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NBERWORKINGPAPERSERIES

THERISEOFE-WALLETSANDBUY-NOW-PAY-LATER:PAYMENTCOMPETITION,CREDITEXPANSION,ANDCONSUMERBEHAVIOR

WenlongBian

LinWilliamCong

YangJi

WorkingPaper31202

/papers/w31202

NATIONALBUREAUOFECONOMICRESEARCH

1050MassachusettsAvenue

Cambridge,MA02138

May2023

WethankYipingHuangandXueWangfortheirfeedbackandgeneroushelpwithdataaccess,Ripple’sUniversityBlockchainResearchInitiative(UBRI)andtheFinTechatCornellInitiativeforfinancialsupport,andMurilloCampello,PulakGhosh,IftekharHassan,YiHuang,andHuanTangfordetailedcomments.RishiKumarprovidedexcellentassistanceonproofreadingthemanuscript.WegratefullyacknowledgeYiranNingfordataprocessingassistance.WealsothankHuangChen,ShaohuaChen,ChidiChidambaran,JiayinHu,HaoLiu,XiaomengLu,CongPeng,JasonSchloetzer,VickiTang,HaoZhang,LiZhou,YinggangZhou,aswellasconferenceandseminarparticipantsatCornellUniversity,FudanUniversityFanhaiInternationalSchoolofFinance,FordhamUniversityGabelliSchoolofBusiness,GeorgetownUniversity,9thGlobalConferenceonBusinessManagementandSocialScience(GCBMS-2023),PekingUniversity,andXiamenUniversityforhelpfulfeedbackandsuggestions.DuetothetightenedregulationonInternetgiantsinChina,thedataprovideronlypermittedustocirculatetheresultsinternally(underthemanuscript“DemystifyingE-WalletsandBNPL”)fromlate2020throughlate2022.TheviewsexpressedhereinarethoseoftheauthorsanddonotnecessarilyreflecttheviewsoftheNationalBureauofEconomicResearch.

NBERworkingpapersarecirculatedfordiscussionandcommentpurposes.Theyhavenotbeenpeer-reviewedorbeensubjecttothereviewbytheNBERBoardofDirectorsthataccompaniesofficialNBERpublications.

©2023byWenlongBian,LinWilliamCong,andYangJi.Allrightsreserved.Shortsectionsoftext,nottoexceedtwoparagraphs,maybequotedwithoutexplicitpermissionprovidedthatfullcredit,including©notice,isgiventothesource.

TheRiseofE-WalletsandBuy-Now-Pay-Later:PaymentCompetition,CreditExpansion,andConsumerBehavior

WenlongBian,LinWilliamCong,andYangJi

NBERWorkingPaperNo.31202

May2023

JELNo.E42,G20,G23,G51

ABSTRACT

Thepastdecadehaswitnessedaphenomenalriseofdigitalwallets,andtheCOVID-19pandemicfurtheracceleratedtheiradoptionglobally.Suche-walletsprovidenotonlyaconduittoexternalbankaccountsbutalsointernalpaymentoptions,includingtheever-popularBuy-Now-Pay-Later(BNPL).Weexamine,forthefirsttime,e-wallettransactionsmatchedwithmerchantandconsumerinformationfromaworld-leadingproviderbasedinChina,withover1billionusersgloballyandabusinessmodelthatothere-walletprovidersquicklyconvergeto.Wedocumentthatinternalpaymentoptions,especiallyBNPL,dominatebothonlineandon-sitetransactions.BNPLhasgreatlyexpandedcreditaccessontheextensivemarginthroughitsadoptionintwo-sidedpaymentmarkets.WhileBNPLcrowdsoutothere-walletpaymentoptions,itexpandsFinTechcredittounderservedconsumers.Exploitingarandomizedexperiment,wealsofindthate-walletcreditthroughBNPLsubstantiallyboostsconsumerspending.Nevertheless,users,especiallythoserelyingone-walletsastheirsolecreditsource,carefullymoderateborrowingwhenincurringinterestcharges.Theinsightslikelyproveinformativeforeconomiestransitioningfromcash-heavytocashlesssocietieswheredigitalpaymentsandFinTechcreditseethelargestgrowthandmarketpotential.

