How to Create a Digital Wallet in 2024?

The global digital payments market is on an upward course, with a projected revenue of $14.79 trillion by 2027. Impressive, right? Also, an impressive two-thirds of adults across the globe are now embracing digital payments, with a striking 89% utilization rate in the United States.

As clients and businesses increasingly embrace the convenience, security, and efficiency of digital payments, the demand for innovative digital wallet solutions has never been higher.

Companies like PayPal, Samsung Pay, Google Pay, and Apple Pay are leading the charge in answering the question of how to create a digital wallet app and pushing the industry forward. Mobile shopping could make up a big chunk, possibly 80%, of all online shopping in just a few years. Let’s check out what a digital wallet is and how it can benefit your business.

What Is A Digital Wallet?

The digital wallet is a solution that eliminates the need for plastic payment cards and physical wallets. This helps both users and financial institutions. If you want to know how to build a digital wallet app, you should learn that not all wallets are the same. By looking closely at all the different apps out there, you’ll see they all have diverse goals and ways to use them.

There are different types of mobile wallet apps, for example:

1. Closed-Loop. Walmart, Starbucks, and 7-Eleven represent closed-loop businesses, where their mobile apps are limited in what they can be used for. These closed-loop apps aim to enhance customer loyalty and encourage purchases from specific companies. With this approach, mobile wallets can substitute physical storefronts and improve communication between businesses and customers.
2. Open-Loop. When it comes to open e-wallets, users can add as many virtual cards as they want, connect as many bank accounts as they wish, and, most importantly, pay for anything they want. They can use a digital wallet like Google Pay or Venmo to pay for Uber rides, energy bills, and anything else. They can also add any number of credit and debit cards, gift cards, loyalty cards, etc., to the wallet.
3. Crypto wallets. Learning how to build a digital wallet empowers you to develop apps for managing cryptocurrencies, enabling activities like staking and trading. Cryptocurrency wallets are migrating to mobile platforms, where users are most active. Popular open wallets like Venmo and Cash App often include crypto features to attract and retain users.

Looking for fintech software development services? Reach out to DashDevs and let’s discuss.

How Do Digital Wallets Make Money?

When it comes to understanding how digital wallets make money, top mobile wallet app providers primarily focus on several key business models, including mobile top-ups, bill payments, e-wallet services, and e-commerce features during the beginning to build a mobile pay wallet app. Here’s a breakdown of how they generate revenue (so you can use this approach in your future products):

1. Recharge services. Digital wallet companies often kickstart their revenue stream by offering recharge services. Operators pay these providers a fee, typically around 2% to 3%, for each successful recharge completed through their platform. For example, mobile networks incur these fees when customers recharge their mobile phones using digital wallets.
2. Bill payments. Digital wallet companies may also earn revenue through commissions on various bill payments, such as utilities or tuition. Service providers compensate the digital wallet company for facilitating these transactions.
3. E-commerce transactions. In online shopping, companies that offer mobile wallets can earn revenue by taking a percentage of the final selling price of products. This commission typically falls within the range of 0% to 20%.

Additional revenue models include:

1. Seller fees. Sellers may pay a monthly fee to digital wallets to list and sell their products on their platforms.
2. Inter-platform transactions. Some digital wallet companies, like FreeCharge and Snapdeal, make money when customers transition between their platforms. For instance, if a customer moves from FreeCharge to Snapdeal, Snapdeal compensates FreeCharge for this transition.
3. Card transaction fees. Banks are also involved, paying fees to sites that offer digital wallets when customers use debit or credit cards on these platforms.
4. Exclusive seller agreements. Some sellers exclusively list their goods on wallet firms’ websites, allowing the wallet companies to earn a significant share of the proceeds.

Building Your Digital Wallet Step-by-Step

It’s worth mentioning that digital wallets, like many other fintech software e.g., neobanks, require banking API integration to operate. Now, let’s move to exploring the entire process of how to create a digital wallet step by step:

Step 1: Define Your Unique Features

• What to do: With numerous digital wallet options available, it’s crucial to pinpoint what sets your app apart. Define its unique digital wallet features before diving into development.
• How to: Understand your app’s distinct value proposition to ensure success in the current market.
• Practical recommendation: Clearly define your app’s differentiating features from the start to enhance its competitiveness.

Here are the must-have ones to discover and understand how to set up an e wallet and make it user-friendly.

