Despite rapid adoption in ecommerce and retail, digital wallet innovations have been slow to transform lending repayments. Many lenders still rely on traditional methods like Direct Debit and card payments that require borrowers to manually input their details when setting up a Continuous Payment Authority (CPA) or creating a Direct Debit mandate. This results in missed opportunities to reduce friction, improve collections, and meet evolving borrower expectations.
This innovation gap represents a significant missed opportunity. Digital wallets, such as Apple Pay and Google Pay, not only streamline sign-up by reducing friction and improving conversion compared to manual card entry or Direct Debit setup but also outperform card payments for recurring collections by increasing success rates and reducing declines.
What’s the data telling us?
Insights from our Consumer Lending Report reveal a critical insight: many consumers aren’t aware that digital wallets can be used for recurring loan payments. Even among 18–24-year-olds, the most digitally native segment, 28% still don’t realise recurring payments are possible via digital wallets. Perhaps more surprisingly, many lending organisations themselves are unaware of this capability, creating a significant missed opportunity across the industry as Digital wallets consistently outperform traditional card payments throughout the entire lending lifecycle. Recent data from UK Finance reveals that 57% of consumers in the UK now prefer mobile wallets for at least one recurring payment service, yet fewer than 10% of lenders actively promote digital wallets as part of their Direct Debit or CPA strategies.
Why Digital Wallets Matter for Lenders
Streamlined Borrower Onboarding: Offering Apple Pay and Google Pay as payment methods during the loan application process eliminates the friction of manual card entry. Borrowers can complete their setup in seconds rather than minutes, which could result in higher application completion rates and increased loan origination volume.
Enhanced Payment Reliability: Digital wallets automatically maintain current payment information and employ superior authentication protocols. This could result in fewer declined transactions, improving collection rates without additional follow-up efforts.
Quick to Implement, Easy to Maintain: Digital wallet transactions process through the same channels as traditional card payments, allowing lenders to enhance their payment capabilities with minimal operational changes and no workflow disruption.
Digital Wallets and payment recovery
In addition to customer onboarding, another element of the borrower journey which can be improved by introducing Digital Wallets is payment recovery. In an ideal borrower payment journey, a failed payment would be followed up automatically with an instant payment link which provides payment options including Digital Wallets and Pay by Bank. This allows the borrower to quickly make a payment without waiting for the next collection cycle. This approach streamlines the recovery process by minimising the number of steps needed between a failed payment and a successful resolution, which could result in faster debt recovery and a more convenient experience for borrowers.
The Solution
If your lending business relies on CPAs, digital wallet implementation should be a top priority. Digital wallets provide a seamless mechanism for recurring payments that could dramatically reduce decline rates while enhancing customer satisfaction.
If Direct Debit forms the backbone of your collection strategy, digital wallets offer the perfect supplementary payment method. They excel at handling one-time transactions that fall outside your standard Direct Debit flow, such as early repayments, account top-ups, or quick recovery of failed installments without waiting for the next collection cycle.
The key element to consider in building a modern repayment journey is offering a range of options at onboarding and guiding borrowers to methods that best suit their profile, resulting in the highest likelihood of a successful transaction.
The most efficient implementation approach is partnering with a payment provider that supports all payment methods through a single integration. This unified strategy eliminates the complexity of managing multiple payment systems, reduces technical overheads, and ensures a smooth, consistent experience for both customers and internal teams from day one of the lending relationship.
Want to find out more?
Download our Consumer Lending Payment Trends Report or get in touch with our team.