WenlongBian

SungkyunkwanUniversity

25-2Sungkyunkwanro

Myeongnyun3(Sam)Ga-dong

Jongno-gu,Seoul03063

SouthKorea

brian123@

LinWilliamCong

SCJohnsonCollegeofBusiness

CornellUniversity

SageHall

Ithaca,NY14853

andNBER

will.cong@

YangJi

XiamenUniversity

jiyang@

2

1.Introduction

E-wallets,alsoknownasdigitalwallets(whichnesttheconceptofmobilewallets),containsoftwarethatenablesuserstomakepaymentsontheircomputersormobiledevicesusinglinkedbankcards,balanceandsavingsaccountsfromwalletproviders,ornewliquidityandcreditproducts.Thepastdecadesawphenomenalgrowthintheworld-wideusageofPayPal,ApplePay,therelaunchedGooglePay,andsuperappssuchasWeChatPayandAlipay.2ThecombinationofdigitalizationandthesocialdistancingengenderedbytheCOVID-19pandemichavefurtheracceleratedconsumers’adoptionofe-walletsforcontactlesspayments.Aconservativeestimateprojectsthetotalnumberofe-walletuserstobeover5.2billiongloballyin2026,upfrom3.4billionin2022.3Togetherwiththeriseofe-walletsistheemergenceofBuy-Now-Pay-Later(BNPL),ashort-termFinTechcreditallowingconsumerstodeferpaymentsinterestfreeintooneorafewinstallmentsatthepointofsaleandisincreasinglypopularamonge-walletusers.Asacommonofferingfromleadinge-walletprovidersaroundtheglobe,BNPLisprojectedtoaccountfor$680billioninglobaltransactionsby2025.4

Whileeconomistsagreethattheshiftfromcashandbankcardstowarde-walletsexertsaprofoundinfluenceontherealeconomy(Agarwaletal.,2020b,2022),littleisknownabouthowvariouspaymentoptionsinteractandcompetewithine-walletsandhowBNPLaffectsconsumercreditprovisionandspendingbehavior.Ononehand,asaconduittolinkedbankcards,e-walletscouldreducephysical-card-carryingcostsandalleviatetransactionfrictionsandcosts.Theiradoptionthuspotentiallybenefitstraditionalfinancialintermediaries(e.g.,banks)andconsumers.Ontheotherhand,e-walletsalsooffertheirownpaymentoptions.Forexample,PayPal,apopular

2/gx/en/industries/financial-services/publications/financial-services-in-2025/payments-in-2025.html#macro3,retrievedonNovember21,2022.

3JuniperResearch.Accessedfrom

/press/digital-wallet-users-exceed-5bn-globally-2026

.

4“BuyNowPayLaterDigitalSpend,LedbyKlarna,PayPal,andAfterpay,toDoubleby2025:Reaching$680Billion,”KaleidoIntelligence,September2020.Alipay’sHuabei,PayPalCredit,andPayPalPayLaterareexamplesofthisfast-growingnewformofcreditwhichistypicallyembeddedine-wallets;ApplejustaddedinMarch2023,ApplePayLater.

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e-walletintheUnitedStates,providesseveralinternalpaymentoptionsinadditiontoexternalbank-linkedaccountsorcards:PayPalBalance,PayPalSavings,PayPalCredit,andPayPalPayLater.Whenuserschoosetheseinternalpaymentoptions,e-walletsmaycircumventbanks,thuscuttingbanksofffromvaluableinformationalsynergybetweenFinTechlendingandcashlesspayments(Ghoshetal.,2022).This,intheory,canhaveanambiguouseffectonsocialwelfare(Parlouretal.,2022).Moreover,withoutknowingdetailedtransactionsanduserinformation,itisunclearwhetherBNPLasaformofFinTechcreditcomplementsorsubstitutesbankcredit,acoreissuepursuedintheliterature(Tang,2019;JagtianiandLemieux,2019;DiMaggioandYao,2021),whatroleitplaysforeconomiestransitioningfrombeingcash-heavytocashless,andwhetheritleadstoexcessivespendingandindebtedness(Ponce,Seira,andZamarripa,2017;Agarwaletal.,2020b).

