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January 27, 2023

How to Build a Digital Wallet: A Complete Guide

Online payments and digital wallets are not new to users. If you want to enter the market with a unique solution, we are here to help.

Mitya Smusin

Chief Executive Officer

When was the last time you made an online payment? Whether it happened just a few hours ago when you ordered some food for yourself or yesterday when you made an order on Amazon, online payments are already an inseparable part of our lives. Juniper Research stated that 4.4 billion around the world will use digital payments by 2025 (which is, by the way, more than half of all humanity).

There are plenty of ways to pay online: online banks, credit cards, cryptocurrency, and digital wallets. Today, we are going to talk about the last one in more detail. The number of e-wallet users is growing each year and some of them (32%, to be precise) have more than one mobile wallet app installed on their devices.

Even though the market already has its leaders like Apple Pay, Google Pay, and PayPal, you have all the chances to stand in the spotlight. In this blog post, we are going to discuss how to build an e-wallet, what challenges to expect, and what resources to allocate.

What is a digital wallet?

A digital wallet is a software application that allows users to make secure and fast electronic money transactions. It stores the user’s payment information like card details or bank account information. Digital wallets help you make online and offline payments without having to enter your payment information anew every single time. Some digital wallets have features to store and use loyalty cards, coupons, and gift certificates.

Digital wallets can be used on desktops, tablets, and smartphones, but the most popular ones are mobile digital wallets like Apple Pay or Samsung Pay. Also, a digital wallet is often a feature available on digital banking or payment apps.

Rise of digital wallets

The use of digital wallets has grown significantly in recent years, as more and more people have adopted online and mobile shopping and as retailers have become more accepting of digital payment methods.

Digital Wallet Illustration

One of the main drivers for the rising interest in e-wallets has been the increasing use of mobile devices for online shopping. Digital wallets make it easy to buy anything via smartphone or tablet. Besides, a user can access their payment information from any device with an Internet connection if necessary.

In addition, the growth of e-commerce and the wide acceptance of digital payment methods by retailers have also contributed to the popularity of e-wallets. Many retailers now accept digital wallets as a form of payment, making it easier for consumers to use them to make purchases both online and in person.

Last but not least, a factor worth mentioning is the COVID-19 pandemic. The last couple of years showed to the public that most everyday processes can be done without leaving your home including things like money lending, paying bills, and shopping. And with the extreme surge of digitalization, e-wallets got their well-deserved spotlight.

Overall, the convenience and security offered by digital wallets have made them an increasingly popular choice for both consumers and retailers.

How do digital wallets work

To use a digital wallet, you first need to create an account and add your financial data like card or bank account information into the app. Digital wallets securely store your financial information in a digital format. Some digital wallets also allow you to scan your physical cards to add them to the wallet.

How digital wallet works

Once you fill out all the necessary information, you can use it to make purchases online or in person if the retailer accepts such payments. To make a purchase online, you simply select your digital wallet as the payment method at checkout and verify the transaction using the login credentials.

In-person transactions with a digital wallet are typically made using near-field communication (NFC) technology. This allows you to tap your digital wallet-enabled device, like a smartphone, against a compatible point-of-sale terminal to complete the transaction. 

Types of mobile wallets

Now, let’s talk about types of e-wallets. These solutions can be used in various industries like e-commerce or banking, so their main difference is on the technical side. We will describe three main ways digital wallets work.

Types of digital wallets

Closed mobile wallets

A closed mobile wallet is a digital payment system that is specific to a particular brand or merchant. Another name for it is "closed-loop" because it can only be used to make purchases from a particular merchant that the wallet is associated with. Examples of closed-loop mobile wallets include Starbucks' mobile app and Amazon Pay.

One advantage of closed-loop mobile wallets is that they can be tailored to the specific needs of your business. Also, closed wallets are more secure than other types of mobile payment systems, as they are not connected to a customer's bank account or credit card. Instead, they are funded by the customer adding money to the wallet in advance.

However, wallets like these can only be used at a limited number of places, which can be inconvenient for customers who want to use a single payment method for all of their purchases.

Semi-closed mobile wallets

Semi-closed mobile wallets include several locations that can accept this payment method. They are not limited to one merchant, but also are not fully open like credit or debit cards.

The advantage of semi-closed mobile wallets is that they offer more flexibility than the previous type as they can be used in a wider range of places. But semi-closed mobile wallets may not offer the same level of security as closed-loop wallets, as they are connected to a wider network of financial services.

