How to Create a Digital Wallet: Step-by-Step Guide

Digital wallets are experiencing explosive growth, with over 3.4 million users worldwide and 2838 billion digital wallet transactions projected by 2028. As consumer demand for fast, secure, and convenient payments accelerates, businesses are increasingly exploring digital wallet development to unlock new revenue streams and boost user engagement.

With this surge comes a key question for fintech founders and product teams: how to create a digital wallet that is secure, scalable, and competitive?

Building a digital wallet is a complex process—from compliance and security to architecture and integrations—but the long-term payoff is significant. Convenience, speed, and customer loyalty grow when the product is built right. In this guide, we break down what a digital wallet is, how it works, and how to create a digital wallet through a structured, efficient digital wallet app development process.

TL;DR—Quick Summary

• This guide explains how to create a digital wallet, covering wallet types, core features, security requirements, and compliance considerations.
• You’ll learn the full digital wallet app development process—from architecture and integrations to UI/UX, testing, and launch.
• We break down best practices for digital wallet development to help you reduce costs, speed up time-to-market, and build a secure, scalable fintech product.

What Is A Digital Wallet?

The digital wallet eliminates the need for plastic payment cards and physical wallets, which benefits both users and financial institutions.

A digital wallet, also known as an e-wallet, is an online service that enables electronic transactions between parties as payment or document validation, such as tickets or pass cards.

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:

Semi-closed wallets

These operate within a defined merchant ecosystem—common in telecom, mobility, and regional super-apps (e.g., Paytm, M-Pesa, GrabPay). Semi-closed models strike the ideal balance for startups and regional fintechs: easier licensing, faster rollout, strong control over merchant integrations, and early revenue from interchange, merchant fees, and A2A payments. They’re often the best starting point for early-stage wallet builders.

Closed-loop wallets

Brands like Walmart, Starbucks, and 7-Eleven use closed-loop wallets tied exclusively to their stores. While limited in payment scope, they are compelling for loyalty, repeat purchase behavior, and cost-efficient settlement (no external card rails). They allow businesses to replace physical loyalty cards, streamline customer engagement, and create their own micro-economies.

Open-loop wallets

These enable users to connect multiple cards and accounts and pay any merchant anywhere—examples include Google Pay, Apple Pay, and Venmo. Open-loop wallets require deeper compliance, bank partnerships, and infrastructure maturity, but they unlock higher transaction volume and broader monetization: interchange, FX, embedded lending, A2A, and merchant SaaS.

Crypto wallets

Crypto-first or hybrid wallets let users hold, trade, stake, or move digital assets. Mainstream open wallets like Venmo and Cash App increasingly integrate crypto rails to boost engagement, retention, and cross-border monetization. With stablecoins entering mainstream payments, crypto wallets are becoming part of the core digital wallet landscape rather than a niche category.

How Do Digital Wallets Make Money?

Modern digital wallets no longer rely on old-school revenue streams like mobile recharges or bill-payment commissions. Instead, today’s most successful wallet platforms build their economics around financial infrastructure, embedded finance, and merchant-side monetisation.

Here are the core revenue models shaping the future of e-wallet profitability:

1. Interchange & FX Spread

Every card payment—physical or virtual—generates interchange. For international transactions, wallets layer an additional FX spread, earning a margin on currency conversion. This model scales with transaction volume, making it a cornerstone for consumer and travel-focused wallets.

2. Embedded Lending

Credit inside the wallet is one of the strongest revenue engines.

Wallets generate income through:

• Interest on short-term loans
• Pay-in-3/pay-later fees
• Merchant-funded discount rates
• Late fees (where allowed)

Embedded lending dramatically boosts ARPU and retention.

3. Instant Payout Fees

Whether it’s gig-economy workers cashing out earnings or merchants receiving settlements, instant payouts offer convenience—and an opportunity to charge a fee (typically 1–2%). This creates a high-margin, high-frequency revenue stream.

4. Subscription Tiers

Premium plans create predictable recurring revenue.

Wallet providers upsell features such as:

• Higher limits
• Lower FX fees
• Priority support
• Cashback boosts
• Virtual card bundles
• Multi-currency wallets

Subscriptions work especially well for cross-border and freelancer wallets.

5. Merchant SaaS Services

Beyond payments, wallets increasingly monetize merchants through SaaS layers:

• POS systems
• Invoicing & accounting tools
• Payouts and payroll
• Loyalty & rewards infrastructure
• Risk scoring & chargeback protection

This turns the wallet into a business operating system—not just a payment method.

6. Open Banking Payments (A2A)

Account-to-account payments reduce card scheme costs and create new revenue opportunities:

• Per-transaction fees charged to merchants
• Verification/KYC add-ons
• Recurring A2A payment mandates
• Premium settlement features

A2A is rapidly becoming the preferred rail for high-value and high-frequency payments.