Weaimtobridgetheknowledgegapbyopeningtheblackboxofe-walletsthatcontainmultiplepaymentoptionsandconductingthefirstempiricalinvestigationusingauniquedatasetfromarepresentativee-walletproviderbasedinChinathatisalsoagloballeaderinthesector.Wealsoobtainmatched,transaction-leveldataonBNPLandcreditcards,insteadofinferringBNPLactivitiesfrombanktransactionsasotherstudiesdo.Thesamplecovers550,000onlineand550,000on-sitetransactionsrandomlydrawnfromalltransactionsinJune2020.Wecomplementthee-walletdatabyrandomlysamplingfromatwo-monthrandomizedexperimentconductedbythesamee-walletproviderinJune2017tostudytheimpactofintroducingBNPLcreditto

consumers.

Specifically,we(i)describethedistributionofpaymentchoicesine-wallettransactionsandhowBNPLdominates,(ii)documenthowBNPLcrowdsoutotherpaymentoptionsyetcomplementsbankcreditcardsinpaymentapplications,servingasanewdigitalcash,(iii)analyzetheexpansionofe-walletcreditthroughBNPLforconsumersandregionsunderservedbybanks,emphasizingtheadoptionintwo-sidedpaymentnetworks,and(iv)showthatintheChinesecontext,BNPLincreasesconsumerspending,butdoesnotleadtogreaterindebtedness.Inadditiontoproviding

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thefirsttransaction-levelanalysisofe-wallets,wealsocomplementrecentstudies(e.g.,deHaanetal.,2022;DiMaggioetal.,2022;Guttman-Kenneyetal.,2023)toaddtothefirstcanonofknowledgeaboutBNPLandtheeconomicimplicationsofitsmeteoricemergence.Ourstudydiffersbydrawingevidencefromaneconomytransitioningfrombeingcash-heavytocashlessandtyingtogetherthepaymentandcreditfunctionsine-wallets,demonstratingthatBNPLservesasa“newcash”insteadofbeingacreditcardcompetitororconsumercreditwithnegativewelfareimplications,whichtheextantliteraturedocumentsindevelopedcountries.Furthermore,wedirectlyobserveBNPLtransactionswithrichconsumerandmerchantinformation,circumventinganynoisyinferenceofBNPLactivitiesfrombanktransactions.

Westartwithsummarizingstylizedfactsregardingthedistributionofe-walletpaymentoptions.Internalpaymentoptions—particularlyBNPL—havebecomeconsumers’predominantwaytopay,accountingformorethanhalfofalltransactionsinoursample,whereasthemostpopularexternaloption—linkeddebitcards—accountsforlessthanone-third.Astheinternaloptionsdominateine-wallettransactions,thepopularityofe-walletscoulddisrupttraditionalbanks’accesstopaymentdata(Ghoshetal.,2022).Givenhowimportantpaymentinformationanddigitalfootprintsareinlending(Agarwaletal.,2020a;Berg,Fuster,andPuri,2022),itisunderstandablethatcentralbanksaroundtheworldarelookingintodevelopingtheirownelectronicpaymentsystems(EPSs)ordigitalcurrenciestocompeteforpaymentflowswithFinTechgiants(BoarandWehrli,2021).

Wenextestimateapaymentchoicemodeltolookintotheimpactofe-walletcreditexpansiononotherpaymentchoicesafteraccountingforasetoftypicalfactorssuchasconsumerdemographics,paymentpreferences,merchants’acceptance,andtransactionvalue.Wefindthatconsumeraccesstoe-walletcreditcrowdsouttheusageofotherpaymentoptionsinbothon-siteandonlinetransactions.Inlinewiththecrowding-outeffect,wealsofindthatsmall-valuetransactions,whichformasubstantialshareofpaymentsthroughthee-wallet,areoverwhelminglysettledwithe-walletcreditthroughBNPL.Whilepriorstudies(e.g.,Klee,2008)concludethatphysicalcashisthemain

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paymentchoiceforsettlinghigh-frequencyandsmall-valuetransactionsinmodernsocieties,wepositthatBNPLisnowthemostpopularpaymentchoiceine-wallettransactionsandhenceservesasthenewdigitalcashintransitionstocashlesssocieties.

