Digital Wallets: Types, Ideas, and Future of Such Products
E-commerce is starting to pick up and gather pace, and, in this regard, digital payment services are in increasing demand. And where there is demand, supply is also required. Why not provide it? In other words, now is the high time to make wallet apps.
Why now? The reason is simple! Mobile & online digital wallets are a relatively new concept, they are only at the beginning of their journey, and a great future is undoubtedly awaiting them. And you need to catch your niche in the market while there is still a chance to become a leader. By the moment the number of competitors increases, you'll have already gained a strong position.
So, how to develop an e-wallet app? And what’s an e-wallet in the first place?
Banks and payment companies are starting to create a large number of partnerships that include payment information and require harmonization within one common ecosystem, including interaction with application developers, technology partners for new payment gateways, etc. Such a complex partner ecosystem requires open APIs and flexibility to provide a seamless payment experience for the client. The growing importance of partnerships is fueling many other trends in the industry, including the growing popularity of developer programs and changes in the regulatory environment. In Agilie, we can help you to build shopping and payment apps for different purposes and needs.
What is the e-wallet app?
According to statistics, electronic payment services take second place in popularity.
This is the data of 2017, and since then the demand for e-payment services and digital card wallets has been growing, as the following statistics show.
As we’ve said, such demand is due to the rapid development of e-commerce. Confirmation is another infographic.
Here a natural question arises: how is e-commerce related to e-wallet payment? Or what is an electronic wallet in e-commerce? Why do we need to create e-wallet at all?
We hope our article will cover the issue in detail, but for now, we'll answer briefly: iOS and Android digital wallet apps are an important tool helping to interact with the customer in a more efficient way. You simplify the payment system for the user, thus showing you are valuing his time, and taking care of him.
But let's consider such a type of mobile payment at length.
What’s an e-wallet?
In fact, we're talking about a program that allows the user to store electronic finances (and manipulate them). It’s a type of digital currency for online transactions via a desktop or smartphone with authentication.
But before taking advantage of his e-wallet, a user must select a digital payment system which is a type of pre-paid and password-protected account for storing money for any future online transaction. It is to this account that the client should connect payment cards.
The online e-wallet has basically two components:
- The software component ensures security and strong data encryption.
- The information component is a database containing personal user data (name, card details, payment options, and so on.
Where and when can one use e-wallet mobile payments?
If you want to convince the person to install your digital wallet app, if you want someone to create payment links and perform other similar actions, you must explain to him where and when he may take advantage of e-payment services.
First of all, where can you use payment cards? Almost everywhere, right? The same applies to various types of e-wallets, only with additional benefits (which we'll discuss later in due course).
So, today, an e-wallet app is an ideal payment tool, and those who spend money on the Internet are very fond of it.
It allows making online purchases, booking flights, getting loans, and the like. Subsequently, such virtual money is easily and simply converted into real assets and withdrawn either to a bank account or to a plastic card.
Cryptocurrency mobile wallet apps
Cryptocurrency is electronic coins, and tokens that have been incredibly popular lately (especially bitcoins, they have won the greatest glory). And since any crypto virtual (you can't touch it with your hands!), you also need electronic wallets. Otherwise, you won’t be able to manage such funds.
In fact, bitcoin is being stored in the blockchain network, not in the cryptocurrency wallet itself. The wallet only contains private and public keys and makes it possible to work with them.
Cryptocurrency wallets are divided into several types:
Desktop wallets are accessible only from the computer on which they are installed. They provide sufficient data security, although when hacking a computer (or if it's been infected with a virus) there is a chance of losing all means.
Hardware wallets, which are similar to previous ones but use a hardware data storage device (USB or something of the sort).
Online digital wallets. Their work is based on cloud storage technology. As you understand, there are some drawbacks in the cloud-focused approach (like a greater risk to have information stolen or fraud), although there are also benefits: let's say, the accessibility (namely, the possibility to use these wallets anywhere, from any device).
Mobile digital wallets, they work as an application on the mobile device. The advantages are undeniable, you’re even allowed to use such wallets in retail outlets.
Paper wallets, they provide the highest level of security but are not always convenient to use.