Open wallets

An open digital wallet is a digital payment system that can be used to make purchases at any merchant that accepts the payment method associated with the wallet. They are not tied to a specific store or e-commerce platform and can be used at any location that accepts such a payment method.

Open wallets are the most flexible solutions for making purchases and payments. They also may offer additional features like tracking expenses and earning reward points. However, they will be the most unsecured type of digital wallet.

Crypto wallets

Yes, in the beginning, we said that there are only three types of digital wallets, but we would also like to mention crypto wallets as a separate category. A crypto wallet is a software program that stores your public and private keys, which are used to send, receive, and store cryptocurrencies like Bitcoin or Ethereum. It allows you to manage your cryptocurrency assets and interact with the blockchain.

E-wallet market overview

Words mean nothing without facts. We can say that the digital wallet market is thriving but without actual proof, these words mean nothing. So here are some interesting numbers to support our claims.

  • The Financial Brand claims that by 2025, digital wallet use will account for around 52.5% of e-commerce transaction value worldwide.

  • According to a report by Grand View Research, the global e-wallet market size was valued at$6.2 billion USD in 2021 and is expected to expand at a compound annual growth rate (CAGR) of 27.4% from 2022 to 2030.

  • According to Marqeta, 75% of US, UK, and Australian consumers use digital wallets for payments.

  • PYMNTS says that the most common categories for using e-wallets in the US are groceries (53.3%), fast food (20.6%), gas (19.6%), clothing (17.5%), and health care (12%).

  • The most popular mobile wallet apps on the market are Apple Pay, Google Pay, and PayPal.

  • IMARC states that by 2024, the global mobile payment market is predicted to be an estimated $3 trillion USD.

Digital Wallet Stats
Source: The Financial Brand

There are several factors driving the growth of the e-wallet market, including the proliferation of smartphones, the expansion of e-commerce, and the increasing use of mobile payments. E-wallets are particularly popular in developing countries, where traditional banking infrastructure may be limited, and in markets with high levels of cash transactions.

Now let’s move to a more detailed description of the benefits that e-wallet app development can give your business.

Benefits of building a mobile wallet app

Well, if you are reading this article, then you must be determined to create an app like that. And there is no surprise in it since e-wallets have quite a number of positive aspects both for you and your potential users.

Benefits of digital wallets
  • Convenience: Virtual wallet apps allow users to make electronic payments and manage their finances from their smartphones, making it more convenient than carrying around physical cards or cash.

  • Security: Digital wallets can be a secure way to make electronic transactions, as they often use strong security measures like encryption and multi-factor authentication to protect user data.

  • Increased sales: Mobile wallets can make it easier for customers to make purchases, which can lead to increased sales for businesses that accept mobile payments.

  • Customer loyalty: E-wallets can include loyalty reward programs and other features that can help increase customer loyalty and retention.

  • Enhanced data collection and analysis: Mobile wallet apps can collect data on user behavior and preferences, which can be useful for businesses looking to better understand their customers and improve their products and services.

Best digital wallet apps

There are many digital wallet apps available, and the best one for you will depend on your specific needs and preferences. We already mentioned the best options available, so now let’s talk about them in more detail.

Apple Pay

Apple Pay
Source: Apple Pay

The first example of a digital wallet is Apple Pay. It’s a mobile payment and digital wallet service developed by Apple Inc. It allows users to make electronic payments, including in-store purchases and online transactions, using their Apple devices such as the iPhone, iPad, and Apple Watch. Apple Pay uses security measures like encryption protocols and Touch ID/Face ID to protect users' payment information.

Google Pay

Google Pay
Source: Google Pay

Where Apple Pay is developed for iOS, Google Pay is made for Android. Google Pay is a mobile wallet that allows users to make payments and transactions with their Android-based devices. Google launched it in 2011 under the name Google Wallet. The Google Pay service works with hundreds of banks and payment providers like Visa, MasterCard, and American Express.


Source: PayPal

PayPal is a payment platform that helps make payments between parties through online money transfers. After signing up, consumers can then use their PayPal accounts to make purchases or send/receive payments from other PayPal users. It also offers businesses a vast range of solutions to facilitate their processes. This includes payment portals for online and in-person transactions, business management services, and credit options.

Cash App

Cash App
Source: Cash App

Cash App is a peer-to-peer mobile payment service developed by Square, Inc. in 2015. This platform allows users to transfer money to one another via their mobile phones. Its first name was Square Cash and in 2018 the service was rebranded as Cash App. This e-wallet mobile app is available on both iOS and Android and the main reason for its popularity is simplicity and ease of use. In addition to person-to-person money transfers, Cash App also allows users to invest in stocks, pay taxes, and create virtual cards.