Somewhatcounterintuitively,BNPLappearstocomplementbankcredit.UnlikepriorstudiesthatexaminetherelationbetweenFinTechlendingandtraditionallending(e.g.,JagtianiandLemieux,2019;DiMaggioandYao,2021),ourstudyfeaturesdataincludingborrowerswhohaveaccesstobothe-walletcreditandcreditcards(dual-accessusers).Usingthissubsample,wecanruleoutthepotentialimpactofborrowers’unobservablecharacteristics.Wefindthatdual-accessusersusee-walletcreditandcreditcardsindifferentpaymentscenarios,withe-walletcreditfordaily,small-valuetransactionsandcreditcardsforbig-ticketpurchases.E-walletcreditservesprimarilyasapotentialcomplementofcreditcards,notasubstitute,becauseitsadoptionbyusersalreadywithcreditcardsincreasesthespendingthroughcreditcardsaswell.

BecauseourdatasetovercomestheempiricalchallengeintheliteratureconcerningdeterminingwhetherFinTechcreditusershaveaccesstobankcredit,wecaninvestigateife-walletcredit(i.e.,BNPL)expandscreditprovisiontothosewithnopriorcreditaccess.Wedocumentasubstantialexpansionattheextensivemargin.Fromtheconsumerside,84.14%(78.38%)ofon-site(online)consumerswithoutcreditcardnowhaveaccesstoe-walletcredit;fromthemerchantside,43.54%ofon-sitemerchantswhodonotacceptcreditcardpaymentsnowaccepte-walletcredit;fromthetransactionside,44.37%(90.21%)ofon-site(online)transactionsthatcannotbecompletedbycreditcardscannowusee-walletcredittocompletethepayment.ThecombinationofdemandfromconsumersandmerchantsforBNPL,andthesupplybythee-walletprovider,hasledtotheexponentialgrowthofBNPLusage.TheimpactofBNPLaccessonconsumercreditusagealsoappearsmorepronouncedinless-developedareassuchasruralareasandnorthernregionsandforwomen.Overall,thee-walletcreditseemstobenefitthosedisadvantagedorunderservedbybanks.

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WiththewideuseofBNPL,apotentialconcernisthattheeaseandconvenienceofthisFinTech-basedconsumercreditmayinduceconsumers,especiallyunsophisticatedoneswholackfinancialliteracyandbudgetingeducation,tooverborrowandoverspend(Berg,Fuster,andPuri,2022;Buetal.,2022).Weexploitatwo-monthrandomizedexperimentconductedbythee-walletproviderinJune2017toexaminetheimpactoftheintroductionofBNPLonconsumerspending.Foruserswhowereextendedcreditinthisexperiment,wefirstdocumentasignificantconsumption-boostingeffectconsistentwiththatobservedindevelopedeconomiessuchastheUnitedStates:anincreaseequivalentto4.78%oftheaveragemonthlyconsumptionasreportedbytheNationalBureauofStatisticsofChina.

Next,wereturntoourtransactiondataandanalyzehowconsumerschangetheirusageofBNPLwhentheyhaveunpaiddebtandincurinterestexpenses.Wedistinguishbetweentwotypesofusersaccordingtotheircreditaccess:single-accessusers(e-walletcredituserswithnolinkedcreditcard),anddual-accessusers(mentionedearlier).Whilesingle-accessusersappeartousee-walletcreditmorefrequently,theyusethecreditcautiously,astheproportionofrevolvers(thosewhoincurinterestchargesonunpaiddebt)andtheunpaid-debtratioforrevolversarelower.TheyalsoreduceBNPLusageintransactionsoncetheyincurinterestexpensesfromlatepayments(whicharehigherthantheratesfromcreditcards),likelyasanattempttoimprovetheircreditscoreandtopaveapathwaytobankcreditaccess(Agarwaletal.,2021).Tosomeextent,thisfindingalleviatesourconcernthatuserswhoreceiveconsumercreditforthefirsttimeoverusee-walletcreditduetothelackoffinancialliteracyandbudgetingeducation.

