eduardo Garcia Eduardo is a Content Analyst for the UK. Providing research and digital tech tips for SMBs. MA in Journalism and in Diplomatic Studies. 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