Europe’s Wallet Evolution

Europe is undergoing a decisive shift in the way people manage their financial lives. Digital wallets already represent 44 percent of e-commerce payments across the continent, a figure projected to grow by more than 20 percent through 2029. What began as a digital substitute for cards and cash has evolved into an essential part of Europe’s financial infrastructure, reshaping how consumers and merchants interact in a digital economy.

This momentum reflects more than consumer convenience. McKinsey’s 2024 survey revealed that nine out of ten Europeans have made at least one digital payment in the past year, whether online, in-app, or at the point of sale, signalling a broader cultural shift toward digital-first experiences.

The state of adoption

The rise of wallets has not been uniform across Europe, but the trend is clear. In markets such as the UK and Germany, wallets are now a central feature of commerce, reflecting high levels of consumer trust in mobile-first solutions. France is seeing rapid uptake among younger generations who prefer app‑based payments to traditional banking channels, while Nordic countries continue to demonstrate how wallets can underpin near‑cashless societies.

This widespread shift is mirrored in McKinsey’s latest survey, which shows that around 90% of European consumers have used some form of digital payment in the past year, including one in four consumers in traditionally cash-heavy markets like Germany and Italy who have used digital wallets in physical stores.

Merchants are also recognising the advantages. Those who integrate wallets into their payment systems see measurable returns, with BPC’s guide noting average transaction values increasing between 25 and 30 percent. The ability to capture richer insights into consumer behaviour allows retailers to refine loyalty programmes and personalise promotions, ensuring that wallets serve as much more than a tool for faster checkouts.

Open and closed loop realities

The European wallet ecosystem is defined by the coexistence of closed and open-loop models. Closed-loop wallets, such as those tied to transport authorities, supermarkets, or retail chains, are designed to retain customers within controlled ecosystems by offering rewards and exclusive benefits. These schemes foster brand loyalty while simplifying transactions within specific networks.

Some of the closed-loop wallets examples include:

• Oyster Card (UK) – A transport-focused wallet for the London Underground and bus network, offering seamless travel within the city.
• Coop Pay (Switzerland) – Retail-based wallet tied to the Coop supermarket chain, rewarding loyalty and enabling in-app payments.
• IKEA Family Wallet (Nordics) – A store-linked digital wallet offering exclusive discounts and rewards within IKEA’s retail ecosystem.

Open-loop wallets, by contrast, connect seamlessly with global networks like Visa, Mastercard, and UnionPay. They thrive on interoperability, providing consumers with the ability to transact across borders, an essential function in a region defined by mobility and cross-border commerce.

Among Europe’s open-loop wallets:

• Bizum – Launched in 2016 in Spain, Bizum has grown to over 27 million users. It is primarily a P2P wallet but also enables online and retail payments, deeply integrated with Spanish banks.
• Skrill – Based in the UK with around 23 million users, Skrill offers a digital wallet for online shopping, money transfers, and cryptocurrency transactions, accepted across global merchant networks.
• Paydirekt – A bank-backed wallet in Germany with about 45 million users, Paydirekt is integrated into customer bank accounts, enabling secure e-commerce payments and direct bank transfers.

Yet with opportunity comes challenge. Compliance with PSD2 for payment services and GDPR for data protection remains critical, while fraud prevention and interoperability must be managed carefully. Europe’s regulatory landscape, though demanding, ensures a higher standard of stability and security, creating conditions that foster long-term consumer trust.

Why wallets matter

The benefits of wallets extend across every stakeholder group. For consumers, wallets offer simplicity, security, and, increasingly, access to financial services in regions where traditional banking penetration is uneven. Gartner projects that by 2026, half a billion people worldwide will regularly use digital identity wallets, and in Europe this is reinforced by the EU’s eIDAS regulation, which mandates that member states provide digital identity wallets to citizens within the same timeframe. This development places wallets at the centre of digital identity, not just payments.

For merchants, wallets drive higher spending, but also unlock real-time insights that allow them to personalise experiences and build stronger engagement. For banks and fintechs, wallets serve as platforms to expand services, launch new revenue streams, and remain competitive in a crowded landscape. The agility of wallet systems makes them particularly valuable in a region as diverse as Europe, where consumer preferences and regulatory standards vary widely.

Opportunities ahead

The transition from closed-loop to open-loop ecosystems presents the most promising path forward. Institutions capable of mastering compliance, security, and interoperability will be able to build platforms that meet consumer expectations while standing apart from competitors. Modular, microservices-based technology frameworks are enabling this evolution, providing scalability and smoother integration with existing infrastructure.

Equally important is collaboration. Banks, fintechs, merchants, and regulators must work together to ensure that ecosystems remain secure, inclusive, and adaptive to future demands. Wallets are no longer simply about payments, they are vehicles for loyalty, identity, mobility, and embedded finance, and Europe’s payment sector is already proving fertile ground for these innovations.

This analysis reflects themes explored in BPC’s “Your Essential Guide on How to Build Closed and Open-Loop Wallet Ecosystems”, which offers a detailed roadmap for financial institutions to design, launch, and scale wallet solutions. To explore the full guide, visit BPC.