Ourfindingshavebroadimplications.First,giventhatpaymentnetworkshaveconstitutedthecoreproductsofBigTechgiantsandFinTechstartups,ourinvestigationonthedistributionofpaymentchoicesine-wallettransactionsprovidesaninitialbenchmarkforunderstandingtheirroleinlargedigitalecosystems.Second,becausee-walletprovidershavehigh-frequencyandexclusivedataonmerchantsandconsumersunderservedbybanks,discussionson“open-FinTech”—inadditiontothe

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“openbanking”proposal—canbetimely.Third,althoughBNPLraisesconcernsaboutconsumerindebtednessworldwide,ourstudysuggeststhatBNPLusers,especiallythosewithnocreditaccessfrombanks,carefullymoderatecreditusageinaneconomytransitioningfromcash-heavytocashless.CreditexpansionthroughBNPLdoesnotnecessarilycomeattheexpenseofgreaterconsumerindebtednessordefaultunderinclusive,ex-antescreeningandex-postmonitoringandincentiveprovisionofthee-walletprovider.

OurdataandtheChinesesettinghaveseveralappealingfeatureswell-suitedfortheeconomicquestionswestudy.First,Chinaisthelargeste-walletmarketintheworldandcurrentlyhasthelargestnumberofBNPLusers(Section2.1containsmoredetails),withmaturemobilepaymentnetworks.5Second,thee-walletfunctionalityandBNPLdesigninourstudyarereasonablyrepresentative,notonlyinChinawithitsoveronebillionusersbutalsoontheworldstage.Forexample,theBNPLembeddedinthee-walletwestudyoffersarevolvingcreditlineandallowsinstallmentpayments,thuscombiningthefeaturesofPayPalCreditandPayPalPayLater,andissimilartoothermajorBNPLprovidessuchasAffirmintermsof“Pay-in-4”(installments)productsandcreditlines.Boththerepresentativenessintermsoffunctionalityandthefactthatmanye-walletprovidersaroundtheglobeareconvergingtotheChinesemodel(CFPB,2022andSection2.1)enableourfindingstobeusefulforothere-walletandBNPLproviders,eventhoughmanyofthemstartedaspureplaypaymentorcreditproducts(thankstothelow-interestenvironments).Finally,ourdatasetislikelytheonlyoneintheliteraturethatallowsdirectobservationsoftransactionsine-walletsandinvolvingBNPL,coveringbothonlineandon-sitetransactionsandbothmerchantandconsumerinformation,thankstothatoure-walletproviderhasitsowne-commerceplatformsandQRcoderegistrationsystem.

Ourworkrelatestoseveralstrandsofliterature.FinTechfirmstypicallystartwith

5Themobilepaymentboomedearlyin2011andtheadoptionamongChineseadultsreached82%in2017.Thecoverageandusagehadsincestabilized.See/docs/20210421101507614920.pdfand

/goutongjiaoliu/113456/113469/3602384/index.html

;accessedonAugust6,2022.

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paymentsandthenexpandintolending,insurance,investmentproducts,etc.(Frostetal.,2019).However,theexistingliteratureappearstofocuspredominatelyonlending,largelyduetodatalimitationsonpaymenttransactions.AshighlightedbyBerg,Fuster,andPuri(2022),paymentdataarefundamentalforcreditratingsinthelendingbusiness.OurstudyfocusesonFinTechpaymentsandprovidesthefirstempiricaldescriptiononatimelyandimportantissue:paymentchoiceswithine-wallets.6Althoughtherehavebeenpaymentsurveysinadvancedeconomiesandnumerousstudieson(electronic)paymentchoices(e.g.,Arangoetal.,2015;Koulayevetal.,2016;Wangetal.,2016;Crouzet,Gupta,andMezzanotti,2019;Agarwaletal.,2020b),thesesurveyshavealwayscategorizede-wallets,ifatall,asanaggregatecategory.Lookingintotheblackboxofe-walletpaymentoptionsisimportantforunderstandingcurrentchangesinpaymentsystemsandevaluatinge-wallets’economicimpacts.OuranalysisofboththeconsumeraccesstoandmerchantadoptionofBNPLasapaymentoptionalsoaddstostudiessuchasHiggins(2019)thatanalyzethecoordinatedtechnologyadoptionintwo-sidedmarkets.