• Payments

Digital wallets serve as repositories for users’ funds, enabling them to make purchases conveniently. Hence, offering seamless payment methods within your digital wallet is crucial. In addition to facilitating user-to-user transactions, consider the vital role of vendors in enhancing this feature for businesses. When partnering with trusted vendors, you can offer users a broader spectrum of payment options, from credit cards to mobile banking integrations, and enhance your digital wallet’s overall usability and attractiveness.

• Transaction history

When you learn how to build a digital wallet, you also learn that there has to be a simple record of all financial dealings. Having search, filter, and sort functions here would be helpful.

• Budgeting tools

You can create a digital wallet that will lead a market by seamlessly incorporating, among others, a budgeting feature into your product. 

At first glance, it may seem like budgeting is one of those tasks needing a dedicated tool. At the same time, a customer’s mobile wallet may be more valuable if it reveals their spending patterns across different purchases and offers suggestions for saving money.

Many e-wallet applications currently require users to connect external budgeting tools, such as Mint or YNAB, to their digital wallets. By offering this functionality within your wallet, you can set yourself apart and provide users with a comprehensive and convenient financial solution.

• E-commerce

While brand-specific ‘closed wallets’ like those for 7-Eleven or Starbucks may offer in-app product displays, you can build out a mobile wallet app that differentiates itself by establishing affiliate connections with various businesses. This enables you to provide a diverse selection of items and services that cater to the preferences of your target audience. 

• Rewards

Your wallet can offer customers the option of a cashback card or earning loyalty rewards from purchases. For this feature you will need to implement a separate panel displaying a balance summary, or cashback, etc., may be required for these incentives.

• Crypto, investing, and other advanced features

Lastly, ensure there’s a place in the app for specialized features. Among the capabilities of competing digital wallets is the ability to create a digital currency wallet where people can make loans, divide up bills, trade and invest in cryptocurrencies, and make and receive investments.

Step 2: Opt for the Right Development Technology

• What to do: Choose technology that minimizes bugs and maximizes performance to offer the best quality to users.
• How to: Node.js is a strong recommendation for its scalability and cross-platform compatibility, ensuring reliable payments.
• Practical recommendation: Alongside Node.js, explore other modern technologies, such as React Native for mobile app development or Python for backend integration, depending on your project requirements. Conduct thorough research and consider consulting with experienced developers to make an informed choice for robust and reliable digital wallet development.

Should you need fintech consulting assistance with choosing a tech stack, defining best-suited features, and more, don’t hesitate to reach out to DashDevs.

Step 3: Design an Exceptional User Interface

• What to do: Craft a high-quality interface to ensure users feel comfortable and confident using your payment technology.
• How to: Prioritize user experience, as discomfort or confusion can deter users. Effective UX design hinges on comprehending your clients and prioritizing a user-centric approach to design. Ensure the design team will conduct thorough individual interviews, conduct competitive research and analysis, and craft wireframes and prototypes.

1. Product Definition
2. Research
3. Analysis
4. Design
5. Validation

• Practical recommendation: Design an intuitive and user-friendly interface for your digital wallet app.

Step 4: Registration, sign-in, and onboarding

What to do: Pay close attention to a seamless onboarding experience for new users; your digital wallet must prioritize user registration and sign-in processes while adhering to Know Your Customer (KYC) regulations.

How to:

1. Design an onboarding process that efficiently collects essential user information while adhering to KYC requirements. KYC verification ensures the legitimacy of users, enhancing security.
2. Enable users to sign up using their phone numbers, simplifying the registration process and serving as a foundation for two-factor authentication (2FA). 2FA adds an extra layer of security to their accounts.

Practical recommendation: Consider integrating social authentication methods like Facebook to provide users with convenient sign-up options. However, ensure these methods comply with KYC regulations and provide adequate user identity verification.

Step 5: Establish Payment Integration Frameworks

• What to do: Ensure your service connects with multiple payment frameworks to maximize utility.
• How to: Collaborate with specialists familiar with local laws and payment integration standards. For example, open the possibilities with Marqeta’s digital wallet integration. Whether you’re streamlining payments, enhancing security, or improving user experiences, Marqeta offers comprehensive solutions.
• Practical recommendation: Develop expertise in various payment frameworks to broaden your digital wallet’s appeal.

Step 6: Prioritize Security

• What to do: Emphasize security to protect user funds and maintain trust.
• How to: Implement comprehensive digital wallet security measures to prevent potential losses.
• Practical recommendation: Provide robust security frameworks to safeguard user funds effectively. Digital wallets typically use strong encryption techniques to safeguard sensitive payment data, guaranteeing safe transactions and preventing unauthorized entry. Even if hackers manage to breach the digital wallet database, this security measure ensures they won’t obtain any information.

