Thales Says Digital Wallets Enter a Fight for Control and Margins

The modern digital wallet has become so ubiquitous that its absence now feels unusual.

A commuter tapping a phone to board a train or pay for coffee rarely pauses to consider the layered infrastructure behind that gesture. Yet beneath this familiar motion, structural shifts are reshaping how digital wallets compete and how issuers and platform providers shape their own strategies.

Michael Doron, North American strategic director for digital at Thales, told PYMNTS that the United States wallet landscape is entering a distinct phase. While Apple Pay and Google Pay remain dominant, the market is evolving. The focus has moved toward control, economics and differentiation.

A Market Moving Beyond Presence

For years, wallet adoption in the U.S. progressed at a measured pace. Consumers gradually migrated from plastic cards to digital credentials stored on mobile devices. The value proposition was to replicate the physical wallet within the phone while preserving security and convenience.

However, with interest intensifying among U.S. players that is partly driven by regulatory and competitive signals emerging abroad, Doron suggested that a measured pace is no longer viable. In July 2024, the European Commission reached an agreement requiring Apple to open its tap-and-go NFC payment technology to third-party providers across Europe. The decision expanded technological access and lowered barriers for new entrants.

The immediate result was a surge of wallet experimentation. Doron pointed to early European launches from global eCommerce wallet providers, buy now, pay later (BNPL) providers, and FinTech firms. The momentum extended beyond Europe.

“The success really showed that a third-party wallet provider can drive user adoption,” Doron said, referencing Vipps’ Norwegian wallet launch, the world’s first Apple Pay-like wallet in iOS, enabled by Thales. “Within the first 24 hours of launch, 200,000 digital cards were activated, and the majority of that was on iOS.”

Although the regulatory environment differs, Doron said U.S. firms are closely studying these developments, assessing whether similar competitive openings may emerge domestically.

Understanding the First Wave

To understand what is changing, Doron distinguished between the first generation of wallets and the current wave.

The earliest wallets pursued two core objectives. First, digitize the contents of the physical wallet by enabling multiple issuers’ cards within a single interface. Second, deliver a frictionless experience that matched or exceeded traditional card payments, in-store and online.

“These two elements were really critical to early wallet adoption,” Doron said.

In this phase, success largely depended on scale and reliability. Wallets functioned primarily as containers for existing payment instruments. Differentiation was limited, and consumer incentives centered on convenience.

Why the Next Phase Looks Different

The emerging generation of wallets reflects a more varied set of ambitions. While the technological foundation remains similar, provider motivations have broadened, Doron said.

“They want to increase margins, and they want to own and control the customer journey,” he said.

The shift reframes wallets from passive storage tools into strategic control points. Providers increasingly view wallets as mechanisms for deepening customer engagement, shaping transaction flows, and capturing economic value previously distributed across multiple intermediaries.

BNPL firms illustrate this evolution. By issuing proprietary cards within their wallets, these providers gain greater influence over user behavior and revenue streams. Such models are not designed as multi-issuer wallets, Doron said. Instead, their value stems from gaining payments on their cards through the use of incentives, offers or financing features.

“[In] reality, the players most likely to succeed are those with either a large user base or a large national brand,” Doron said.

Issuer Strategy Under New Conditions

For issuers, the implications are less about technology and more about strategic clarity. Mere enablement within dominant wallets no longer guarantees meaningful engagement, Doron said.

“Presence alone is not enough,” he said.

Issuers evaluating proprietary wallets face a central question: Why would an existing Apple Pay or Google Pay user switch?

Doron’s answer: An issuer wallet may make sense when it supports a captive ecosystem, delivers closed-loop benefits, or bundles value-added services that cannot be replicated elsewhere.

“Success comes down to incentives and value, not technology,” Doron said.

Absent a clear customer proposition, wallet development risks becoming an expensive diversion rather than a growth lever.

European Lessons Without Direct Replication

Although European developments provide useful reference points, Doron cautioned against direct imitation. Market structures, device economics and platform access vary.

One distinction involves host card emulation (HCE), a software-based approach that simplifies wallet deployment. Doron said HCE is broadly available across iOS and Android in Europe, reducing launch complexity.

In the U.S., the picture is more fragmented. Google and Samsung support HCE at no cost, while Apple relies on the iPhone’s embedded secure element. Access to this hardware-based model is not yet broadly available and is expected to involve fees, Doron said.

Compounding this challenge is smartphone market share. With more than half of U.S. users on iPhone, Doron said Android-only wallet strategies are unlikely to achieve meaningful scale.

The Strategic Role of Partnerships

Across both regions, Doron said successful wallet launches rarely occur in isolation.

“None of the wallet providers that launched in Europe went at it alone,” he said.

Instead, providers partnered with established technology and infrastructure specialists, such as Thales, enabling faster deployment while preserving performance and security standards.

Even large technology firms opted for collaboration rather than building every component internally, Doron said. Partnerships allowed wallet providers to concentrate on customer-facing value rather than back-end complexity.

A Market Defined by Value

As digital wallets evolve, Doron’s analysis pointed toward a competitive advantage that depends less on the wallet construct itself and more on the tangible benefits delivered to users.

“It’s not simply about copying strategies,” Doron said. “It’s about understanding your specific market dynamics.”