Types of Digital Wallets: Choosing the Right Option for Your Business

Q: What are the types of digital wallets?

There are plenty of digital wallet types, among which you have to choose based on your expected features, functionality, degree of openness, device compatibility, and the like. Wallets can be closed and open, centralized and decentralized, and serve the needs of merchants, B2B transactions, and retail users. They may be mobile, desktop, or cross-platform in terms of device support, and they can work with fiat or cryptocurrency types.

Q: What types of businesses can benefit from adopting digital wallets?

Integrating a mobile wallet into one’s business service offering is a must for modern digital businesses, as it opens new revenue streams and fosters financial inclusion by making payments easier for broader client categories. It is exceptionally important for e-commerce businesses, crypto-related startups and projects, and companies dealing with digital banking and finance.

Q: Can digital wallets be integrated with existing business systems and platforms?

Sure, the majority of custom-built digital wallets can seamlessly integrate with the existing business architecture, provided that you work with a competent development team that creates your wallet for your specific needs and technical requirements. Ready-made digital wallets have a lower level of compatibility, so they may require additional fine-tuning and integration work.

Q: What is the cost of implementing digital wallets for businesses?

If you opt for the custom wallet development path for your wallet, it may cost you from $80,000 to $250,000 and more, depending on the chosen features and technology stack. The cost of wallet integration for a ready-made or white-label solution with minimal customization can start from $30,000 – $50,000. Yet, these figures are approximate, as every project’s budget is calculated individually based on the technical requirements, the size of the required team, and the initial architecture of your business.

Q: How to choose a reliable tech provider to build a digital wallet?

The choice of your tech provider makes or breaks the success of your digital wallet project, as only a safe and functional solution with an appealing set of features will give you a competitive advantage in the market. Pay attention to the provider’s domain-specific expertise, the size of its developer team, global coverage, the success rate of its projects, and the number of years in the market to make an informed decision.

16/08/2024

(12 min)

Andrew Klesov

CEO

Banking and finance are undergoing rapid transformations today, and the main change is digitalization. The availability of the whole suite of financial services on a user’s smartphone has made digital banking an appealing niche with the growing number of users. Therefore, the mobile wallet market is on the rise, with a $318+ billion market size in 2022 and a CAGR of the market registered at 18.5% for the next decade.

If the pace of digital wallet development stays unchanged, we’re likely to witness a $690+ billion market by 2032 – an immense, promising field that every forward-looking business can join with functional, secure digital wallet solutions.

These reasons urge all digital businesses to consider the integration of a digital wallet solution into their architecture. Yet, the problem of choice is acute in this sphere, as the range of available digital wallets is varied and diverse. In this article, the RNDpoint expert team explains the typology of digital wallets and clarifies the main criteria for choosing the right type for your business project.

Benefits of Digital Wallets

In simple words, a digital wallet is a financial app that users can quickly install on their computers or smartphones. Once they register in the system and complete verification procedures, they get access to a variety of features, such as sending and receiving electronic transactions, storing money, investing, etc.

The ease, speed, and accessibility of a large number of features thus make digital wallets ever more popular among users. These solutions can thus become beneficial to both users and businesses.

Benefits for Consumers

24/7 access to money, assets, and financial services.
Ability to pay for online and in-store purchases hassle-free.
Appealing loyalty programs and rewards.
Domestic and cross-border money transactions.
Ability to conduct and receive remittance payments.
Smart, comprehensive analytics of spending.
Finance management advice.
Digital ID and documentation storage and processing.
Investment features.
Ability to conduct instant contactless payments.

Benefits for Businesses

Businesses can also reap many benefits from digital wallet software solutions. These include:

A broader range of revenue streams.
Cross-selling opportunities and product/service promotion.
Customer experience improvements.
Financial inclusion and ability to serve broader customer populations.
Flexibility in offering loyalty and reward programs.
Competitiveness in the digital-friendly market.

A Comprehensive List of Digital Wallet Types by Different Categories

There is a broad variety of digital wallet types, and so the process of choosing a digital wallet can become somewhat confusing. To help you out, we have categorized wallet types by the digital ecosystem they use, currencies, usage, storage, supporting devices, and functionality.

By Digital Ecosystem

The wallet’s digital ecosystem is the degree of the wallet’s openness in the digital space. In this category, we distinguish closed, semi-closed, and open wallets.

Closed

This type of wallet is created for a specific business or network and can be used to make transactions only within it. These are usually pre-loaded wallets with funds and reward points aimed at paying for the issuer’s products and services.

Examples: Amazon Pay, Starbucks App.