There are e-wallet apps focused only on a particular type of currency, but there are also those which allow making any type of mobile payment. You have to take it into account when choosing a digital payment system we've talked about earlier.
Digital wallet benefits
Now that you understand the capabilities of the e-wallet, how to use it, it's time to discuss its benefits. You should know them to promote the product more effectively.
Electronic payment services are, relatively speaking, card-based payments since the user should link a credit card to the app. But in the case of e-wallet apps, there are a number of additional benefits which common payment cards don’t have.
So let’s discuss electronic wallets' advantages and disadvantages.
Simplified payment process. With the online e-wallet, the user can very quickly pay for the service or product in the online store. As you know, payment with a plastic card involves a much more complicated process, since it’s necessary to enter the card number, CVV code, etc.
Unlimited period of use. Once the user has registered an account in the system of electronic payment services, he may use it as he likes, for a really long time.
Convenient work in the online mode. Paying with electronic money is the best solution for freelancers who deal with clients online.
High transaction speed. Bank transfers sometimes take from several hours to a few business days. Transactions with electronic money are performed in a matter of minutes.
Extended payment functionality. Digital wallet features are:
a highly protected user account with all the necessary information for making a secure e-wallet mobile payment;
the ability to select the desired currency (ideally, the list should offer cryptocurrency either);
the possibility of convenient funding of the e-wallet (or withdrawal of funds from it).
Disadvantages of e-payment services
mandatory Internet access;
the low probability of hacking the digital card wallet. However, the security issue will be discussed separately because it deserves more of our attention.
Types of e-wallets by delivery technology
There are different ways to classify online payment services, and we'll consider one of them a bit later while discussing the e-wallet operation scheme. In the meantime, we'd like to talk about classification by delivery technology.
NFC means Near Field Communication. The essence of technology lies in the simple data exchange between closely located devices: between a credit card/smartphone and reading terminal and so on.
In fact, we're talking about contactless payment which allows us to pay using a smartphone - instead of payment cards. Striking instances are Samsung Pay, Android Pay, Apple Pay.
Easy connection to the ecosystem of e-payment services.
High level of security.
Terminals (or other similar devices) must be equipped with an NFC component.
By the way, Near Field Communication is also good at transferring funds (by touching a smartphone to a smartphone).
Here we’re implying at cloud-based technology which uses QR code generated by the client’s gadget or merchant’s sales outlet.
Thanks to the QR-coding system, customers are able to make purchases and payments through a mobile gadget almost everywhere, online and offline: in Internet shops, cafes and restaurants, in taxis, in retail outlets.
Among the examples worth mentioning are WeChat Wallet, Starbucks mobile payment, and Walmart Pay.
There are a great many barcode readers in the store outlets.
Entering mobile payments via a card reader is a really simple process requiring no extra effort.
Security isn’t high enough.
Lack of a global payment ecosystem.
Digital Delivery Technology
As you understand from the name, such digital wallets are focused on payment for goods and services on the Internet. In the outlets of the real (non-virtual) world, these applications can be used in rare cases and only under certain conditions.
Best digital wallets of this type include Alipay, PayPal, Pay with Amazon.
Easy to install and use.
It’s harder to pay in real stores.
In this case, the account is managed using SMS commands (to confirm payment). The method is good for P2P marketplaces, C2B real-world transactions, etc. Examples are Mobile Money, Orange Money, Tigo.
The possibility not to leave the seller’s site (application) while making the payment;
You can do without Internet access in real-world conditions (say, at some gas stations you can inform the operator about the phone number and payment confirmation code, and such information would be enough to pay).
Fairly limited platform type, not flexible enough.
How do digital wallets work?
Unlike traditional pocket wallets, mobile and online e-wallets don't store currency (or rather, don't store physically or you don't have to use an ATM). All that really exists are transaction records.
As you already understood, electronic payment services usually work using the application installed on the user's smartphone (that's why you should create the e-wallet app). Further, the scheme of work depends on the delivery technology we've considered earlier and the type of mobile wallet apps.
Remember, we promised to talk about another classification method? The time has come!
The closed type. Imagine a company selling goods or providing services that decide to make an online wallet app for its customers. And these customers will be able to use such a wallet only in its stores (or salons, whatever!). Say, Walmart Pay, which we've mentioned while describing delivery technology, is designed exclusively for the Walmart network.
