Mobile and other web-based payments have come a long way in the last few years, but they have a lot of room to run. That's good news for investors in this rapidly burgeoning fintech sector — and for users of payment processors, otherwise known as digital wallets.
And right now, Apple Pay, Zelle, Amazon Pay, PayPal and Google Pay occupy the driver's seat on this leg of the journey, according to a survey conducted by Investor's Business Daily and its polling partner TechnoMetrica. These fintech companies nabbed the top five spots overall in the customer satisfaction survey of 6,000 people nationwide, coming in ahead of such names as Cash App, Venmo, Affirm, Shopify and Square, which is owned by Block.
Many of the players in this sector don't directly compete with one another. But there are more similarities than you think, says Jaime Toplin, senior analyst with Insider Intelligence.
"It's important to recognize the differences (between the companies), but there's a lot of common ground," Toplin told Investor's Business Daily. And there's a lot at at stake, she says.
"It used to be (a credit) card wanted to be the card that people reached for. Now (digital) wallets want to become the wallets that people reach for," she said.
What Is A Digital Wallet And How Does It Work?
Simply put, they're all essentially payment processors for consumers and businesses — whether it be payments to a relative, friend, retailer, supplier or micro-business. And the growth trajectory for digital wallets and mobile payments is sharp. Toplin says users are expected to total 108.6 million in the U.S. this year and reach 125 million by 2025. Spending will reach more than $306 billion this year and surpass $508 billion by 2025.
Some of that is due to Covid-19 and the desire to shift to digital payments to limit personal contact.
Except for Zelle, the services involve some transaction fees, though they vary from processor to processor. Some charge interest rates for offering credit. Most offer money transfers for free unless they seek an instantaneous withdrawal. Using a pay service at a merchant is usually free.
IBD Survey Of Digital Wallet Users
We provide details below on the five top-rated digital wallets, including what consumers like most about them. But first, how were the ratings developed? The survey by IBD and TechnoMetrica conducted in late December asked digital wallet users to evaluate the fintech companies on five categories of performance.
The categories were determined by preliminary research in which consumers named the attributes they liked in fintech services that they used. They were ease of use, customer service, pricing, speed of transactions and security and privacy.
Consumers rated all the digital wallets that they used over the prior year. At least 100 users of a digital wallet had to participate in the survey for it to be included in the results. (Other types of fintech companies included in the survey will be covered by IBD in coming weeks. See all the Best In Fintech coverage .)
TechnoMetrica developed a Customer Experience Index, or CEI, for each digital wallet performance category. It asked users to rate the payment processors based on their experience over the last 12 months.
The CEI denotes the difference between the percentage of respondents giving ratings of "excellent" and "very good" and the percentage who gave ratings of "fair" and "poor." The overall CEI is the average score of the five categories.
Ten digital wallets qualified for the survey analysis based on the number of their customers who participated in the survey. We recognize the top five in Overall Customer Experience as the Best In Fintech.
Each of the top five companies in this fintech segment received scores of at least 71.1 out of a possible 100 overall. They also were markedly ahead of the rest of the pack. The No. 6 finisher's overall score was 65.9, more than five points behind fifth place. (See tables with all the digital wallet survey findings, including rankings by category and company.)
"The experience with these companies is very good or excellent," said Raghavan Mayur, president of TechnoMetrica. He noted that the digital wallet players in some cases serve different markets, but all come under the banner of payment processors.
"One could be an apple, one could be a pineapple and one could be an orange. They're all fruits," Mayur said.
1. Which Digital Wallet Is Best? Apple Pay
At the top of the heap is Silicon Valley tech giant Apple and its Apple Pay service. Apple Pay got a CEI score of 78.7 overall and finished first in four of the five categories. They were ease of use, customer service, security/privacy and transaction speed. In the category of pricing, Apple Pay came in second.
Analysts say that Apple Pay not only has that fiercely loyal Apple allegiance, it also has a captive audience — literally. Owners of the company's omnipresent iPhones are the only ones who can get access to Apple Pay, and they can't get a competing service such as Google Pay from Google-parent Alphabet on their phones.
"They've sort of walled off the competition in that sense," said Jordan McKee, analyst for S&P Global Intelligence's 451 Research.
Not only are Apple Pay users loyal, they're also frequent users of their digital wallets. Insider Intelligence's Toplin says Apple Pay will reach 47.2 million users this year. That amounts to 43.5% of what she calls mobile proximity payment users. Apple's closest peer in this space is Google Pay, which will reach 27.1 million users this year. That's 25% of mobile proximity users.
The market share numbers get even more lopsided when you look at actual use of digital wallets. A study released in August from Pulse Network said Apple Pay accounted for an astonishing 92% of 2 billion total mobile transactions in 2020, leaving the rest to Google Pay and Samsung Pay.
"Apple Pay is capturing the lion's share of transactions, compared with Google Pay and Samsung Pay," said 451 Research's McKee.
Apple officials did not respond to requests for comment.
2. Zelle
A relative newcomer, the Zelle brand got its start in 2017. It's part of Early Warning Services, which is owned by a consortium of banks, including Bank Of America, Wells Fargo Bank and JPMorgan Chase. Scottsdale, Ariz.-based Zelle formerly was clearXchange.
Zelle is a person-to-person pay network, and its success is tied to its links with big banks. By having a presence in 1,300 banking apps and websites, it is available to roughly 75% of the checking accounts in the U.S., says Melissa Lowry, Zelle's chief marketing officer. If a bank doesn't offer Zelle yet, its customers can still download the app.
"Pretty much everyone has access to Zelle," she said.
