May 2, 2023

Why interoperability matters between digital wallets for mass adoption?

The importance of digital wallets is evident from the number in use, estimated at 2.5 billion in 2020 and accelerating to over 4.4 billion in 2025.

The rise of digital wallets (also called e-wallets/mobile wallets) is undeniably transforming how we manage and spend money in today's digital age. From storing currency, they are evolving into digital identity, 'pocket banks,' certificates, health records, and even credentials like passports, driving licenses, national IDs, access, and keys to tickets.

Using solutions from vendors such as Bankingly, banks, and micro-finance, Coops can integrate and offer digital wallets to its customers for faster remittance and cross-border transactions to reduce financial fraud. For payments, they lead the way. As per Worldpay's Global Payments Report 2022 digital wallet transactions reached a staggering US$15.9 trillion in 2021, making up 49% of e-commerce payments and 29% of retail, the latter projected to rise to 39% by 2025, almost catching up with cards at a predicted 44%.

Latin America is in pace with this trend. Digital wallets are the fastest-growing payment methods in the region and becoming the primary means of financial access for millions of unbanked consumers.

Limitations and challenges

With hundreds of digital wallet options, choice also creates complexity and some related challenges. Despite its immense potential and growth, digital wallet offerings are fragmented on a global, regional and country level with several competing solutions. This means the merchant, vendors and consumers must choose, one or only a few to accept. Nearly all are restricted by lock-in from the vendors, banks, or nations that issue them.

Unlike card networks (like Visa and MasterCard), digital wallets lack a universal framework that underpins transactions and not specifically designed to transact cross-border or cross-wallet. Digital wallet payments are API based, which are unique. This means that more development resources are required for integration with individual wallet provider(s). This makes it difficult for merchants and SME Financial institutions to access economies of scale, track the latest APIs, manage additional processes and regulatory requirements and meet all the standards.

In many cases, payment processors have related wallets, which makes adding competing wallets into the payment experience difficult. In short, all the above, leads to a lack of interoperability, lesser versatility or functionality, which can be avoided.

Interoperability: The key to unlocking digital wallets' true potential

One critical factor to ensure mass adoption is interoperability. This allows digital wallet users to enjoy increased convenience, as they can quickly transfer funds between wallets or financial systems (like banks) and countries efficiently, without clumsy workarounds, juggling multiple wallets, or incurring extra costs. Additionally, by enabling users to choose, interoperability promotes healthy competition resulting in better services, more features, and lower costs.

Overcoming Challenges

Firstly, there are technical barriers, such as varying payment protocols and infrastructure, that require alignment to ensure smooth communication. Additionally, regulatory complexities may arise from differing legal jurisdictions and compliance requirements.

Hence collaboration between digital wallet providers, financial institutions, regulators, and technology innovators is crucial to overcoming these obstacles. Joint efforts to establish common standards around regulatory frameworks can pave the way for the ecosystem to flourish.

Accelerating Financial Inclusivity and Innovation

Interoperability can result in a multitude of benefits. Foremost is financial inclusion – by streamlining the digital wallet usage, it opens up access to financial services for hundreds of millions in Latin America who are unbanked or underbanked. It eliminates the barriers created by traditional banking infrastructure and encourages innovation, fast-tracking the development of new financial solutions that cater to the unique needs of all users.

A shining example of how interoperability benefits everyone is in Bolivia. Working closely with 10 local financial institutions, Bankingly helped integrate an interoperable QR - a great initiative by the Central Bank of Bolivia. Today tens and thousands of customers, merchants, and their banks benefit from efficiency, reduction in the use of cash, immediacy of transactions and improved financial inclusion, thanks to interoperability. This can happen only when regulators, solutions providers, banks work together.

The Road Ahead: Fostering a Collaborative Ecosystem

The future is undoubtedly bright. Several industry players are recognizing its importance are working together. For example, the Open Wallet Foundation (OWF) a global consortium of companies and non-profit organisations are collaborating to creating an open-source software stack that any developer can use to create a portable, highly secure, interoperable, multi-functional wallet. Other Initiatives like the Mojaloop Foundation are working to provide a blueprint for building interoperable payment systems, and collaborative efforts by central banks exploring digital currencies, showcase the momentum.


Interoperability is instrumental in ensuring mass adoption and transformation of the global financial landscape. To tackle the challenges, collaboration between all stakeholders and aligning technology to work seamlessly is essential. It makes user experience more convenient and spurs financial inclusion and innovation. Want to integrate and offer digital wallets to your customers? Talk to us!

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