Digital Wallet App Development Guide 2023
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With the massive adoption of smartphones and how handy they come for people from all walks of life, mobile payment options are becoming mainstream all across the globe. A digital wallet or e-wallet is one of the popular contactless payment methods used by people to handle their money digitally.
According to Statista, mobile wallets are already a preferred payment method in ecommerce among people in the U.S. Whereas ApplePay and GooglePay will lead the future of mobile payment where the number of people who use Apple Pay is expected to grow by nine million between 2022 and 2026.
If you are a business owner looking to increase your offerings and convenience for your target audience or a startup wanting to be a part of a market that has highly exponential growth in the future, digital wallet app development at this time would be a lucrative option.
In the following blog, we will reveal all critical aspects of what it takes to create a digital wallet application like cost, top features, processes, security & compliance integration, technology stack, and others so that you can set the right foundation for your payment app development business.
Table of Content
What Is Digital Wallet?
A digital wallet is a software application that serves as an electronic version of a physical wallet. With a digital wallet, you don’t need to carry along your physical wallet while going out or filling out your card details. All you need is your smartphone with a mobile application downloaded from a digital wallet and it ensures you have a faster and easier transaction process at eCommerce sites, merchant shops, malls, and other places from where you want to buy something or need to transfer money for any reason.
To use a digital wallet, all you have to do is to download the application to your smartphone and register your debit or credit card details within the application. These applications store your financial information in a form of a token along with your device number known as a cryptogram as a virtual identification number. These tokens and cryptograms are further used by digital wallet applications to validate your identity when you want to send money to someone or pay for buying something with the application.
Digital wallet applications remove the need to insert the card into POS terminals or swap them and enter security pins. These applications promote contactless payment along with excellent security, making them the most popular and highly convenient choice to do payment anywhere. According to industry experts, mobile wallet application development is just the beginning of a new era. Besides storing payment methods, FinTech leaders are also developing a complete ecosystem of digital wallet applications. It wouldn’t be wrong to say that digital wallets will remove the need for physical wallets in the upcoming time as these wallets are also designed to hold a wider range of digital items people used to carry within physical wallets, including:
Gift cards
Loyalty cards
Coupons
Reward points
Driver’s licenses
Plane tickets and boarding passes
Event tickets
Membership cards
Insurance cards
Coupons
Hotel and restaurant reservations
If you are still not convinced why you should jump onto building a digital wallet app, as a digital wallet app development company we would like to discuss with you the advantage of digital wallets for both businesses and customers. Let’s explore a few of them:
Advantages Of Digital Wallet For Customers
Convenience: Mobile wallets enable transactions to be completed instantly without waiting in long lines or going to an ATM to withdraw cash.
Easy & quick: With a mobile wallet, you don’t always need to keep entering your card number, expiry date, and CVV, to do transactions. Just pick up your phone, scan the QR code and you are done. It’s that easy!
Easily accessible: Since a mobile wallet resides within your smartphone, it’s always accessible and supports day-to-day transactions faster and more easily. Wide range of users: The reach of mobile wallets has gone far and wide as it can be used for bill payments, water, electricity, water, flight tickets, buses, trains, and many other things.
Never miss a payment: You can also enable autopay within your mobile wallet and it will pay your bills on the specified date. This lets you go about your dates hasslefree.
Security: Your wallet can be stolen, but your mobile wallet can not. Even in the case when you lose your phone, your mobile wallet has security settings that enable only you to access it. Additionally, when data is transmitted via mobile wallet for making payments, the account number isn’t communicated. Instead, encrypted payment codes or tokens are sent and received to ensure security
Advantages Of Digital Wallet Development For Businesses
Better customer experience: Mobile wallets streamline the checkout process by providing fewer click-throughs and auto-fill forms. This in turn drives up conversion rates – a win-win for businesses and customers alike.
Secure financial detail: Protecting cardholder details is vital for your business, as any security breach can create a serious hit to your reputation. Digital wallets add an additional layer of security with the use of biometrics like fingerprint and face recognition technology and secure users’ financial data.
Serve as an alternative payment option: Mobile wallets can be used as an alternative payment option for customers as not all customers like carrying cards or cash especially Generation Z. Having a contactless payment option in place allows you to accept payment from the new generation people who are always in a hurry or prefer digital means for everything. Digital wallets also allow you to accept payments like Bitcoin or direct PayPal payments.
Insights into customer shopping habits: Digital wallets help a business beyond payment transactions. It also provides real-time data analysis of customers’ shopping histories and preferences, which facilitates a more targeted marketing campaign. Using the same, a business can also manage inventory and create more accurate budgets.
How Do These Digital Wallet Applications Work?
