All-in-One Guide: Digital Wallet Development

The online payments market is one of the fastest growing — according to Fortune Business Insights, it’s expected to hit $17,643.35 billion by 2027. This booming development is based, among other things, on users’ great interest in convenient, fast, and secure payment methods. Digital wallets meet all these criteria — they enable fast transactions, offer convenient payment options and a high level of security for user data.

To help you get answers to all your questions about these apps, we’ve created a comprehensive guide to digital wallet development. Inside, you’ll learn how to develop a digital wallet, what subtleties to pay attention to when designing the user interface, what trends to expect in the niche, how to win user loyalty with advanced features, and much more.

History of Digital Wallets

The story of the development of digital wallets begins in 1994, when a New Hampshire entrepreneur sold a CD over the Internet via credit card payment. That transaction triggered a string of one technological marvel after another. Here are the key milestones in the digital wallet revolution:

• In 1997, Coca-Cola installed two vending machines in Helsinki that enabled mobile and contactless payments via SMS.
• In 1999, PayPal was launched as an online platform for money transfers.
• Four years later, in 2003, Alibaba launched the mobile payment platform Alipay in China.
• In 2007, the first payment system for cell phones was introduced by M-PESA.
• 2009 brought the first decentralized payment network, which enabled secure, untraceable payments.
• In 2011, Google introduced a discontinued peer-to-peer payments service introduced.
• Three years later, in 2014, Apple Pay launched with 220,000 merchant locations in the United States, and it now claims 2.2 million.

Since then, digital wallets popularity has grown tremendously. According to some estimates, 3.6 billion people — almost half of the world’s population — will be using digital wallets by the end of 2022. But it will not stop there — industry experts predict that digital wallets growth will continue for a long time, reaching over 5 billion users by 2026.

Advantages of Digital Wallets

The increasing use of digital wallets is due to a number of benefits they offer to both businesses and consumers. They save time and money, provide unique services, and even allow instant access to information that would otherwise be unavailable. Below, we listed key advantages of digital wallets for businesses and consumers.

Benefits of digital wallets for businesses

✔️ They improve the customer experience and increase conversion rates by streamlining the payment process and offering customers more payment options.
✔️ They protect cardholders’ sensitive financial data and provide an additional layer of security with biometric features — e.g. fingerprint, retina scan or facial recognition.
✔️ They provide access to real-time data and actionable insights into customer behavior, enabling data-driven decisions and more effective marketing efforts.

Benefits of digital wallets for consumers

✔️ They enable multiple payment methods through a single app, as if users were storing multiple cards in a physical wallet.
✔️ They allow additional information to be stored such as loyalty cards, concert tickets, travel cards, coupons, boarding passes, etc.
✔️ They offer enhanced security — users don’t risk to loose their cards or cash, all sensitive financial data is encrypted and protected by multi-factor authentication.
✔️ They enable P2P money transfers, making it easy to share bills with friends or send money to family.
✔️ Some digital wallets offer advanced features such as expense tracker that helps develop healthy financial habits.

Types of Digital Wallets

There are different types of digital wallets, which can be categorised based on the following criteria:

• target audience
• delivery technology
• goals

Below, we explore the most widespread digital wallet types and explain their differences.

Classification by Target Audience

Depending on the digital wallet functions and target audience, apps can be divided into three groups.

🟢 Closed.
These are developed by a company that sells products or services. The use of such wallets is limited to the purchase of products or services offered directly by the issuer of the wallet; these apps cannot be used for money transfers or payments to third party providers.

🟢 Semi-closed.
Such apps allow users to conduct transactions at listed merchants and stores — both online and offline. To accept such payments, merchants need to sign an onboarding agreement with the wallet issuer.

🟢 Open.
Open digital wallets are issued by a bank or other organization in partnership with a bank. These apps allow users to make any type of transaction, including payments, transferring money between financial institutions, withdrawing cash from ATMs, etc.

Classification by Delivery Technology

This classification is based on the delivery technology.

🟢 NFC.
NFC stands for Near-Field Communication. In short, this technology is a form of contactless payment that enables data to be exchanged between devices that are close to each other — for example, between a smartphone and a payment terminal. It also enables the transfer of funds. The advantages of this delivery technology include easy connection to the ecosystem of e-payment services and a high level of security.

🟢 iBeacon and Bluetooth payment.
Wallets equipped with the Bluetooth iBeacon-based payment method enable contactless data transfer within a certain distance range (up to 70 meters on average). This delivery technology enables electronic payments, is characterized by ease of use, can reduce the requirements on a payment terminal and costs, and can therefore be used more widely.

🟢 Optical/QR code.
Such wallets allow consumers to use their devices to make online and offline payments almost anywhere — e-stores, grocery stores, coffee shops, taxis, etc. A simple tap and scan is all it takes to complete the transaction. The payment information is tokenized, encrypted and contactless.