7. Stablecoin Rails

Wallets increasingly integrate stablecoins for:

• Cross-border remittances
• On-chain merchant settlements
• Treasury optimisation
• Near-instant global transfers

Revenue comes from on/off-ramp fees, spread on conversion, and merchant settlement margins. For global wallets, stablecoins are becoming a major driver of speed and profitability.

Building Your Digital Wallet Step-by-Step

It’s worth mentioning that digital wallets—like many other fintech products, including neobanks—require a strong technological and operational foundation to function reliably. At DashDevs, we’ve built a range of successful solutions such as MuchBetter, PayTile, and Eleven, each showcasing different approaches to digital wallet development. Below, we break down the full process of how to create a digital wallet step by step, enriched with insights from these real-world cases.

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 differentiation 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

Payments are the core of any e-wallet app. Whether processing peer-to-peer transfers or merchant payments, users expect instant, smooth, and secure transactions.

For example, MuchBetter—a global e-wallet built by DashDevs—integrates multi-layered payments, vendor connections, and instant transfers, making it efficient for both consumers and merchants.

Transaction history

When you learn how to build a digital wallet, you also learn that it must 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, budgeting may seem like a task that requires a dedicated tool. However, 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 integrations

Beyond closed-loop wallets (like Starbucks), you can introduce affiliate marketplaces to expand user value.

PayTile, for instance, used geolocation-based reward drops and merchant partnerships to blend payments with shopping gamification.

Rewards

The 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, cashback, etc., which 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.

Real-world wallet builds we’ve delivered:

MuchBetter

Region: UK

Use Case: Built a high-volume e-wallet and payment app for the gaming/online-gambling sector, delivered under tight budget and timeline constraints.

Outcome: Available in 180+ countries, supports more than 400K users and 300+ merchant integrations, and has a unified API interface that scales easily to add new merchants, banks, and payment methods.

PayTile

Region: US

Use Case: A private digital wallet enabling geolocation-based transfers and reward drops (gift cards/discounts) to drive foot traffic to partner physical stores.

Outcome: Supports 5M+ users worldwide, maintains a 4.5+ rating across major mobile platforms, and has been honored with the Webby Award for Best User Experience in Finance; delivers a private digital wallet with barcode check-in, user ID functionality, geolocation-based reward drops, and a growing partner store network that drives customer engagement and merchant loyalty.

Eleven

Region: Germany

Use Case: Created a combined secure messenger and crypto wallet, enabling users to send BTC or native coins as easily as a chat message, alongside voice/video chat features.

Outcome: Delivered full backend crypto-integration, blockchain (SPV) access, and secure chat infrastructure; positioned the client with a converged communications and fintech offering in Europe.

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: At DashDevs we typically combine Node.js with microservices architecture, containerization (Docker/Kubernetes), and event-driven processing for high-volume transactions. The final stack depends on regulatory region, scale, and product roadmap.

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 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.

• Product Definition
• Research
• Analysis
• Design
• 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:

• Design an onboarding process that efficiently collects essential user information while adhering to KYC requirements. KYC verification ensures users’ legitimacy, enhancing security.
• 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 . 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. DashDevs implements AES-256 encryption, tokenisation, device fingerprinting, biometric authentication, SCA flows, and PCI DSS compliant environments. 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 the benefits digital wallets 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: 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 how well your product does.

• 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.
• Legal compliance. Digital wallet compliance varies per jurisdiction and may involve central banks, financial authorities, and data protection bodies (e.g. FCA, CBB, SAMA, MAS, etc.)
• Guidelines compliance. Adhering to GDPR, PSD2, and AMLD is required for European Union compliance. Operating in Saudi Arabia requires a license from SAMA and compliance with e-commerce, cybercrime, and data protection laws. The Central Bank oversees regulatory compliance in the UAE and issues.
• Device compatibility. Keep the software up-to-date for both to encourage adoption.
• Enhanced functionality. To remain competitive during and after digital wallet development, you should always learn about your rivals and market trends. This will allow you to expand the app’s features beyond basic transactions.

By tackling these challenges, you can build out a high-quality mobile wallet solution that will become your competitive leverage and attract users.

To Sum Up

In summary, digital wallets are pivotal in the growing fintech field. When creating a digital wallet, there are many aspects to consider, such as legal compliance and guidelines, especially those tied to a region. But with a reliable team, those can be easily tackled.

DashDevs is best suited for fintech founders, non-financial brands embracing embedded finance, and regulated institutions seeking fast, compliant wallet solutions. Our hybrid expertise in payments, compliance, and product engineering has enabled us to build scalable wallets across Europe, the US, and MENA. 

From global e-wallets (MuchBetter) to reward-driven wallets (PayTile) to crypto messenger wallets (Eleven) — DashDevs has proof points across wallet types & markets, delivering high-performance digital wallet development.

If you’re ready to build a digital wallet that stands out in the market, DashDevs is the partner that turns ideas into reliable, revenue-driving products.

Contact us.