Walmart Pay

Walmart Pay
Source: Walmart Pay

We have already mentioned Amazon Pay as a closed-loop digital wallet. Well, Walmart also has its own payment system. Walmart Pay is a mobile payment service that allows customers to pay for purchases made in Walmart stores using their mobile devices. The service is available through the Walmart mobile app on both iOS and Android. To use Walmart Pay, customers can scan a QR code at the checkout using their mobile app, and the necessary amount of money will be charged via the payment method linked to their Walmart account.

Are digital wallets safe?

Digital wallets can be a secure way to make electronic transactions, as they typically use strong security measures to protect your payment information.

  • Point-to-point encryption (P2PE)

This is an advanced security measure that protects the transaction from the beginning to the end. The encryption process starts the moment you swipe your phone over a PoS-terminal and continues throughout the whole process. Such protection is a part of the must-have security features you need for your digital wallet.

  • Password

This security measure goes without saying. A password is a must for every software product that requires personal or sensitive information. To make passwords more effective, you can implement a rejection feature in cases where the password entered by the user during the registration process is too weak. This will increase the level of data safety and make a wallet more secure.

  • Tokenization

Basically, tokenization is an enhanced encryption system. Instead of giving all the payment information to the seller, the app turns it into a random sequence of symbols called a token.

Must-have features of a mobile wallet

Even though your digital wallet solution should stand out from the crowd, there are certain features that users expect from any new e-wallet. For example:

Features of digital wallets
  • Sign in/Sign up: These processes should be simple and offer multiple options for registration and logins such as phone number, email, or even social media.

  • Security: A digital wallet should have strong security measures in place to protect your payment information.

  • Payments and transactions: The digital wallet should support the payment methods that you use like credit and debit cards, bank transfers, and contactless payments. Also, don’t forget about technologies like NFC, QR codes, and biometric payments.

  • Card/bank account integration: It will help users transfer money from and to their e-wallet account.

  • Transaction history: Users should clearly see where they spend their money, so your app should have a detailed transaction history.

  • Bill payments: A mobile wallet should be able to help users pay their bills and remind them about upcoming payments with push notifications.

  • Analytics dashboards: An easy-to-navigate dashboard can show users how much money they spend on various goods and services.

  • Chatbot: A customer support chatbot will be perfect for answering simple and frequently asked questions.

More advanced features can include:

  • Rewards and discounts: Some digital wallets offer rewards or discounts from partners for using the app.

  • Budgeting tool: Let your app help users track their spending and plan budgets.

  • Automatic payments: Allow your users to schedule regular withdrawals like loan payments and subscriptions so they won’t forget about them.

  • Virtual cards management: Users can create virtual cards to facilitate their money management and make payments with them.

Steps to build a wallet app

Building a digital wallet from scratch is a complicated process with a lot of possible situations to take into account. That is why it’s crucial to have a defined strategy that will help you stick to your vision. Here are the steps you should take to build a mobile wallet app:

Steps of digital wallet development

1. Discovery phase

Define the scope and purpose of your app. What type of mobile wallet do you want to create? Will it be focused on payments, loyalty rewards, or something else? Also, conduct market research to understand the needs and preferences of your target audience and analyze your competitors to see their strengths and weaknesses. This will help you identify unique functionality that will set your app apart from competitors.

2. Choose your platform and tech stack

When we speak about choosing a platform for your e-wallet, we mean developing either a native app or a cross-platform one. A native mobile application is an app that is compatible with only one mobile OS (iOS or Android). These solutions are usually more feature-rich and stable, but they require more resources and are usually more expensive. Besides, if you decide to cover the other platform, you will need to basically create a new app.

A cross-platform application has one codebase that is compatible with multiple platforms like Android, iOS, and even web. They are cheaper and don’t require additional coding, but some device features may not be available for them. The approach will depend on your business needs and technical requirements.