Semi-Closed

This is a more universal category of digital wallets, but its coverage is also limited. The user can make or receive payments with the help of this wallet within a specific range of businesses and merchants. P2P payments are available in such wallet systems, but withdrawal options are restricted.

Examples: Apple Pay, Samsung Pay, and Paytm.

Open

Open wallets are universal payment tools with a wide range of features that enable smooth transactions across the entire financial ecosystem. They give users full freedom in transacting with various service providers and e-commerce platforms and don’t pose limitations for sending or receiving money.

Examples: PayPal, Google Wallet.

By Currency

Not so long ago, wallets were only about fiat money, and the only difference between the wallets’ functionality was in their ability to support only one currency (usually the user’s national currency) or multiple currencies. In this regard, we differentiate between single-currency and multi-currency wallets.

Single-Currency Wallet

This wallet type allows accepting, sending, and storing only one currency type. It may be a fiat or crypto wallet. While this solution may seem restrictive to many, it usually offers a simple interface and advanced security of fund storage.

Examples: Bitcoin Wallet (crypto), Cash App (fiat).

Multi-Currency Wallet

This type of wallet enables transactions with different currencies and often supports the in-app currency exchange. Users can store multiple assets in their balances and manage their finances with ease via the consolidated transaction history.

Examples: Revolut, Atomic Wallet.

Yet, as the world has witnessed the birth of cryptocurrencies, a new dimension has been added to this category – fiat vs. cryptocurrency support. When these specifics are taken into account, we divide wallets as follows.

Fiat Currency

This is the most traditional type of digital wallet that supports transactions with fiat currencies. It is usually an extension of a traditional bank’s service infrastructure or a digital-only bank offering services in fiat currencies.

Examples: any bank’s digital wallet (e.g., Bank of America)

Cryptocurrency

Crypto wallets have gained immense popularity recently due to the rising interest in cryptocurrencies and the expansion of the DeFi industry. This wallet type enables secure transactions with crypto assets in one or multiple blockchain ecosystems. Such wallets are completely anonymous and can be accessed by using public and private keys.

Examples: MetaMask, Trust Wallet (for the decentralized type); Binance Wallet or Coinbase Wallet (for the centralized type).

You should also keep in mind that as the pace of digital transformation of the banking industry accelerates, some businesses have already introduced a fusion of all these wallet types. Some leading providers of banking services (like PayPal or AlchemyPay) support both fiat currencies and cryptocurrencies in their wallet solutions.

Therefore, you don’t need to choose between the two when choosing a digital wallet for your business needs. You can enjoy the best of the two worlds with functional, innovative wallet solutions that offer crypto-friendly functionality added to the traditional set of currency support features. Choose a reliable crypto wallet development company and discuss this option with it to offer ultimate flexibility to your users.

By Storage Type

Wallets are also differentiated by the type of custody over the funds that users store on them. You can find decentralized and centralized digital wallets in the modern market.

Centralized

As its name suggests, a centralized wallet is supervised by a central authority that oversees its operations and keeps user money safe and intact. This means that user data and funds are stored on a private, secure server, with rigorous user identification and verification procedures put in place to prevent fraud or theft.

Examples: PayPal, Coinbase Wallet, Binance Wallet, and Venmo, among others.

Decentralized

Decentralized wallets are the primary tools of the decentralized finance (DeFi) world. They are unsupervised and fully private, giving users total control of their funds. However, full freedom and anonymity also come with greater responsibility, as users have to self-custody their assets. These wallets enable p2p transactions without the involvement of banks or other financial intermediaries, support various cryptocurrencies, and can be seamlessly integrated with DeFi platforms and services.

Examples: MetaMask, TrustWallet, MyEtherWallet, or SafePal.

By Usage Form

Digital wallets may be implemented for various purposes, and this aspect affects the wallet’s selection. In other words, to choose the right wallet for your business, you need to be clear about what you will use it for. The present-day market of payment software offers the following wallet categories.

Merchant Wallets

This variant is suitable for e-commerce projects that need to accept payments from clients for products and services. These wallets can also be integrated with point-of-sale (POS) terminals. Their strengths include the versatility of accepted payment methods, instant and safe payment processing, sales tracking, and the availability of chargeback/refund functions.

Examples: Shopify Payment, Stripe.

Retail Banking Solutions

In a nutshell, a retail bank wallet is a mobile-friendly variant of the traditional banking functionality that allows clients to utilize a variety of banking services. These include sending and receiving money, opening and managing a bank account, locating ATMS nearby, and integrating with a broader ecosystem of digital banking services.

Examples: HSBC Banking, Chase Mobile.

B2B Wallets

This payment solution is designed specifically for B2B transactions, so it usually comes with the bulk payment feature and the ability to issue invoices. Such wallets integrate well with accounting software to simplify business operations and allow multi-user access.