🟢 SMS-based payment.
These apps allow payments and accounts to be managed via SMS commands and are used in P2P marketplaces and C2B transactions. This delivery technology allows to make payments via a smartphone even when the Internet is turned off, but it is not flexible enough to be widely used.

🟢 Digital delivery technology.
These apps are for online payment only. They are easy to install and use, but useless when it comes to offline payments — digital delivery technology can be used for offline payments in rare cases and under certain conditions.

Classification by Goals

E-wallets have long been a part of everyday life. To win over users and stand out from competitors, issuers constantly add advanced features to their solutions. Depending on the added functions of a digital wallet, they can be used for different purposes:

🟢 Storage and exchange of cryptocurrencies.
Cryptocurrency digital wallets enable secure storage and exchange of crypto assets, protect and validate transaction information, and store private keys. There are hot and cold crypto wallets. Hot wallets are always connected to the internet and include mobile, desktop, and hybrid solutions, while cold wallets are hardware-based and not connected to the internet.

🟢 Money management.
These wallets aim to give users maximum control over their spending and financial habits. They often come with advanced reporting — this function of digital wallet provides deeper insights into one’s spending patterns and helps to reach financial goals.

🟢 Online payments.
Such wallets allow all kinds of online payments and provide fast transactions. They support a wide range of devices and are compatible with most debit and credit cards.

🟢 Money transfer.
Just like other types of digital wallet, these allow all kinds of online payments. However, their function is to provide users with fast and secure local and international money transfers. Such apps help save on transfer fees as they don’t require the involvement of a third-party provider in the process.

Monetization Possibilities

There are multiple ways e-wallet can make money. But essentially, they all boil down to the following:

• Charge users for cash withdrawals, cross-border transfers, etc.
• Charge transaction fees from merchants or banks. For example, a bank that issued users’ connected payment cards pays a certain amount to the wallet issuer. This way, Apple charges 0.15% for each payment made through Apple Pay.
• Generating interest income from customer funds held in partner bank accounts.
• Sale of anonymized and aggregated users behavioral data.

However, before an e-wallet can turn a profit, it has to establish a strong market presence and grow the user base.

Digital Wallet Trends

There’s no doubt that mobile wallets will continue to dominate the way people make purchases. But what can we expect from these apps in the coming years? Let’s explore the key digital wallet trends and the technologies driving their development.

Extensive Use of AI & ML

When it comes to users’ money and sensitive data, security is crucial. Banks and financial companies have been actively investing in AI- and ML-powered fraud prevention solutions lately, so the chances are that digital wallet issuers will pick up on this trend. The scope of these technologies in the fintech space is immense — from improving decision-making and automating customer service to virtual financial assistants and predictive analytics.

Advanced Biometric Authentication & Verification

We are all used to biometric authentication being applied in financial apps to log in or verify transactions. The most common techniques for biometric check are fingerprint and retina scanning, face recognition, and vein mapping. However, data breaches still occur, leading to identity theft and fraud. As fraudsters’ methods become more sophisticated, financial service providers need to move forward more advanced options to protect users’ data and funds.

Increased Adoption of Voice-Activated Transactions

Voice-enabled transactions haven’t been on the rise in the financial industry, however, this digital wallet technology is expected to become more widespread. To implement voice-controlled authentication and transaction verification, wallet issuers leverage AI capabilities — either by integrating existing voice recognition solutions or developing their own.

Increase in QR Codes

The benefits of QR technology include flexibility, convenience, efficiency, affordability and a wide range of applications. It’s no wonder that more and more businesses want to give their customers the ability to pay with quick response codes, and digital wallets are expected to meet that demand.

Keys to Get Users Love Your App

As mobile wallets have evolved over time, users’ expectations of them have also grown rapidly. And when it comes to the features digital wallet offer, users want more than just high transaction speed and data security. Below, we explore winning digital wallet features that will help you win users love and make them recommend your app to others.

Smooth Onboarding Flow

There’s only one chance to make a first impression. In this regard, registration and onboarding can either make it or breake it — high drop-off rate is often caused by a confusing registration process. Users don’t want to be confused, they want to complete their tasks quickly and without extra effort. A smooth onboarding flow is a powerful tool to delight users from the start and get them to keep engaging with the app.

Frictionless User Experience

The role of user experience cannot be overstated, especially when it comes to a fintech app that users trust with their financial assets and sensitive data. This way, it is crucial to ensure the best user experience possible. The most efficient way to achieve this is to have a well thought-out app design and ensure intuitive navigation.

• The best user interface is an invisible one that helps users focus on their goals and guides them to what they need.
• As far as navigation goes, it’s about structuring an app to be simple and efficient, not just about design aesthetics. It needs to be consistent and simple, and provide a clean interaction that relates to the physical way users interact with the navigation in a variety of contexts.