Since this post is dedicated to helping you understand how to create a digital wallet, it is also important to discuss how these digital wallet applications work. Here is the following steps performed by the user to use the application:
A user downloads the digital wallet application. The user registers his card details into the application. The application stored the bank or card details in an encrypted way. To pay with a digital wallet, the user passes his authentication based on his OS device.
He holds his smartphone close to the contactless terminal or pays using his mobile. number by authorizing the transaction with further security processes implemented within the application.
In order to complete this cycle, there are several technical processes that work behind the mobile wallet application to make the transaction work such as quick response code, near-field communication (NFC), and magnetic secure transactions (MST). While working together as a complete payment processing cycle, digital wallets offer users a faster, more secure, and satisfactory payment experience.
As an experienced fintech app development company, we help you (startups and companies) build and customize mobile wallet applications based on your unique business needs. Let’s know these technical processes in detail to understand how these are enabling payment through a mobile wallet and fostering contactless payment culture.
Quick Response Codes or QR Code
QR code is a type of machine-readable code or barcode that typically stores information as a series of pixels in black-and-white square format. These barcodes are readable by a camera of a smartphone and this thing has unlocked an entirely new way to make a payment.
When scanned through a smartphone camera, it directs the user to access the relevant information and make hassle-free payments online. QR codes are truly a multifaceted shortcut to the internet with which within a few seconds users can make a contactless payment with zero effort, enabling a stress-free customer experience.
Near Field Communication (NFC)
Near field technology or NFC is a method of wireless data transfer that uses electromagnetic signals to enable smart devices like smartphones, laptops, tablets, and other devices to share and transfer data when in close proximity. Using NFT in developing digital wallets allows you to power wallet users (sender) and businesses (receiver) for contactless payment processes.
However, near field communication payments require the merchant’s terminal and customer’s device to be NFC-enabled. Meaning, the sender and receiver have to be within an inch and a half of each other to connect, which is also a better option to send and receive payment securely
Magnetic Secure Transmission (MST)
Magnetic secure transmission is another mobile payment and wireless technology that replicates payment with both traditional pre-chip magnetic stripe systems and modern noswipe credit card terminals. If you aim for digital wallet mobile app development, especially for the United States, make sure to enable MST digital technology within the application.
The US is notoriously slow in adopting new payment technology i.e. NFC. If you are expecting a quick spike in the adoption of your mobile wallet payment application, you must enable both NFC and Magnetic Secure Transmission (MST) technology as approximately 90% of merchants were accepting MST in 2022. It makes your application work with nearly all merchant payment terminals.
Types Of Digital Wallet Applications
Interestingly, there are multiple options available for mobile wallet app development. You can go with the one that addresses your business model, target user’s needs, location, and device’s operating system. For example, Apple Pay is a good option for iPhone users whereas Google Pay is best for users having android devices. While others use PayPal since it provides international-level acceptance. Apart from this, Venmo and Cash App work only with a valid US phone number. These are some considerations that you must decide beforehand for developing a modern and successful digital wallet application business. We can segregate these applications into different digital wallet categories, offering different conveniences to different users. Let’s check different types of e-wallets that can be developed.
Closed wallet applications are applications that allow users to make payments through the application or website. But these wallets are developed by businesses that sell products or services and allow the business users to use the provided wallet for payment. In case of a canceled transaction or refund, the whole amount is credited back to the wallet that you can’t use on another platform or with other businesses.
2. Semi-Closed Wallet
A semi-closed wallet like Apple Pay or Google Pay can be developed and used as an integrated payment system between a business and a user. Semi-closed digital wallet software development allows you to play the role of an integrated payment system between merchants and customers. Whereas merchants agree to a contract or agreement with you for using the application, customers have to provide their personal details like bank or debit card number, location, and other identity verification including generating pins to ensure secure payment transactions.
3. Open-Wallet
Open wallet applications are designed to support any type of transaction. These types of wallets can be used to transfer funds and send to receive online and in-store payments. If you are developing an open wallet, make sure you facilitate transactions that can be done from anywhere in the world. These types of wallets require both sender and receiver to have accounts on the same application.
4. Cryptocurrency Wallet
Crypto wallet development refers to developing applications that store and transfer cryptocurrencies. These wallets store user’s public and private keys also known as ownership certificates for facilitating transactions over its application.
Key Features To Include In Digital Wallet App Development
Just like any other digital application, digital wallet features also happen to incorporate three panels that address different needs of different users of the application. It includes a user panel, merchant panel, and admin panel. Let’s know them below.
User Panel Features
Signup via Social Login
User authentication via pin, pattern, and Face ID
Add authorized bank account
Check account balance
Transfer money via contact number or QR code scanner
Pay bills and set a bill payment reminder
View transaction history
Multi-currency & multi-language support
Chat support