The half-closed type. With the half-closed type, the situation is better. Users can take advantage of these e-wallet apps when served in certain sales outlets: those that have signed a special agreement with the respective provider. However, the e-wallet coverage area is still rather limited.
The open type. It's quite simple: these iOS and Android digital wallets are freely used to pay for goods and services (including financial ones), withdraw and transfer funds, etc.
Best digital wallets as an example
And now it's time to talk about your competitors. Alas, you’re not the first to think about mobile wallet development, and you need to know who managed to win their place in the sun.
Let’s analyze the top list of mobile wallets.
As you see, the most popular rival is PayPal. Nevertheless, we’d like to consider a couple of less obvious, but also worthy examples of digital wallet apps - those which is in high demand among consumers. Such as…
Payeer is a very popular payment system created in 2012. It’s in demand among users who wish to deal with electronic money in the most anonymous mode. The system is easy to use, well-protected, and works quickly.
more than 15 million users;
optional account verification;
150+ ways to add funds to the digital card wallet;
operations with zero commission worldwide;
mass payments through the API without restrictions;
high level of anonymity;
no locking user wallets.
ePayments is oriented on e-payment services and was created in 2011. It boasts a client base of 500 thousand users from more than 100 countries.
processing 100 million transactions per year;
the official website, personal account, and mobile application are available in 5 language versions;
replenishment of the cash balance with cryptocurrencies, bank transfers, payment systems, and plastic cards;
funds withdrawal (to ePayments card, to a VISA, Mastercard or Maestro bank card, to a bank account) is possible even for unverified users;
convenient mobile payment app available for iOS and Android.
Perfect Money is a digital system focused on online and mobile cashless payments. It was founded in 2007 and has a great number of proper e-wallet features. Among other things, it allows receiving, depositing, and withdrawing funds completely anonymously (that is, user identification isn’t a prerequisite).
processing more than 40 million transactions per day;
low commissions (0.5% if the account is verified);
buying fiat and digital currencies online;
replenishment of the e-wallet in various ways: bank transfer, e-Voucher, online exchange points, Bitcoin, credit exchange;
safe custody of funds;
monthly payments from the account balance;
improved user account security;
high-quality customer-oriented service.
Best practices in making a digital wallet app
If you decide to make wallet apps, you need to know what to consider in order to achieve the maximum effective result.
This seems like pretty obvious advice, but, oddly enough, not everyone pays enough attention to well-designed usability.
First of all, good usability implies that the desktop and mobile applications should have similar payment functionality, and the most important digital wallet features must exist in both versions. In the end, you have no idea of your users’ preferences! Who knows what they’ll choose - a website or an application? You must consider any sequence of events.
By the way, the applications we’ve described have convenient online and mobile versions.
Are mobile wallets safe? Can I trust them with my cash savings?
People often ask these questions, and the fear of hearing a negative answer prevents them from becoming active users of digital wallets. However, if you perform several manipulations to protect user personal (and confidential) information during the mobile wallet development process, there will be no reason to doubt the safety of the electronic payment services you provide.
Let's look at several possible ways to protect the application which deals with money. Of course, we won't be able to consider everything, especially since every year there are more and more innovative methods to increase the security of mobile wallet apps. But we’ll do our best.
In different e-wallet mobile payment systems, the password may be called differently: control code, PIN code, etc., but this doesn’t change its essence. All e-currencies use such a simple, but quite effective way to protect access to a client’s account.
In addition, many digital payment services use several passwords to enhance security, which the user must enter at different stages of working with his account.
Tokenization technology allows securing e-wallet payments using a reliable data encryption system.
A token is a crypto key that contains no financial information per se. Even if the fraudster receives the data token, it will be completely useless. And the original information, meanwhile, is stored in an encrypted cloud database.
Such well-known wallets as Apple Pay combine tokenization with the use of biometric features… let’s discuss these features, by the by.
This is quite a popular and modern way to protect mobile digital wallets.
The point is simple: as you know, each person has unique physical features by which his personality can be identified. These features are biometric data that you’re able to record in a special database with the help of innovative devices: scanners, sensors, and other readers. The system stores the information (say, user’s fingerprint) and converts it into a digital code.