Here you can also think about a tech stack for your project. A possible list of technologies may include:

  • Mobile: Swift, Kotlin, CoreData

  • Backend: PHP, jQuery, Node.js, Java Spring Boot, Swagger, AWS, Firebase, Twilio

  • Frontend: React/Redux, TypeScript, HTML5, CSS4

  • Database: MySQL, PostgreSQL, MongoDB

  • Payment gateway: Stripe, Braintree

  • Cloud: AWS

  • Real-time analytics: Amazon Kinesis, Apache Kafka

  • Chatbot: Twilio, PubNub

3. Make a prototype and create UX/UI design

A prototype is the first visual implementation of your product. It usually consists of black-and-white screens—wireframes—and displays the app’s main flow. Prototyping will help you find core design mistakes and fix them early so the costs won’t snowball. Then, when the prototype is approved, your team can start working on the user experience and user interface. A digital wallet’s design should be intuitive and easy to use, with a clear and consistent style.

4. Develop an MVP

You don’t need the whole feature list from the start, so we recommend starting with a minimum viable product. Implement the core functionality of your app like the ability to add payment methods and make transactions. Then show it to your target audience and listen to their feedback.

5. Test your app 

You can apply automated and manual tests to ensure that your digital wallet is stable and reliable. Depending on which platform you choose to release your app, testing should include a variety of devices and operating systems.

6. Launch and support

When your application is up and running, you can start promoting it to your target audience with social media campaigns, email marketing, or partnerships with relevant businesses or organizations. Then, when you get enough real user feedback, continue to update and improve your app to ensure that it remains relevant and valuable to your users.

Main challenges of digital wallet app development

Since mobile wallet development is a complex process, it has certain risks you need to take into account. Here are some of the main challenges of digital wallet app development you may face.

Challenges of digital wallet development
  • Security

Digital wallet apps handle sensitive financial information, so it’s important to ensure that the app is secure and protects user data from hackers and cybercriminals. This requires implementing strong security measures and constantly testing them. To achieve the highest quality of data security, you can use penetration tests.

  • Lack of trust

Even though the number of e-wallet users grows every year, a lot of people still don’t trust this technological solution. Users are afraid of cyberattacks, data leaks, fraud, and even identity theft. You need to make sure your potential customer has enough proof to trust you with their money.

  • Integration with existing systems

Digital wallet apps often need to integrate with existing payment systems like credit card networks and banks. It can be a complex process and may require working with multiple partners to ensure that the integration is seamless.

  • Regulatory compliance

Digital wallet apps are subject to a variety of regulations, for example, data protection laws and financial industry regulations. You must make sure the app is compliant with all relevant regulations in the markets where it will be used.

  • Competition

There are many digital wallet apps on the market, so it can be challenging to make your app stand out from the crowd. This may require identifying unique functionality that will set your app apart.

Mobile wallet app development costs

The cost of developing a mobile wallet app can vary significantly depending on a number of factors:

  • the complexity of the app

  • the number of features you want to include

  • the platform you want to build it for (iOS, Android, cross-platform)

  • the location of the development team

  • their hourly rate

Here is a rough estimate of how much different parts of mobile wallet development may cost:

Quality assurance$5,000-$15,000
Project management$5,000-$15,000

Speaking about development time for an e-wallet app, here is how it can work out:

FeatureNumber of hours
User registration and authentication40-80
Linking bank accounts and credit/debit cards80-160
Adding and managing digital assets80-160
In-app purchases80-160
Push notifications40-80
Transaction history20-100
Security features160-320
Integration with third-party services80-160

In general, you can expect to pay anywhere from $50,000 to over $160,000 for the development of a mobile wallet app. Please note that this is just a rough estimate and the actual cost of developing a digital wallet app may be higher or lower depending on the specific requirements and complexity of the project. Also, the number of hours may vary depending on the experience and skill set of the development team. It's a good idea to work with a software development agency to get a more accurate estimate for your project idea.

In a nutshell

Mobile wallet development is definitely not a breeze. It consists of numerous stages and processes that gradually take you from a simple concept to the first working version with real users.

The current market state shows that the usage of mobile wallets will grow even more, so now is the best time to realize your idea to get business benefits. If you need help with digital wallet services, feel free to drop us a line.

💳 How does a mobile wallet work?

To use a digital wallet, you first need to create an account and add your financial data like card or bank account information into the app. Once you fill out all the necessary information, you can use it to make purchases online or in person if the retailer accepts such payments.

💳 Are mobile wallets secure?

Digital wallets can be a secure way to make electronic transactions, as they typically use strong security measures to protect your payment information: point-to-point encryption (P2PE), passwords, and tokenization.

💳 What are the best wallet apps?

They include Google Pay, Apple Pay, and PayPal.

💳 How much does it cost to create a digital wallet?

In general, you can expect to pay anywhere from $50,000 to over $160,000 for the development of a mobile wallet app.

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