The adoption of digital payments continues to accelerate across the US and Europe, reshaping consumer behaviours and driving innovation in commerce.
Findings from McKinsey’s ninth annual Digital Payments Survey highlight the growing integration of digital payment methods into everyday transactions, with roughly 90% of consumers in both regions reporting usage in the past year.
The survey also uncovers notable differences in regional preferences and points to new opportunities for ecosystem players to engage consumers earlier in their shopping journeys.
The Rise of Digital Payments Across Channels
Digital payments – defined as transactions conducted via websites, apps or in-store digital solutions like wallets – are now nearly ubiquitous, with the US hitting a record 92% adoption rate in 2024.
While online shopping remains the most popular use case, accounting for over 70% of transactions, newer channels like in-app and in-store payments are experiencing the fastest growth.
In the US, in-app purchases have surged to 60% adoption, an 8-point increase since 2019.
Meanwhile, in-store digital wallet usage has grown from 19% to 28% over the same period, driven by consumer convenience and an increasing willingness to leave physical wallets at home.
This trend reflects a broader shift in how consumers engage with payment tools, as digital wallets increasingly replace physical wallets for everyday spending.
Europe mirrors many of these trends, with in-store adoption of digital wallets showing significant gains – even in traditionally cash-heavy countries like Germany and Italy, where roughly a quarter of respondents now report using digital wallets in physical retail environments.
Diverging Preferences for Digital Wallets
While overall adoption rates are comparable, preferences for digital wallets vary significantly between the US and Europe.
In-store purchases in both regions are dominated by OEM wallets – solutions from smartphone manufacturers like Apple Pay and Google Pay.
However, US consumers frequently rely on retailer-specific apps for payments, with nearly half of in-store digital payment users embracing platforms like Starbucks or Walmart Pay.
In Europe, local wallet solutions, such as Swish in Sweden and iDEAL in the Netherlands, play a more prominent role.
These wallets often rely on account-to-account (A2A) payment rails, offering an alternative to traditional card-based systems.
Yet, OEM wallets often outpace local options in user experience, especially for in-store payments.
The recent liberalisation of near-field communication (NFC) capabilities on Apple devices could help close this gap, offering local wallets the opportunity to compete on a more level playing field.
For online purchases, global players like PayPal maintain dominance in both regions.
However, in countries with strong local wallet penetration, such as the Netherlands, local solutions often capture a larger share of transaction volumes, thanks to the growing popularity of A2A transfers supported by Open Banking initiatives.
Shopping Begins with Digital Payments
The role of digital payments is expanding beyond the checkout process to influence the entire shopping journey.
Platforms like Buy Now, Pay Later (BNPL) marketplaces and offer aggregators are increasingly becoming the starting point for consumers’ purchasing decisions.
In the US, younger consumers are particularly likely to initiate shopping journeys on non-merchant platforms.
Among those aged 18–34, nearly 18% begin their shopping experience on BNPL or aggregator marketplaces, compared to 13% across all age groups.
These consumers also tend to spend significantly more – 1.5 to 2 times as much – than those who start directly on merchant websites or apps.
This shift highlights an important opportunity for payment providers to engage consumers earlier in the shopping process.
By integrating rewards programs, personalised offers, and seamless checkout experiences into these platforms, providers can capture consumer loyalty and drive higher transaction volumes.
The Growing Role of Rewards and Incentives
Ease of use and security remain foundational for digital payment adoption, with over 70% of consumers in both regions citing faster checkouts as a primary driver.
However, rewards and incentives are becoming increasingly influential, particularly in the US, where 25% of respondents identify discounts and points as key motivators for their payment choices, compared to 17% in Europe.
This trend is prompting many digital payment providers to embed rewards into their offerings, creating opportunities for deeper consumer engagement while balancing economic returns.
Loyalty programs tied to wallets could become a powerful differentiator as competition in the digital payments space intensifies.
Strategic Opportunities for Payment Ecosystem Players
The survey identifies four key strategies for payment providers looking to capitalise on these trends:
- Omnichannel Rewards Integration: Payment providers should develop rewards programs that work seamlessly across in-store, online and in-app channels to drive consumer adoption and engagement.
- Marketplace Expansion: Building shopping marketplaces or offer portals tied to specific payment methods can help providers capture consumer attention earlier in the shopping journey.
- Rethinking Wallet Partnerships: Issuers should focus on integrating accounts into digital wallets seamlessly while enhancing loyalty offerings to achieve “top-of-wallet” status.
- Exploring A2A Payments: As Open Banking expands, providers should consider incorporating A2A rails into wallet solutions, offering merchants lower transaction costs and consumers greater flexibility.
The Path Forward
In short, digital payments have become an integral part of the consumer experience, with continued growth across regions and channels.
As digital wallets replace traditional wallets and new use cases emerge, providers must innovate to meet evolving consumer expectations.
By leveraging rewards, personalisation, and omnichannel integration, the payments ecosystem can remain at the forefront of this dynamic and rapidly expanding landscape.
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