Reward Programs

Mobile wallet rewards are an effective brand loyalty strategy. They can be loyalty points that users receive exclusively for performing desired actions within the app, which can then be spent on something; or cashback for payments at certain merchants; financial referral programs; etc. Whichever option you choose, it will boost user engagement and help increase the number of users by encouraging them to recommend your wallet to their friends, colleagues and family members.

Of course, all of these are add-ons that cannot exist in isolation and should be built on top of an efficient, robust, and well-designed application. The core digital wallet features are described in the next section.

Core Components & Costs

Let’s explore the basic features of the digital wallet and their cost. Please note that all estimates are rough and can go either way. For simplicity, features are estimated in labour hours — to express it in monetary terms, multiply the labour hours by the hourly rate of your software development partner. On average, the hourly rate of experienced fintech developers starts at $40.

Registration & Onboarding

The financial services industry is heavily regulated, and fintechs are also subject to these regulations. To comply with AML requirements, it is necessary to allow users to undergo KYC verification (or KYB — this depends on the specifics of your particular app) during registration. For this purpose, your digital wallet will be integrated with a KYC provider (e.g. Jumio or Alloy). Such solutions not only allow you to perform KYC, but also help fintechs prevent fraud and money laundering.

💡 On average, it takes 14–26 hours to implement registration & onboarding for iOS devices and 20–28 hours for Android. Backend development takes between 18 and 26 hours.

Authentication

Although it’s a standard feature of any fintech app, it should be approached with proper attention as it implies handling user credentials. Therefore, security measures should be taken — a common practice is to enable multi-factor authentication.

💡 Implementing a secure login with MFA takes 14–26 hours for iOS and 20–28 hours for Android. Backend development takes between 18 and 26 hours.

Card Management

As mentioned earlier, one of the biggest advantages of mobile wallets is that they allow users to store a variety of information in a single app — not only credit or debit cards, but also loyalty cards, coupons, tickets, etc. This multitude of items should be easily and conveniently managed so that users can switch between cards or their categories, select a card for payment, view transaction history, etc.

💡 Card management implementation takes between 75–109 hours for iOS and 88–124 hours for Android. The backend requires about 75–105 hours.

Money Management

This feature includes topping up accounts, checking account balances, withdrawing money, transferring money to other cards within the app, and making transfers to other users. Needless to say that all transactions should be fast and secure.

💡 Implementing money management requires between 35–48 hours for the iOS app and 44–58 hours for Android. The backend development takes 166–105 hours.

💡 If you want your users to be able to pay rent, utilities, telecom, insurance and other bills with your digital wallet, this requires extra time — 36–50 hours for iOS, 44–56 for Android, and 165–221 for backend development.

Payment Link Sharing & Contacts Management

This feature allows digital wallet users to create and share a payment link in the app or generate a link to request and send money through a messenger of their choice. Payment links function takes between 32–43 hours for iOS and 44–56 hours for Android. The backend takes 101–134 hours.

💡 The contact management feature allows users to manage contacts manually or sync the app with the phonebook and requires 54–73 hours for iOS, 63–80 for Android, and 40–55 hours for backend development.

Analytics & Reporting

It’s crucial to provide users with actionable insights into their spending patterns through comprehensive information about their transactions. To enable your digital wallet to analyze expenses and create descriptive and digestible charts and infographics, you can implement the analytics and reporting feature.

💡 This feature requires between 120–160 hours for iOS, 140–180 hours for Android, and 83–109 hours for the backend.

User Support

It’s not that difficult to gladden already satisfied users. However, when a user faces a problem, it is the availability and quality of support that determines their overall experience. Therefore, it’s important to implement efficient support service.

💡 This takes between 20–28 hours for iOS, 26–34 hours for Android, and 22–32 hours for backend. Note that this is estimate for a basic support system — advanced features like AI-powered chatbot requires extra time.

Notifications & Alerts

Notifications are not only necessary to keep users updated about their transactions and account, remind them about upcoming payments, etc. They are also a powerful marketing tool — used correctly, they can increase user engagement and retention and contribute to upselling and cross-selling.

💡 Implementing the feature requires 28–39 hours for iOS and 37–45 hours for Android. Backend development takes between 22–32 hours.

Advanced Functionality

Depending on the specifics of your app and your target audience, you may want to add some advanced features. These can be QR-enabled payments, bill splitter, crypto asset management or even trading, loyalty program, budget planning and so on. For more information about these additional features, the time required to implement them, and the overall digital wallet architecture see our article on e-wallet app components.

Core Principles of Digital Wallet Design to Follow

We’ve already discussed that a clear & engaging user interface and intuitive navigation are a must for a successful digital wallet. Let’s now explore the basic principles for designing such an app that would help you overcome the challenges of fintech UI/UX, create convenient and extensible digital wallet UI, and provide a superior and seamless experience for your users.

