As is the case in the digital generation, the expectation is for effortless, instant customer experiences, and the payments landscape is no different. In the UK alone, digital wallets are projected to reach a 21% share of transaction volume this year, up from 8% in 2019. This surge is driven by a shift towards smaller, more frequent transactions. Actions like digital bill splitting and small in-app purchases are becoming routine, placing performance strains on traditional banking infrastructure.
At the same time, customer expectations have changed. Seamless, always-on and intuitive experiences are no longer a nice-to-have; they are a baseline expectation. However, many banks are struggling to meet this demand, constrained by legacy batch-based systems that were not designed for real-time processing or continuous availability.
As a result, trust is being redefined. Customers no longer look solely to their bank for trust, but increasingly as the provider of an elevated digital experience. Digital wallets are central to this shift, forming a new layer of infrastructure that underpins how trust is established, maintained and scaled across financial services.
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The shift to programmable finance
We are seeing the traditional bank account shift from a static ledger entry to a dynamic, programmable wallet capable of securely transacting, authenticating users and managing digital assets and identities. In doing so, it forms the foundation of a new trust model embedded directly into digital interactions.
Mobile wallets are a clear example of this evolution, having progressed from contactless payment tools to platforms incorporating digital identity credentials, including digital IDs. As of late last year, US users can create an ID from their passport and present it securely from their Apple device at airport checkpoints, offering a glimpse into a future where the physical wallet becomes obsolete.
At the same time, crypto wallets are enabling custody of tokenised assets across decentralised ecosystems, signalling a move toward customer-controlled financial identity and value storage. Tokenised deposits, or digital representations of cash on asset networks, enable real-time settlement and interoperability, while tokenised investment products are redefining how assets are issued, held and transferred.
It will not be long before digital wallets across regions incorporate these verifiable credentials, allowing banks to issue and validate identity attributes seamlessly across services as well as jurisdictions. This convergence of programmable value, portable identity and secure authentication positions wallets as critical infrastructure for trust, enabling banks to place themselves at the centre of a rapidly evolving digital landscape. As a result, the wallet becomes the opportunity for banks to place themselves at the centre of this new ecosystem of trust.
Regulation and tokenisation accelerate digital wallet ecosystems
Regulation plays a key role in enabling the scale and adoption of digital wallets. Greater regulatory clarity is driving convergence between traditional finance and tokenised ecosystems, building confidence in new forms of digital value. The rise of tokenised deposits, stablecoins and central bank digital currencies (CBDCs) is pushing banks to develop interoperable payment rails and robust compliance frameworks. As a result, financial institutions are exploring how to integrate these capabilities to support faster cross-border payments, improved liquidity and new digital services.
However, fragmented regulation and geopolitical events continue to create complexity and friction across markets. For example, sanctions on Russia have excluded it from international card networks. At the same time, other regions are emphasising the need for payment sovereignty to reduce dependence on other, more powerful countries. Real-time expectations are also raising the bar for performance, making cloud-based scalability and high-performance compliance essential. In an increasingly fragmented world, resilient infrastructure will be key to sustaining trust.
AI and the rise of the wallet-less generation
Less than half of Brits now leave the house with a physical wallet, while only one in six rely on a chip-and-PIN or contactless card as their primary payment method. This shift is increasing reliance on digital wallets, putting particular pressure on areas such as fraud prevention and compliance.
With legacy systems pushed to their limits, agentic AI and machine learning are coming into sharper focus because providers need to increase speed and accuracy. These technologies enable faster, more accurate payment processing, shifting operations from manual and reactive to automated and proactive. AI can detect and resolve discrepancies in real time, often before they escalate, while identifying failed transactions and strengthening fraud detection through advanced pattern recognition.
This reduces operational burden, allowing fraud teams in banks to focus on higher-value risk decisions. However, AI is not a one-off investment; it is increasingly being baked into operating models and is expected to continue evolving not just within payments, but also across financial institutions more broadly.
The future of banking is built on digital trust
Digital wallets are a method of choice, not a feature. By combining programmable value, identity and intelligence, they are reshaping how trust is established and delivered in financial services.
For banks, this is a critical moment. Legacy, batch-based systems are not equipped to support the digital wallet demands of real-time, high-volume and highly interconnected ecosystems. To remain competitive, institutions must modernise, embracing cloud-enabled platforms, interoperable architectures with AI-driven capabilities.
More fundamentally, banks must rethink their role. As wallets become the primary interface for financial services, the opportunity is to move beyond transaction processing to become the champion of digital trust.
Mick Fennell, Business Line Director – Payments, Temenos
