Rise of digital wallets integrating payments and digital identities across Asia

Digital wallets have grown from innovation to an essential financial instrument, easily integrating into billions of people’s daily activities. By the end of 2024, 4.8 billion people globally were estimated to use digital wallets, with Asia-Pacific leading the way, accounting for more than 60 percent of the overall customer base. Rapid mobile internet penetration, financial inclusion initiatives, and the growth of super-apps have accelerated this change, with digital wallets being the leading payment mechanism in markets like India, Indonesia, and the Philippines.

Beyond payments, digital wallets are developing into multifaceted systems that combine digital identity and financial services. Government-sponsored projects such as India’s Aadhaar Pay, Malaysia’s MyDigital ID, and Singapore’s Singpass Pay show how authentication and transactions are merged. This connection improves payment security, simplifies financial access, and fosters confidence in digital ecosystems. As Asia continues to be the leader in digital finance innovation, the capacity of digital wallets to combine payments and identity verification into a single experience will influence their future.

Converged wallets supporting digital identity

Asia’s digital wallet market is rapidly changing, with countries developing both digital identity and payment wallets, with some integrating both for seamless transactions. Indonesia’s Digital Population Identity, Identitas Kependudukan Digital (IKD), and Singapore’s Singpass enable safe digital identity verification. At the same time, India’s Digilocker and Vietnam’s VNeID provide government-backed authentication for online and offline services. These wallets are significant for digital governance since they provide citizens with access to e-government services and healthcare and secure financial transactions. To achieve universal adoption and trust in digital identity frameworks, primarily governments are prioritizing security, privacy, and interoperability.

Wallets supporting the digital payments landscape across Asia

Digital payment wallets are advancing financial transactions, with China’s Alipay and WeChat Pay, India’s Paytm and PhonePe, and Indonesia’s GoPay and OVO leading the way in mobile payments. These wallets promote financial inclusion, particularly in cash-dependent economies, by facilitating seamless peer-to-peer transfers, merchant payments, and even integration with government subsidy programs. Some countries are now linking digital identity and payments, including China Alipay’s digital ID integration, Singapore SingPass’ financial services extension, and India’s Aadhaar-linked united payment interface (UPI) wallets to create a single digital landscape. As Asia continues to innovate, the convergence of digital identity and financial technology will reshape economic participation and digital security across the region.

Forecasts converging, too

According to recent research by Euromonitor International, it highlights that digital wallet payments are expediently expanding in emerging Asia-Pacific (APAC) markets like India, Indonesia, the Philippines, Malaysia, Thailand, Vietnam, and China. From 2019 to 2024, personal digital payments in these markets increased at a compound annual growth rate of 43 percent, with India leading at 67 percent, Indonesia at 48 percent, and the Philippines at 44 percent.

Two important drivers fuel this growth. Mobile internet penetration rose from 75 percent in 2019 to 89 percent in 2024, with a predicted increase to nearly 100 percent by 2029. Financial inclusion demand is also motivating converged digital wallets, with 38 percent of customers remaining unbanked or underserviced.

Adding to these factors, competitive digital wallet providers such as Paytm (UPI Lite) and Malaysia’s Touch ‘n Go entice customers with loyalty programs and transaction efficiency.

Biometric Update has reported that digital wallets are speedily integrating identity and payments, which improves security and user authentication. France-based Fime identifies cross-border efficiency gains to come from EUDI Wallets and the digital euro. Australia-based Mattr‘s Luke McIntyre believes that linking payments and identities might release trillions in value.

More converged wallets flood in

In Asia, digital wallets are progressing to integrate payment and identity functionality, resulting in a more seamless digital experience. The Aadhaar-enabled Payment System (AEPS) in India supports biometric transaction authentication, while the UPI is linked to Aadhaar for secure and instant financial transactions. Singpass has expanded its offerings beyond digital identity verification to include integrated payment services. Indonesia’s Digital Population Identity IKD aims to integrate identity verification and financial transactions, while Malaysia’s My Sejahtera, which began as a COVID-19 monitoring app, now supports health records and digital payments.

China’s e-CNY digital yuan provides dual services as a payment method and an identity verification system, while WeChat Pay and Alipay integrate digital IDs to ensure secure authentication. In Japan, the My Number Card is growing into a digital identity wallet with banking and healthcare integrations. Pakistan’s RAAST instant payment system, which is linked to NADRA’s digital ID, promises to allow for seamless identity-based transactions. Thailand’s NDID National Digital ID supports financial authentication, and Vietnam is developing a unified national digital identity wallet for e-government and banking services.

In South Korea, PASS and Samsung Pay link mobile identity and banking services. Malaysia’s MyDigital ID program is moving into payments, connecting national identity with financial transactions. Indonesia’s Digital Population Identity IKD serves as a digital ID wallet that will integrate with banking services.

Insights from an Indian fintech

In an online interview, Dr. Ratish Gupta, director of Wealth Wisdom India Pvt. Ltd., told Biometric Update that digital identity systems are redefining financial inclusion in Asia by offering secure and remote banking access. Aadhaar’s infrastructure has proven instrumental in India, connecting over 788 million bank accounts in mid-2023 and improving government benefit delivery. Similarly, in the Philippines, eKYC has enabled banks and fintech firms to register customers remotely, improving access to financial services.

However, integrating digital IDs into payment systems in emerging markets still faces challenges. Dr. Gupta highlighted inadequate internet infrastructure, cybersecurity concerns, and regulatory difficulties as major obstacles. Many rural people lack sufficient identity credentials, making financial inclusion difficult. Dr. Gupta believes that collaboration between governments and fintech companies is crucial for secure and interoperable digital ID-based payments. Similar regulatory regimes include India’s Aadhaar-enabled UPI and Singapore’s SingPass. He emphasized the importance of public-private partnerships in strengthening cybersecurity by utilizing AI-based fraud detection and biometric authentication.

In India, Aadhaar, UPI, and Digilocker are converging to form a seamless cashless payment landscape, indicating a shift toward digital wallets that incorporate digital identity verification. Biometrics, particularly facial recognition and fingerprints, are improving digital wallet security across Asia. WeChat Pay and Alipay in China already provide facial recognition payments, while Paytm and PhonePe in India leverage Aadhaar authentication.

Leading digital ID and payment wallets such as Alipay in China, Paytm and PhonePe in India, GrabPay in Southeast Asia, and GCash in the Philippines are all playing important roles in expanding financial services to the unbanked population, he added. Dr. Gupta also pointed out that data privacy legislation, such as the GDPR in Europe and India’s DPDP Act, is influencing the integration of digital identity and financial services. AI and blockchain are being used to improve security, but regulatory expenses pose a challenge for smaller fintech firms.

In the future, AI-driven fraud detection, blockchain-based digital identity verification, and decentralized digital IDs will shape Asia’s digital payments landscape. As smartphone adoption rises and governments back digital initiatives, financial inclusion will expedite across evolving markets, Dr. Gupta concludes.

Article Topics

Asia  |  biometric authentication  |  China  |  digital identity  |  digital payments  |  digital wallets  |  financial inclusion  |  India