Examples: PayPal, Transfer Wise, Payoneer wallets (business plans).

By Device

Digital wallets may be used on various devices; some of them are device-specific, and others are more universal in application. In this category, we have singled out the following wallet categories.

Mobile

As the world is quickly becoming mobile, this category of wallets is also expanding and diversifying. Thus, mobile wallets have become the most widespread wallet type that modern tech-savvy consumers choose for their transactions. These wallets link to your debit cards and accounts and allow seamless, secure transactions with one click.

Examples: Google Pay, Apple Pay, Samsung Pay.

Desktop

This type of wallet allows you to use them in either a web version or via installation on the desktop. It doesn’t mean that such wallets don’t have a mobile version. Yet, the desktop app usually comes with a greater number of features and better UI. Thus, it is more suitable for business transactions.

Examples: PayPal, Skrill.

Wearable

With the rise of the smartwatch market, many wearable devices have also come to include support for payment features. This way, you can link your debit or credit card to your fitness tracker or smartwatch.

Examples: Garmin Pay, Fitbit Pay.

Cross-Platform

This is the most universal category of wallets that may work on all devices and platforms without limiting users in their functionality. This way, a user may enjoy a seamless cross-platform experience by logging in to the wallet from a smartphone, PC, or wearable device and enjoying the ultimate financial experience.

Examples: MetaMask, Atomic Wallet, Exodus, Trust Wallet.

By Functionality

It’s also important to cover the functionality division of digital wallets. Some digital wallets attempt to give users a variety of services in all spheres, while others prefer niche specialization. Here are the most common categories.

Payment

These are wallets exclusively meant for making and receiving payments and typically offer limited extra services.

Examples: Google Pay, Apple Pay.

Storage

With the rise of the crypto industry, storage wallets have also acquired greater demand and popularity. These apps offer only secure storage for the funds and facilitate transfers in varied currencies.

Examples: Exodus Wallet, Trust Wallet (for hot wallets); Trezor, Ledger (for cold wallets).

Investment

There is also a separate type of wallet specifically meant for investment and portfolio management. Such wallets typically come with versatile investment-specific features, such as copy-trading, investment advice, analytics, etc.

Examples: BudgetBakers, the wallet of the IG trading platform, Interactive Investor.

Remittance

As the labor market is becoming increasingly globalized and people travel to other countries to earn money and support their families, remittance apps are also gaining popularity. As a business, you can reap many benefits to launch remittance wallet solutions, including access to a quickly rising immigrant worker population and the ability to offer them additional financial products and services.

Examples: Wise, PayPal, Western Union, Remitly, Cash App.

Other Types

Businesses can also take advantage of additional types of digital wallets, depending on the payment methods they support. Here are some of the categories you may also be interested in.

IoT Wallets

These wallets are specifically designed to operate within an isolated IoT system of interconnected devices. Some use cases for IoT wallets include smart meters connected to user wallets for automated utility bill payments and in-vehicle payment systems (e.g., car sharing or smart option subscriptions).

Examples: Apple Pay, Google Pay.

NFC Wallets

Near Field Communication (NFC) technology is also a viable contactless payment method that many points of sale use to allow quick transactions from customers.

Examples: Apple Pay, Google Wallet, Garmin Pay, Samsung Pay.

QR Code Wallets

QR code payments are also gaining popularity in the digital banking and finance sphere because they enable quick and hassle-free transactions without the use of a physical card. Wallets supporting the NFC feature can offer the simplicity and speed of instant transactions with a minimal number of actions required from the user.

Examples: QR Wallet by Etsy, Apple Pay, PayPal.

Prepaid Wallets

As the name of the wallet suggests, it comes pre-loaded with a concrete balance that the user pays for and is used for specific purposes. They also help users store and use prepaid debit and gift cards to pay for purchases and services.

Examples: NetSpend, Gyft, Chime, Walmart MoneyCard.

Why Build a Digital Wallet with RNDpoint?

As soon as you decide to integrate a digital wallet solution into your business operations, RNDpoint can become your trusted partner. We are a FinTech and banking software provider with 10+ years of experience in the global market. Our team includes seasoned developers, engineers, managers, and business analysts with a solid background from Mastercard, Barclays, and McKinsey.

RNDpoint has worked with many regional banks and large-scale financial players on software design, development, and integrations. Besides, we offer white-label digital wallet solutions for businesses aiming at fast and affordable software development. We can also provide an in-depth consultation on the digital wallet’s launch and calculate the cost to develop remittance digital wallet solutions for your business project or choose the right technology stack for creating a cryptocurrency wallet.