WecontributetotheliteratureonFinTechcredit,especiallytheemergentdiscussionsonBNPL.Earlierstudiesfocusoncreditforonlinemerchants,smallfirms,andentrepreneurs(e.g.,Huangetal.,2018;Hauetal.,2019;Hauetal.,2021),whereaswestudycreditforconsumersandhouseholds.Withinthisdomain,marketplacelendinghasbeenshrinkingwhileBNPLhasbeengrowing.Berg,Fuster,andPuri(2022)estimatethatnewlendingintheU.S.marketplacelendingmarketwas$6billionin2020;theU.S.BNPLmarket,bycontrast,wasabout$25billion.Comparedtothenumerousstudiesonmarketplacelending(e.g.,Lin,Prabhala,andViswanathan,2013;FreedmanandJin,2017;JagtianiandLemieux,2019;Tang,2019;Cong,Tang,Xie,andMiao,2019),theresearchonconsumerFinTechcredit,particularlyBNPL,is

scarce.

6Hong,Lu,andPan(2020)documentthatrepeatedusageofdigitalpaymentsthroughsuper-appscanhelpusersbuildfamiliarityandtrust,therebyincreasingtheirparticipationandrisk-takinginmutualfundinvestmentsofferedbysuper-apps.

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ThreerecentarticlesstudyBNPLindevelopedeconomieswherecreditcardshavealreadylargelyreplacedcash.Guttman-Kenneyetal.(2023)describeBNPLusageintheUK,where19.5%ofactivecreditcardusershadatransactionwithaBNPLfirmontheircreditcardsin2021,andyoungusersandthoselivingindeprivedregionswithlimitedrepaymentcapabilityhadanevenhigherratio.deHaanetal.(2022)findthatBNPLintheUnitedStatesplausiblyhasanegativeeffectonusers’spendinghabitsandfinancialhealth.Similarly,DiMaggioetal.(2022)findthatBNPLaccessincreasestotalspendingandtheproportionofretailspendingintheUnitedStates,whichisbetterexplainedbythe“liquidityflypapereffect.”Thesestudiesprovidevaluableinformation,especiallyconcerningtimetrends,onBNPL,buthavetorelyonbankandcreditcardtransactionstoinferBNPLactivities,thuscaptureonlytransactionslinkedtobanks,withlimitedmatchedmerchantorconsumerinformationandonlycoverasmallsetofpure-playproviders.7WeinvestigatetheusageofBNPLanditsimpactonconsumerspendingandindebtednessdirectlyusingamorecomprehensive,matched,transaction-leveldataset,inacountrywithdrasticallydifferentfinancialdevelopmentandbusinessecosystems,whilefeaturinganequallyimportantBNPLmarketandmodelthatmanymarketsaroundtheglobeareconvergingto.Furthermore,ourstudyalsohighlightsthepaymentnatureofBNPLandexaminesitsinteractionwithotherpaymentoptions.

Finally,wecomplementearlierresearchonmobilepayment,consumercredit,andoverspending(Aydın,2022;GrossandSouleles,2002;Ponce,Seira,andZamarripa,2017;Agarwaletal.,2020b).Previousstudiesdocumentaspending-boostingeffectofpaymentinnovations(e.g.,mobilepaymentande-wallets),whichcausesconcernsaboutoverspending.Recently,Wang(2023)theoreticallyandempiricallyanalyzecompetitionamongbank-card-basednetworksandfindsthatitleadstooveruseofcreditandreducedsocialwelfare.WefindBNPL,asanewconsumercredit,boostsconsumption,butdoesnotincreasehouseholdindebtednessinChina,suggestingthat

thepaymentcompetitioninducedbye-walletsandBNPLinChinaismorenuanced:7Forexample,PayPalisexcludedbecauseitcontainslargenon-BNPLbusiness,despitealsobeingamajorBNPLplayer.ThetransactionsfromomittedBNPLprovidersarelabeledasnon-BNPL,leadingtoclassificationerrors.

