Digital wallets: far more than just money   

Your morning has got off to a hectic start and in your rush to leave the house, you forget to pick up your wallet. What once might have been a major headache is now barely cause for concern. You use TWINT to pay for your croissant at the baker’s, purchase your train ticket with Apple Pay and display it as a QR code in the SBB app, and collect loyalty points for your shopping using the barcode in the supermarket’s app. Come evening, you realise that, thanks to your smartphone, you’ve breezed through the day without a hitch. Digital wallets, it seems, really are a practical alternative to their physical counterpart. 

A taxonomy of wallets 

Until recently, wallets have been viewed as apps for managing means of payment, but they are increasingly being used to handle everything from assets and passes (such as tickets and membership cards) to electronic identities (e-IDs). Against this backdrop, the SBA supported a study by the Institute of Financial Services Zug IFZ, part of the Lucerne University of Applied Sciences and Arts, to contribute to the debate surrounding these apps. 

At its core is a taxonomy that categorises wallets according to 18 different attributes such as use cases, governance, privacy and underlying technology. The best-known and most widely used wallets in Switzerland are then mapped onto this taxonomy. One of the study’s findings is that wallets serve a wide range of purposes and target groups. Google Pay and TWINT, for example, are focused on day-to-day payments, while MetaMask plays an important role in decentralised finance (DeFi) and is more geared towards self-custody. 

Illustration: The IFZ taxonomy distinguishes wallets according to a range of attributes. Most solutions are currently used for payments, open banking or DeFi. Source: IFZ (2024) 

Wallets becoming a prime channel for customer interaction: what does it mean for banks? 

The first thing banks need to do is decide on their preferred role in the wallet environment. Looking to the future, they could issue passes, store and manage digital identities and assets, process payments and transactions, or act as wallet providers or compliance partners for third-party providers. That last point is a reminder that, obviously, wallets do not operate outside the existing framework. Depending on the functionality they offer, wallet providers in Switzerland may already be deemed part of the regulated financial market and subject to financial market law.  

Having done that, banks can essentially consider three generic strategies to unlock the potential of wallets: 

1. Integration into existing wallet platforms: incorporating bank services and products into pre-existing services such as Apple Wallet or Google Wallet, thus offering seamless access for their customers, just as they already do with credit and debit cards. 
2. Developing TWINT into a “super-app”: making Switzerland’s “favourite app” even more attractive by adding in extra functions such as e-ID, digital signatures and digital asset management, transforming it into a “super-app” that benefits banks too. 
3. Developing a proprietary wallet solution: creating their own wallet platform to act as a central access point for customers, thereby reinforcing trust and thus aiding long-term customer retention. 

Conclusion 

Consumers will increasingly use the capabilities of digital wallets in their everyday lives. Wallets will take on more and more functions, from e-IDs to driving licences and even insurance policies. User-friendliness and multiple features will continue to drive takeup. It is time for banks to think about what these developments mean for their business. The study compiled by the IFZ in collaboration with the SBA is a good starting point.