Step 7: Awareness and Trust

• What to do: Commit to educating your users and fostering trust in digital payment methods, emphasizing digital wallet benefits can provide to ensure successful adoption.
• How to: Implement user-friendly guides, tutorials, and informative content to enhance user awareness and understanding. Employ transparent security measures and showcase the benefits of using your digital wallet.
• Practical recommendation: Develop engaging educational resources and prominently communicate the security features and advantages of your digital wallet to build trust and encourage user adoption.

Step 8: Merchant Integration

• What to do: Help businesses adapt to contactless payments to drive user adoption.
• How to: Collaborate closely with businesses to integrate your wallet seamlessly into their payment systems. Build strong partnerships where both parties benefit—businesses gain access to a wider customer base, and your wallet gains broader acceptance.
• Practical recommendation: Provide comprehensive support to businesses during the integration process. Offer resources, training, and incentives to make it as smooth as possible. Encourage businesses to promote your wallet to their existing customers and reward them. Building strong relationships with merchants is vital to the success of your digital wallet.

Step 9: Start with a Minimum Viable Product (MVP), Test, and Scale

• What to do: Create an MVP, then proceed to a full-scale product.
• How to: Test your concept before launching it to the public.
• Practical recommendation: Develop an MVP, conduct thorough testing, and then release a complete digital wallet solution to ensure its success.

Challenges in Creating a Digital Wallet Application

The main benefit of learning how to create a digital wallet is to understand how much people need it. Even though you can build out a mobile wallet with undeniable benefits, you should be aware of potential pitfalls before, during, and after the creation process that could greatly impact on how well your product does.

1. Security: Protect sensitive user information from unauthorized access and breaches and comply with data protection and privacy regulations, such as payment details and personal data. Avoiding security breaches helps you avoid costly legal penalties and liabilities. Also, when customers feel their data is safe, they are more likely to use your mobile wallet and recommend it to others.
2. Legal compliance: Digital wallet providers must adhere to location-specific regulations. In the United States, for example, they must follow the Bank Secrecy Act, USA PATRIOT Act, and Dodd-Frank Act. 
3. The European Union’s compliance involves adhering to GDPR, PSD2, and AMLD. Operating in Saudi Arabia necessitates a license from SAMA and compliance with e-commerce, cybercrime, and data protection laws. The Central Bank oversees regulatory compliance in the UAE, issuing guidelines to ensure payment safety and user rights.
4. Device compatibility: Keep the software up to date for both iOS and Android development to encourage adoption. 
5. Enhanced functionality: You should always learn about your rivals and market trends to expand the app’s features beyond basic transactions to remain competitive during and after the digital wallet development.

By tackling these challenges, you can build out a mobile wallet solution of a high-quality, that would become your competitve leverage and attracts users.

Examples of Digit Wallet Companies

Before diving into digital wallet development, let’s explore the most popular digital wallets that have taken the market by storm.

• Elvn crypto messenger: Developed by DashDevs, Elvn integrates crypto wallet functionality, cryptocurrency trading capabilities, and social networking features. DashDevs made a groundbreaking move by crafting an iOS wallet app that unifies various crypto platforms, catering to businesses and their clientele.
• PLC wallet: Also a creation of the DashDevs team, PLC Wallet facilitates calculations and transactions within the Platincoin system. The primary aim of this app is to simplify cryptocurrency usage, making it accessible to individuals with limited prior knowledge or experience in the field.
• Daalder: Daalder, another child of our team, enables seamless money exchanges between customers and merchants using mobile devices. Merchants benefit from direct contactless and mobile payments, eliminating the burden of high transaction fees often associated with such methods. Additionally, Daalder offers the convenience of shared wallets, allowing friends to split bills effortlessly.
• PayPal: Renowned as one of the premier payment services globally, PayPal offers a seamless payment experience, both online and in-person, through its innovative One Touch software. This versatile app is compatible with Android and iOS devices, providing clients with a convenient payment solution.

To Sum Up

In summary, digital wallets are pivotal in the growing fintech field. As you venture into creating a digital wallet, consider seamless integration with social media platforms. To learn more, explore our article on social media payments. With insights on digital wallet development and challenges, you’re ready to begin.

Interested in Developing a Digital Wallet?

Hiring an expert fintech team is essential for creating a digital wallet and financial software since only the team with experience developing fintech products can create a competitive product. DashDevs company has the expertise you need and excels in delivering cutting-edge fintech technology and innovative business solutions.

Contact us today to discover how we can help you make a digital wallet that will exceed your expectations.