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Heterogeneityinpaymentoptionsleadstodifferentmerchantfees,retailprices,andconsumersegments,withBNPLservingmanyconsumerswithoutcreditcardaccess.Consequently,dependingonthedesignandenvironmentofthepaymentinnovation,merchantfeesdonotnecessarilygetpassedontoretailprices,andconsumersdonotnecessarilyoverusethenewlyavailablecredit.

Therestofthispaperisorganizedasfollows.Section2providestheinstitutionalbackgroundandintroducesthedata.Section3describesthelandscapeandstylizedpatternsofe-walletpayments,includingtheeffectsofBNPLonotherpaymentoptionsandbankconsumercredit.Section4presentsthefindingsconcerninge-walletcreditexpansionthroughBNPL.Section5investigateshowtheriseofBNPLaffectsconsumerspendingandindebtedness.Section6concludes.

2.InstitutionalDetailsandDataDescription

2.1InstitutionalBackground

Theemergenceofthee-walleteconomy.E-walletsallowuserstostoredigitalcurrencyanduseittomakeonlinetransactionsaswellason-sitetransactionsviascanningQRcodes.E-walletsaresteadilyreplacingtheuseofphysicalcardsandcash,andarehailedasrevolutionizingdigitalfinance,transforminghowconsumersandmarketsoperate,empoweringbusinesses,andboostingfinancialinclusion.Forone,theysignificantlyreducetheinconvenienceofcarryingphysicalcardsandcashandarefasterandeasiertouserelativetobank-basedpaymentsandtransfers.Manyconsumersarepurchasingproductsthroughe-commerceplatformswithvariouse-wallets,nottomentionthatdigitalcurrencyusersarealsousinge-walletsforsecuretransactions.

Digitalwalletsfirstbecamepopularindevelopingcountriesthatwereconsideredcashheavyorlackingwell-developedcreditreferencesystems.8Aftertheytookoff

8Whilethetechnologiesbehinddigitalwalletsseemnew,somehavebeenaroundfordecades.Forexample,Coca-Cola’svendingmachinesbackin1997allowedpeopletopayviatextmessage;Amazonlaunched1-clickin

1999andPayPalexpeditedeBaypurchasesin2022.

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inChinaandIndia,theywerequicklyadoptedincountriessuchasPhilippines,Thailand,andVietnam.AustraliaandSingaporealsoembracede-walletsquickly,followedbyotherdevelopedeconomiesinEuropeandNorthAmericaamidsttheCOVID-19pandemicbecausetheyofferaconvenientpaymentoptionwithoutphysicalcontact.

Dependingontheissuerandthelevelofacceptance,e-walletscomeinthreetypes:closede-walletsissuedbyaspecificmerchantorserviceprovider(e.g.,AmazonPay),semi-closede-walletsthatallowuserstomakepurchasesatmultiplemerchantsbutlackwidespreadapplicability(e.g.,AlipayandPaytm),andopene-walletsthatareissuedbybanksorinstitutionspartneredwithbanksandallowuserstomakepurchasesatanymerchantthatacceptselectronicpayments(e.g.,PayPal,ApplePay,andGooglePay).

BNPLaroundtheglobe.BNPL,anewFinTechconsumercredit,hasalsoemergedrapidlytogetherwithe-walletsoverthepastdecadeandespeciallyduringthepandemic.WhilethereisnosingledefinitionofBNPL,itisgenerallydefinedasatypeofshort-termconsumercreditthatallowsuserstomakepurchasesbutdeferpaymentsintooneorafewinstalments.Withthepandemiclimitinghouseholdincomeworldwideandbankscautiousfromprovidingcreditinchallengingeconomicenvironments,BNPLmeetstheelevateddemandfornon-contactpaymen