Create a Digital Wallet with Our Expert Guide
In today’s financial industry, many startups and established businesses show increased interest in how to create a digital wallet to elevate their operations. As technology evolves, the convenience of using electronic wallets proves to be popular among users for managing their transactions. Therefore, we are here to dig deeper into this topic.
With the help of our experts, we put together a detailed guide that explores the nuances and insights needed to create a digital wallet. In our discussion, we will answer pressing questions that frequently arise walking you through the intricacies of building such a solution from the ground up.
As a long-standing software provider, we have experience delivering e-wallet solutions to brands from diverse niches, covering their unique requirements. So, let’s start unpacking this subject one topic at a time.
What is a digital wallet?
A digital wallet is an application or an online platform where users can store their credit or debit card information as well as other payment methods to make efficient and quick payments online or in physical stores. The digital wallets are also commonly referred to as e-wallets, with an “e” standing for electronic.
Example of a digital wallet design.
Over the years, the boost in popularity of widely used digital wallets like PayPal, Apple Pay, Google Pay and others has normalized online transactions for everyday users. In fact, a study by Forbes in 2023 concludes that 53% of respondents use digital wallets more often than traditional payment methods.
This goes to show that the trend of using e-wallets as a preferred method of payment will only increase in the upcoming years. Hence why businesses that are looking to invest in digital wallet development can expect to reap the benefits of online transaction popularization.
Most common types of digital wallets.
With that being said, if you want to build your own digital wallet from the ground up you have to consider several different options. Depending on your specific business model one type of e-wallet can be more advantageous to develop than the other. Here are the common types of e-wallets that serve different purposes and correspond with the end-users’ needs:
- Closed wallet. A closed electronic wallet allows users to store funds and make transactions within a particular payment system of an issuer. The money from returns and refunds is typically stored in such wallets. For example, Amazon Pay is regarded as the most prominent closed wallet.
- Semi-closed wallet. This type of wallet lets users make transactions at selected merchants and locations with a restricted coverage area. Generally, users must enter agreements and conditions for using semi-closed wallets with the issuers for them to accept payments. An example of such a wallet type is Paytm.
- Open wallet. The most common type is open wallets. These are issued by the bank or their partners and allow for transactions of any kind including ATM transactions, with merchants that accept digital wallets. Currently, the biggest mainstream open wallet is PayPal.
- Crypto wallet. A cryptocurrency wallet is one of the recently popular options. Such wallets store the passkeys needed to sign the cryptocurrency transactions. One of the examples of crypto wallets is Trezor.
As you can see, the fintech industry has a wide variety of options that will suit your particular business needs and requirements. Carefully consider which type you need to create a digital wallet for your goals. By establishing that choice you can move forward with the development process for your e-wallet solution.
Features to consider during digital wallet development
Building feature-rich software does not necessarily equate to shoving as much diverse functionality as possible. At this point what is more valuable is understanding the kind of features users want to see and building them in a way that addresses their pain points.
Doing your due diligence with competitor analysis will help you in understanding which functionality is absolutely essential for this type of software and which can fill the gaps in the market. On top of that you will uncover how to make these features user-friendly avoiding any confusion from the experience.
Features to consider.
With that being said, we can point out a list of features you should be considering implementing when you build a digital wallet. Here is what they are:
Payment information storage.
No matter how you spin it but with digital wallets one of the fundamental capabilities is being able to store information about payment methods. This includes the name of the user, credit or debit card number, bank accounts, and other information. The main key to making this work and remaining reputable is complete security and protection from cyber breaches of data.
History of transactions.
Being able to review the history of transactions helps users monitor their spendings, keep a record of their purchases, and even control budgeting. In addition it is a useful feature when it comes to instances when a user needs to prove the actuality of one or another transaction. This as well means you can consider adding a feature of sending receipts of transactions to the customer’s email address per request when you create a digital wallet.
Contactless payments.
Some may argue that cash is slowly becoming obsolete and being replaced by digital technologies, in particular contactless payments which many smart devices now carry. Most smart phones nowadays are equipped with technology like Near Field Communication (NFC) or QR-code scanners that elevates the need to physically carry credit cards.
So it is in your best interests to add contactless payment options to your future digital wallet in order to expand your reach to a wider pool of potential users.
Cross-platform accessibility.
In order to cover a variable spectrum of the needs of customers you need to take into account that some of them feel the most comfortable using your wallet from different devices and platforms. So if you are looking at how to build a digital wallet that will be in demand for larger audiences be sure to optimize your software to be accessible from iOS and Android operations systems as well as Windows, Mac, and others.
To offer the most comprehensive service you can also implement compatibility with wearable devices like smart watches which allow for payments with a simple movement of an arm.