When the user puts his finger on the scanner again, the system compares the new code with the one it stores. If the codes match, then the identification is considered successful.
Files of keys
When registering a new iOS or Android digital wallet, the user receives a file in which the keys to it are stored. Without the key file, the attacker, even knowing the password, won't be able to use the wallet.
In turn, the file is protected by its own password.
Such a method of protecting electronic money is applied if none of the security measures provided could ensure the safety of funds. Then, by calling, SMS or in any other way, the user forcibly blocks his e-wallet payment account.
We’ve repeated the rule regarding simplicity many times over a wide variety of applications, but it has a special meaning when it comes to digital wallet apps. After all, everything associated with money disturbs and alarms people, in one way or another, and therefore the process of making payments should be as clear as possible - and therefore simple.
Don’t force the user to perform too many steps to achieve the desired result. The fewer actions required, the better (but, of course, within reason). However, if the situation with the site (namely, online e-wallet) can be solved with ease, applications are more difficult to handle. The small screen of smartphones gives us limited information, while not missing key steps.
You may either place all the data on one screen or divide the information into several blocks which will replace each other as the transaction proceeds. In the first case, there is a risk to overload the interface with extra details, in the second - to tire and even anger the user. However, experienced UI/UX experts will help you to avoid such a pitty outcome. They'll strike the happy medium.
Mobile wallet development is costly. Surely you're interested in figuring out the most effective ways to recoup your wallet investments and, of course, earn. We're going to bring to light the monetization issue.
You may already know the basic methods to monetize applications, but they're not very suited to digital card wallets. Here we need a special approach.
So, what options do you have?
Taking a fee. It’s a simple way, but not always the best one. There are a lot of free solutions, and to persuade to choose yours is the task of an increased level of complexity.
Commission. The company providing digital payment services gets a commission (usually not more than 3%) when the user conducts transactions, pays for various services, replenishes an account, etc.
Increasing business profitability. There is a different situation. Some companies, wanting to increase customer loyalty and attract new clients, create e-wallets to give people an opportunity to use various payment methods. If you remember, we've already mentioned the closed type of mobile wallet apps, and this is the case. The main goal is not to monetize, but to strengthen the business. Although one thing does not prevent the other, of course. Works both ways, right?
Future of electronic wallets
You could hear a variety of opinions about the future of e-wallet payment systems. The ardent supporters of e-currency believe that the time will come when humanity can freely forget about paper money at all. However, there are people with opposing beliefs too.
As a result of public opinion polls, it has been found out: those who advocate the active development of the future of electronic currencies are in second place. So far, the most popular is still bank cards. After e-currency, the third place is occupied by Internet banking. As for the number of paper money supporters, it’s getting smaller every year.
Based on the number of potential users of virtual settlement systems, one can outline the future of electronic payment platforms. Providers of e-payment services set themselves the task of satisfying the demands of their average consumer, which means they're going to focus more and more on:
updating the resource so that it constantly meets the dictates of time and uses the most innovative technologies;
security enhancement. A rather obvious point which will receive increased attention in the coming years;
improved usability. Another factor that will be determinant during mobile wallet development.
expansion of scope. Now there are still outlets not accepting e-wallet mobile payments. However, all types of e-wallets should be no less commonplace than the same bank cards.
focus on user experience. Obviously, electronic payment services providers attach importance to the experience their user gets. Therefore, maximum efforts will be made to improve this experience and allow the user to manage his e-wallet app more efficiently.
Having considered different opinions, we can make a conclusion: e-payment services are developing at a very rapid pace. Of course, the parallel existence of two monetary systems is quite acceptable. But the power balance will be on the side of virtual money, this fact is too obvious to deny it.
Now you’ve got a complete picture of the digital payment services and the future which may await them. Perhaps it's time to move to more action, what do you think?
If so, Agilie team would be happy to offer its services. We know how to develop an e-wallet and have the appropriate experience. Therefore, our experts are quite ready to face all the difficulties and pitfalls, for we understand how to circumvent them. That's why we’ll be able to provide you with the most effective and successful wallet service built from scratch.