A striking advantage of digital wallets lies in their capacity to bridge gaps and reach un(der)banked populations. Traditional banking services often require in-person visits to branches, an obstacle for rural communities and regions with limited branch coverage. Digital wallets revolutionise this process with rapid onboarding and frictionless sign-ups, making them ideal solutions to address these financial service gaps.

While not as rapid as in Europe, Africa, or Asia, the adoption of mobile wallets in the region has gained momentum. Concerns about handling cash and the growth of online shopping and contactless payments have elevated the status of mobile wallets among consumers and financial institutions. In 2021, digital wallets represented 19.2% of LATAM e-commerce spending, with projections indicating they will constitute a quarter of transaction value by 2025 (FIS Global Payments Report 2022).

As of 2021, 122 million Latin Americans are unbanked. Many of them are micro-entrepreneurs and small traders who predominantly rely on cash. To address this issue, digital wallets play a pivotal role in integrating the unbanked population into the formal economy. Using a basic or smartphone, consumers can easily manage stored value accounts, bank accounts, or tokenised cards for secure, simplified low-level financial transactions.

These applications empower users to receive, hold, send money, open digital accounts, make QR code-based purchases at affiliated stores, pay bills, top up balances, request credit, and access social assistance funds and payroll payments, among other functions.

In many emerging markets, the competition for digital payments predominantly involves banks, offering mobile banking apps and wallets, and third-party mobile wallets owned by telecom firms, e-commerce platforms, and other ecosystem players.

The effectiveness of a digital wallet hinges on various factors. First and foremost, it must serve a relevant purpose with a compelling value proposition. Consider retailers or telecom companies with extensive existing customer bases as prime candidates for developing their digital wallets. Such technology can play a pivotal role in not only expanding their customer base but also in retaining it.

Our customer Banco de Crédito e Inversiones (Bci), a Chilean financial institution, recognised the need to provide accessible financial products, especially to the unbanked. A substantial portion of Chileans had expressed a desire for alternatives to cash when it came to loans and payments but found themselves excluded from the traditional banking system. In an effort to extend financial services to this segment, Bci launched MACH, a digital bank, offering a range of digital services including a digital wallet, payment card, and money transfer capabilities.

MACH was first to provide digital bank accounts in Chile. Today, the fintech boasts over three million users, two million of which were first-time account holders. Operating on Mambu’s SaaS banking platform gives MACH the flexibility to choose the partners and services needed to best respond to a changing and increasingly complex and nuanced market.

Find out more about how Mambu's cloud-native banking platform empowers financial institutions in Latin America and beyond with cost-effective back-end functionality, quick loan delivery, and seamless scalability, in our Digital wallets: How to get your slice of a $10 trillion industry research.