Wallets Raise the Bar While Regulation Splits the Market

Digital payments innovation rarely advances in lockstep, and the divergence is becoming more pronounced as regulation, technological readiness and consumer habits pull markets along distinct trajectories.

Speaking with PYMNTS TV, Arjen Hollander, VP of Strategic Partnerships at Thales, described a global payments landscape defined by local realities.

“Innovation is really where three forces, regulation, technology and consumer habits intersect,” he said.

The consequence for issuers is a persistent tension: Customers expect uniform digital experiences, while the conditions shaping those experiences vary sharply across regions.

Expectations Converge Faster Than Markets

Consumer behavior is arguably the most unpredictable. Payments are deeply cultural, and habits vary widely even between neighboring markets, even if from the consumer’s vantage point, payments appear borderless. Hollander noted that “payments feel global,” reflecting decades of coordination by card networks that made credentials widely accepted. Yet beneath that apparent consistency lies substantial fragmentation.

Wallet adoption, Hollander said, is one of the clearest signals that consumer expectations are shifting to instant provisioning, seamless checkout and uninterrupted authorization regardless of geography, device or channel.

“When we see Apple Pay and Google Pay being enabled for a market, we almost always see all other digital payment technologies accelerate,” he told PYMNTS.

In practice, wallets serve as catalysts, moving digital issuance and tokenization from experimental initiatives into core priorities. As customers grow accustomed to immediate, friction-light interactions, issuers face mounting pressure to deliver reliability not only within their own apps but across third-party ecosystems.

Winning Globally, Thinking Locally

Despite the perception of global payments uniformity, Hollander said expansion remains deeply localized. Issuers must navigate regulation — licensing frameworks, BIN rules, KYC obligations and data regulations — market by market as they introduce structural constraints that directly influence cost, timelines and product design.

Issuers that move into markets effectively, Hollander said, adopt a dual strategy: global technology platform standardization combined with targeted local adaptation. They only localize components where truly necessary. Unified issuance stacks, life cycle management and tokenization capabilities can provide consistency and efficiency, while regional compliance and fulfillment layers absorb local complexity.

As an example, he pointed to Thales helping banks and FinTechs deploy standardized digital and physical issuance, tokenization and life cycle management capabilities for them that can be adapted for local regulatory and infrastructure requirements. The company’s approach emphasizes modular technology stacks while maintaining a cohesive global platform.

Europe Illustrates Regulations’ Structural Impact

Europe illustrates how regulation can become a strategic driver of innovation rather than a pure compliance exercise. Hollander described PSD2 as “a significant turning point” that “changed the mindset of the banks,” particularly around openness and API-driven collaboration. Passporting rules, which allow firms to operate across multiple markets under a single license, represent what he called a “huge structural advantage.”

Regulatory decisions affecting NFC access and wallet competition are similarly recalibrating issuer strategies. Rather than serving as compliance exercises alone, these measures influence product design, competitive positioning and partnership models. Issuers must now evaluate wallet enablement as a strategic dimension of customer engagement.

These regulatory dynamics also interact with varying levels of technology maturity across regions. For example, some Latin American issuers, he observed, have built cloud-native stacks capable of rapid adoption, while certain European institutions operate highly reliable but older cores that complicate modernization.

Competition Is Shifting Toward Share of Wallet

Taken together, these regulatory shifts shape how issuers deploy new capabilities across Europe. But even when regulation accelerates innovation, the decisive force ultimately becomes consumer behavior — especially in markets where wallets dominate the payment experience.

In wallet-centric markets, the competitive battleground increasingly resides within digital interfaces controlled by third parties. Hollander recounted his experience living in Guangzhou, China, where he “wasn’t paying with my bank anymore, I was paying with the app.” And no matter the setting or locale, even minor frictions, such as slower authorization or cumbersome provisioning, can trigger immediate credential switching. “Consumers just switch their cards, but they stay loyal to the wallet,” he said.

Wallets, in this view, function less as payment instruments than as primary customer interfaces. Issuers must therefore optimize performance, user experience and reliability beyond their own environments.

Wallets Provide Infrastructure, Not the End State

Wallets, therefore, reflect both consumer expectations and the underlying technological readiness required to support instant, seamless interactions.

While wallets accelerate adoption, Hollander characterized them as foundational rather than final. The technologies used by wallets establish the foundation on which new commerce experiences — such as Click to Pay and payment passkeys — can scale rapidly once consumers are accustomed to instant, wallet‑driven interactions. Standardized digital issuance, tokenization and life cycle management become prerequisites for participation.

Even in digitally advanced ecosystems, digital journeys meet a physical layer — cards — and that layer remains deeply local. Card manufacturing, personalization and delivery retain localized dependencies tied to logistics and customs. Maintaining consistent customer experiences requires coordination across both digital and physical layers.

Security Strategies Must Adapt Regionally

Just as can be seen with innovation, fraud patterns, Hollander stressed, are not uniform. Copying a security setup from one region to another can actually backfire, he warned.

Increasingly, issuers are adopting adaptive, risk-based models that determine when to step up authentication and when to remain invisible. Technologies such as tokenization and payment passkeys strengthen protection while minimizing disruption.

“The goal is not maximum security at all times. It’s the right amount of security,” Hollander said.

Interoperability Remains a Persistent Constraint

Interoperability, though often taken for granted by consumers, continues to challenge issuers operating across markets. Even when standards exist, their implementations often diverge. Hollander cited variations in Click to Pay deployments as an example of how nominal standardization can still generate operational complexity, each scheme designing the solution with varied implementations.

Looking ahead, emerging credentials and commerce models are likely to intensify these demands. Alignment across APIs, data formats and security frameworks will remain central to scaling efforts.

As Hollander summarized, the payments industry’s dynamism shows little sign of slowing.

For issuers, success hinges on one discipline: global standardization where possible, and precise local adaptation where required. “Although we are global, that local component is key,” he said.