Zelle is used primarily for money transfers from one person to another, generally sending money to friends or relatives. But Zelle also comes in handy for customers wanting to pay the various micro-businesses in their lives such as the dog walker or babysitter, without carrying exact cash, Lowry says.
"Zelle is a really convenient way to pay in those smaller use cases," she said. It handled $490 billion in transactions last year, she added.
The overall score for Zelle was 76.3. It came in second in security/privacy and speed of transactions. Zelle placed third in ease of use and fourth in customer service.
It managed to beat Apple Pay for first place in one of the five categories, pricing. The reason is simple: the service is free. Apple Pay's Apple Cash charges a 1.5% fee for instant transactions. Other services also charge for instant transactions.
"I use it to pay my rent," said Insider Intelligence's Toplin. "Zelle is huge."
3. Amazon Pay
Coming in third is Amazon's Amazon Pay, essentially a digital wallet for online shopping. Its overall CEI was 73.5. Amazon Pay finished fifth in ease of use and second in customer service. It came in third in pricing, third in security/privacy and sixth in transaction speed.
It's unclear how many Amazon Pay users exist. The company didn't provide information on its service or make an official available for an interview.
Amazon Pay stands apart from Apple Pay and Google Pay in that all its users are online shoppers, at least for now. The size and reach of Amazon itself — with nearly a half-trillion dollars in revenue last year — ensures that Amazon Pay will endure. But can the service grow outside the e-commerce realm, and can it find online retail partners to use its service?
There is no separate app for Amazon Pay, says MoffettNathanson analyst Lisa Ellis. She says the Amazon Pay "wallet" is transaction information stored in an Amazon member's account, and the company doesn't appear to do much to market it. In fact, it offers checkout buttons for Venmo and Affirm on its site.
Some other sellers — generally third-party merchants on the Amazon network — offer Amazon Pay as a checkout option. But merchants that aren't on the Amazon network seem unlikely to offer the option because they see the e-commerce giant as a rival.
"The one challenge is simply the fact that they're Amazon," said 451 Research's McKee. Amazon is challenging the retail world, most particularly Walmart, and will find partners hard to come by, he says.
Toplin agrees it probably is difficult for Amazon, an imposing rival for many online retailers.
"The downside is Amazon Pay doesn't have a huge reach outside of Amazon," she said. "A lot of retailers don't want to give Amazon Pay a huge amount of real estate on their page."
4. PayPal
PayPal takes the fourth spot in the survey, but it's tops in the number of users, Toplin says. She expects it to hit 95.6 million this year, which doesn't include the multitude of pay services under the PayPal Holdings umbrella. PayPal itself is an online payment system operating in a number of countries. But it also offers buy now, pay later (BNPL) services, payment management and an online coupon site.
"They've really packed a lot into one place for consumers," Toplin said.
With all those divisions under its belt, PayPal has gained a reputation for trying to become all things to all people in the mobile payment world ever since it was spun off by eBay in 2015. McKee at 451 Research notes PayPal launched a "super app" last year.
"They definitely are moving in a number of different directions," he said. "The challenge for them is to pull (their different services) all together into one place that makes sense for the consumer."
In the survey by IBD and TechnoMetrica, PayPal's overall CEI score was 73. It was second in ease of use and third in customer service. It placed seventh on pricing, fourth in security/privacy and third in transaction speed.
PayPal declined to comment for this story.
5. Google Pay
Though it has struggled to keep up with Apple Pay, Google Pay seems to be finding its footing in the digital wallet space. Google Pay is essentially for Android phone users what Apple Pay is for iPhone users. You can pay for apps, online purchases, mobile subscriptions and payments at physical retailers.
Google Pay scored 71.1 overall on CEI. It was sixth in ease of use and sixth in customer service. Google Pay placed fourth in pricing, sixth in security/privacy and fourth in transaction speed. Google did not comment for this story.
Analysts agree that Google Pay, which struggled to resonate with consumers a couple years ago, has turned things around. The division has a new chief in Arnold Goldberg, a former PayPal executive.
"They've made a number of changes on the strategic front," said McKee.
Toplin adds that Google has added a number of features as part of a redesign in late 2020.
"I think the trajectory the product is on is really good," said Toplin. "They've worked to make it more of a destination rather than a default."
Other Fintech Leaders In Digital Wallet Survey
What about the other five fintech companies included in the digital wallet survey? Cash App and Venmo tied for sixth place in overall Customer Experience Rating. The others, in order, were Affirm, Shopify and Square.
Cash App and Venmo finished with an overall CEI of 65.9. Cash App is much like Zelle in that it offers person-to-person money transfers, but it also helps with banking by speeding up direct deposits and offers free ATM withdrawals, and facilitates cryptocurrency and stock trades. It scored in the top five in transaction speed and ease of use but at the bottom in customer service and security/privacy. It placed sixth in pricing.
Venmo is also person-to-person and offers cryptocurrency trading as well. It hovered between fifth and eighth place in all performance categories, scoring best in pricing.
In eighth place was Affirm, a buy now, pay later service with an overall CEI of 65.7. Users can buy pricier items online immediately and pay later, or over a course of months, interest-free in many cases. Its best category was security/privacy, where it ranked fifth. Its worst was pricing, where it was ninth.
Coming in ninth was Shopify with a score of 62.7. It enables online selling of products and acts as a digital wallet for websites by aiding with payment processing. Shopify ranked fifth in customer service and last in ease of use and transaction speed.
In 10th place was Square with a CEI of 62. It was ninth or 10th in most categories but scored seventh in security/privacy. The payment processor for small and medium businesses also owns Cash App.
