ARK Invest’s Cathie Wood says digital wallet wars will be a ‘big take’ opportunity
Cathie Wood, CEO of investment management startup Ark Invest, thinks the digital wallet industry will be consolidated. At a time when conventional banking services are declining, whoever dominates the wallet market will wield significant power in the financial sector, he says.
In an interview with Coinbase CEO Brian Armstrong at the company’s State of Crypto Summit on Thursday, Wood asserted that there is a new generation of consumers who want a digital wallet to be their one-stop shop for all online payments. Citing the absence of traditional banks in the digital wallet space, “this is an opportunity to take the biggest winners,” he said.
Wood made repeated references to WeChat Pay—a digital wallet from Chinese gaming giant WeChat, which allows users to make mobile payments and online transactions—saying it sets a “model” for how the market will evolve. WeChat Pay acts as a “bank branch in your pocket,” he said, offering all kinds of financial and commercial services. Since its initial release in 2013, the app has amassed more than 1.13 billion active users. Along with Alibaba’s Alipay, these two applications account for more than 90% of all mobile payments in China.
Digital wallets can be loosely defined as phone apps that enable peer-to-peer transactions, real-world purchases and online payments. Major players include PayPal, its subsidiary Venmo, Zelle, and Cash App, all of which are digitally native with no brick-and-mortar branches.
But the services offered by these fintech companies are quickly taking over traditional banks. According to Worldpay’s Global Payments 2024 report, digital wallets accounted for half of all e-commerce transactions last year.
Speaking about the future generation that may never see the four walls of a traditional bank, Armstrong said he wants crypto to be considered a serious competitor in the digital wallet competition. Like Wood, he predicted that a person’s phone will exist interchangeably with a wallet, and consumers’ demand for a single financial account “where they get paid, shop and send money,” will become the norm.
Despite Coinbase’s reputation as the first and foremost exchange, Armstrong noted “the real power of innovation. [in crypto]it comes from these peer-to-peer transactions.”
Crypto’s presence in the digital wallet space is growing. In April, PayPal users announced that they can make free global transfers of its stablecoin PYUSD, while the Cash App has allowed users to buy and sell Bitcoin since 2018. Last week, Coinbase released its Smart Wallet, an autonomous crypto wallet that replaces hard work. recovery phrases, applications, and extensions are often associated with accessing DeFi wallets that keep other users away, with biometric data, such as FaceID and fingerprints. In addition to this, the Smart Wallet can withdraw funds from both the user’s wallet and their Coinbase account balance.
In a competitive, crowded digital wallet market, Armstrong praised “interactivity” as DeFi’s comparative advantage. In other words, Coinbase wallet transactions do not need to be connected to another Coinbase wallet, unlike, say, PayPal.
The CEO likened payments to flowing water—it follows the path of least resistance. Instead, he predicted that a quarter of the world’s GDP will be in crypto rails—the name for payment platforms that support the transfer of digital assets—within ten years. Armstrong concluded with an ambitious, ultimate goal: For Coinbase wallets to be the “main financial account” of the next generation.
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