Digital Wallets - Market Opportunity

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Today, digital wallets like Venmo, Cash App, and others are penetrating traditional financial services, including brokerage and lending, thanks to superior user experiences and much lower costs of customer acquisition. Digital wallets could scale at an annual rate of 69% in the US to $5.7 trillion, and 78% globally to $20 trillion during the next five years..

Dominating e-commerce payments since 2017, digital wallets surpassed cash last year in point-of-sales (POS) payments, likely in response to the COVID-19 pandemic.

Based on publicly available data, Square’s Cash App and PayPal’s Venmo have amassed 74 million and 82 million annual active users in the past 8 and 11 years, respectively while J.P. Morgan hit 60 million deposit account holders after five acquisitions in more than 30 years!

On a net basis, traditional banks in the US spend roughly $750 in paid marketing and roughly $2500 in total, including the occupancy expenses for branch networks, to acquire a new customer.

Based on network effects, viral marketing, and arguably superior value propositions, digital wallet providers spend as little as $1 to acquire new customers, giving them room to invest and move up-market.

If digital wallets were to become consumer financial dashboards, the net present value of their financial service revenues would be roughly $10,000 per average US user.  Beyond financial services, digital wallets could become lead-generation platforms for offline and online commerce, potentially adding more than $12,000 to their net present value per user.

Digital wallets also could serve as on-ramps to Web3 assets, such as NFTs. ARK estimates that such Web3 monetization could add $1,700 to their net present value per user.