Multi-factor authentication.
We should preface by saying that to develop a protected digital wallet software you need to focus on hiring specialists that highly prioritize the security and stability of your solution. Since such apps deal with sensitive and personal information, various security measures and protocols need to be established.
With that out of the way we can say that multi-factor authentication is one of the more visible security practices that customers recognize and therefore feel more trusting towards your software. This includes multiple ways to access and be authorized to use the wallet and a personal account instilling confidence that data is kept defended.
Automated payments.
Diving more into the territory of not completely necessary but rather attracting and useful features you can keep in mind when creating a digital wallet are automated payments. Such a feature entails that a customer can setup recurring payments for their needs like renewing subscriptions, paying for the internet, and many other things within established periods of time.
Loyalty programs.
Reward systems are a proven way to maintain a solid acquisition and retention rate as they incentivize the consumers to keep using your software. As for the digital wallets you can implement cashback programs either for particular purchases or general, as well as other bonuses and perks when engaging with your wallet over a period of time.
Create a digital wallet: benefits and challenges
Creating an e-wallet can majorly benefit your business if done correctly. We advise you to partner with reliable IT companies with expertise in developing similar fintech solutions. That way you can gain a competitive edge and deliver on the user’s expectations.
Benefits and challenges of creating a digital wallet.
As with any business there are two sides of the coin. First, let’s take a look at some of the advantages you can earn with a digital wallet of your own:
- Convenience for users. Using digital wallets, you give customers an opportunity to conduct easy and convenient transactions at any time with their preferred cards. This can ultimately increase customer loyalty and promote engagement with your platform on a cash-free basis.
- Reduced transaction costs. On one side, you can eliminate the need for third-party transactional commissions or traditional cash. On the other hand, you also minimize the cost of accounting and financial reporting from the administrative side.
- Faster transactions. Compared to bank transfers that frequently require additional time for transactional approvals, e-wallets allow for instant transfers. Moreover, users only need to enter their personal information once without filling out card info each time they want to make a purchase.
With that being said, as with any set of benefits you can also expect some challenges down the line. Some of the difficulties you may encounter when searching for how to make a digital wallet can include the following:
- Integration with payment systems. When integrating your wallet with certain payment gateways you may encounter compatibility and standardization issues. As a solution, you should consider different payment alternatives, including credit and debit cards, to broaden the pool of potential customers.
- Security concerns. In the fintech industry security is one of the biggest concerns that gatekeeps a portion of consumers from engaging with technologies like digital wallets. Luckily, implementing robust security measures can help detect and mitigate the risk of any vulnerabilities.
- Compliance with regulations. Navigating various regulations associated with online transactions can become a hurdle for some businesses. Adhering to compliances like the General Data Protection Regulation (GDPR) and others requires effort to avoid penalties.
Evaluating the pros and cons of starting your digital wallet can help you better understand the pitfalls of this niche and whether you are ready to tackle them. On the bright side overcoming challenges and reaping the benefits is possible if you put your mind to it.
How to create a digital wallet legally?
It is completely realistic to build and operate a digital wallet legally. The main thing to remember is that your software must comply with the necessary regulations in the financial industry. What those regulations are will heavily depend on the specific type of business and the location of operations.
For example, if you want to build a digital wallet you need to ensure you are compliant with Anti-Money Laundering (AML) laws. However, these may differ based on the region. Since the legal system in the US and, for instance, Europe has different regulatory bodies like PSD2 SCA responsible for overseeing businesses that want to start a digital wallet.
AML laws may differ depending on the region.
It is strongly recommended to seek legal counsel if you want to create your own digital wallet as the professionals in this system will be able to guide you and give you resources to overcome the obstacles. This is especially valuable if you want to include cryptocurrency payments in your system since navigating this niche’s constantly shifting jurisdictional landscape can be problematic.
Overall, running such a business is not an impossible task. If you are determined to create an e-wallet software you must be prepared to handle serious regulatory environments with a trustworthy counsel by your side.
Limeup can help with creating a digital wallet
If you have made a decision to embark on the journey of creating your digital wallet solution from the ground up then taking steps to prepare will be one of your top priorities. Getting to the bottom of technical and regulatory intricacies will allow you to better understand and navigate the development process.
Collaborating with skilled experts in this field becomes a significant aspect of project success as they will be able to guide you and help you make informed choices regarding the most suitable solution. So don’t be discouraged from asking for aid when building a digital wallet.
If you are interested in crafting a tailored e-wallet solution with Limeup, be sure to reach out to us anytime for a free consultation. Our team is ready to answer any of your questions and lend a helping hand in developing your idea from the ground up.