W2W: Are (Digital) Wallet-to-Wallet Transactions the Future of Payroll Payments?

What does the future hold for cross-border payments? Many pundits believe real-time payments, also known as instant payments, are the next big thing. Others are hailing open banking and open finance – the practice of financial data sharing, at the client’s request, between banks and third-party service providers – as a trend that will make cross-border payments faster, easier, and more secure.

When you ask consumers, however, they point in a different direction. PYMNTS, a leading platform for news and information in the payments and commerce space, recently conducted a census-balanced survey of 2,466 U.S. consumers to measure their experiences with and expectations from new payment methods. The results, published in “New Payments Options: Why Consumers Are Trying Digital Wallets,” were telling:

• Most consumers used a new payment method in the past year, with younger consumers leading the way: 79% of Generation Z consumers tried one out in the past 12 months, as did 70% of millennials and 66% of bridge millennials.
• Digital wallets are the most popular new payment method: nearly 6 of 10 consumers adopted them in the past year.
• Millennials are leading the charge for digital wallets, with 67% giving them trial runs in the last 12 months.

Early adopters catch the worm

Born between 1981 and 1996, millennials are the first generation to grow up with home computers and the internet. Unlike Gen Z, they have all reached adulthood. As a result, millennials are early adopters of digital technologies in practical areas, such as healthcare and payment preferences.

According to another PYMNTS survey, 90% of millennials have tried at least one mobile wallet feature, and they utilize the most wallet features of all age demographics – an average of 8.1 per user. 62% view mobile wallets as secure or more secure than physical wallets. And, maybe most importantly, 80% of millennials use mobile wallets to pay bills.

Using digital wallets to make official payments opens the door to receiving official payments – such as salaries and wages – via digital wallets. In Japan, for instance, workers will soon be able to receive payroll payments directly into digital wallet apps. App operators must go through a screening first, and companies considering this form of payment will have to get employees’ consent, said the Labor Ministry after approving the ordinance.

Exploring every digital avenue

Japan’s decision to allow digital payroll payments shouldn’t come as a surprise; in the past few years, Asia has emerged as a global leader in digital transactions. Other regions are expected to follow suit soon. A recent EY report identifies digital wallets as one of the seven forces shaping the future of payments, urging financial institutions to “explore digital wallet strategies and apply them to existing propositions to extend value to the customer base.”

That’s precisely what Papaya Global, the only PayTech designed for cross-border payroll payments, has done. Papaya’s platform provides each client with a designated digital wallet that can be used to pay its entire global workforce, local tax authorities, and benefits vendors. Each wallet holds one currency, but clients can open as many wallets as they need – all accessible under a single account – and divide the funds between them as they see fit.

You can use any of the major currencies – GBP, EUR, USD, AUD, CAD, HKD, or SGD – to fund your virtual wallets. Our currency management offering supports more than 100 currencies, ensuring that payments are delivered in your employee’s local currency.

Since Papaya is licensed to hold and move funds in all major markets, transferring money between wallets doesn’t require an invoice and doesn’t need to be declared in a financial audit. Financial transactions that do need to be declared in an audit appear in monthly statements Papaya sends out – exportable to your accounting software – that list deposits and withdrawals, with line items showing which employees were paid in each country.

If it sounds like a bank, it’s because Papaya has all the capabilities of one – including bank-level security. We leverage AI to perform Know Your Customer (KYC) and Anti Money Laundering (AML) processes for each new client and for each worker who is being paid via our system. At the moment, they are still being paid into bank accounts. But in the foreseeable future, all signs are that payroll payments will be a (digital) wallet-to-wallet transaction.