User Centricity at the Top of Everything

A customer-focused approach is a powerful tool that can be used in all business processes, not just in building a digital wallet. In a nutshell, it’s a strategy that puts the customer at the center of business decision making. This way, you can make data-driven decisions and adapt your products to users’ expectations and needs, helping them solve their problems with your app, and thus win their loyalty and love, which directly affects more mundane metrics like user acquisition, time in app, lifetime value, and others.

Data Visualisation

Digital wallet interface is essentially all about numbers. Lots of details should be displayed on the user’s device — debited/credited funds, transaction information (volume, date, recipient, etc.), etc. To prevent users getting bogged down in long walls of symbols, data visualisation should be on top. Numbers are easier to digest in the form of clear and understandable graphs and charts than in their numerical form, so make the most of visualisation opportunities.

Smart Gamification

It’s undeniable that the subject of money is sensitive and should be taken seriously. However, a dash of fun can never hurt. Gamification is on the rise at fintect. Used skillfully, it increases user engagement and drives unique user experiences and “aha!” moments.

Consistency

Consistency helps build a relationship with an audience and deliver the intended message. Conversely, a lack of consistency leads to user confusion, slow design and development processes, and difficulty in onboarding. A good way to eliminate inconsistencies is to implement a design system. A well-thought-out digital wallet system design also reduces cognitive load, increases the overall speed of development, shortens time to market, and allows you to save time and money on redundant questions or repetitive designer work.

These are four of six basic design principles. To learn the rest and find a comprehensive 5-step plan for digital wallet design, read our article on best practices for e-wallet app design.

Top Companies to Outsource Digital Wallet App Development

Digital wallet app development requires a deep understanding of the ins and outs of the financial industry and solid engineering skills. But that’s not all — a company you trust to develop your app should have an impeccable reputation, as it will also affect the trustworthiness of your future product. Therefore, you should not only check the company’s portfolio and technical capabilities, but also make sure that it is a reliable, reputable partner.

To help you find the best digital wallet development company, we’ve explored the market and shortlisted top agencies that would bring their expertise to create a secure, user-friendly, and efficient fintech solution for you.

Itexus

With top tech talents on board, years of fintech engineering experience, robust development processes and a customer-centric approach, Itexus creates secure, powerful and engaging digital wallets with efficient designs and integrates them with industry-leading third-party service providers. The company offers full-cycle product development and post-launch maintenance and support services, as well as team augmentation for those who need to reinforce in-house development team with seasoned engineers, designers, and other specialists.

Nimble AppGenie

As a digital wallet app development company, Nimble AppGenie creates robust and high-quality apps for Android, iOS and wearables. Their specialists can advance your app the way you want, from various integrations to unique features that set your app apart from the competition.

Octal IT Solution

The team at Octal strives not only to develop software, but also to deliver engaging digital experiences to users through mobile products and digital wallet web app development. The agency is constantly scaling its technology stack and expanding its expertise in the fintech space, so you can expect nothing but a high-quality and extensively tested product.

AppsChopper

AppsChopper is a one-stop shop for custom digital wallet development that aims to create advanced apps with cutting-edge features and payment technologies. Whether you want to enrich your app with budget management, cryptocurrency trading or other features, the company’s engineers are here to make your ideas a reality.

To explore more trustworthy agencies, check out the full list of digital wallet app development companies, where you can also find some insightful tips on the subject.

Itexus Digital Wallet Portfolio

Now that you know all about digital wallet development, you may want to get some inspiration to refine your own app idea. To that end, you can check out a couple digital wallet projects Itexus has delivered for our clients.

🧩 Money Saving and Personal Finance Assistant App

The app delivered for a Silicon Valley startup helps users develop healthy financial habits with advanced gamification features and supports viral marketing through social features. Within the app, users can manage their finances, set and achieve savings goals, participate in various challenges (such as “Cutting down on junk food”), and invite friends to track or compete with their progress. To ensure an appropriate level of security, the app uses in place role-based access controls, multi-factor authentication, encryption, and other measures. To learn more about the project, read the original case study.

🧩 Personal Finance Assistant App

In a nutshell, it’s an intelligent money management system designed to help users make proactive and rational decisions about their finances. The app’s target audience is millennials, who often struggle to keep track of their regular spending. The solution takes advantage of ML and AI technologies to analyze, systematize, and categorize data about the user’s income and expenses over a period of time and displays the corresponding results in the form of graphs and charts. To learn more about the project, read the original case study.

🧩 Team Extension for Building eWallet

At Itexus, we do not just provide turnkey financial software development — we also offer flexible engagement models to fill the knowledge or skills gap in your in-house team. That’s exactly what we did for a fintech startup from Northern Europe. Our client had already started developing a digital wallet and then decided to hire more mobile developers with deep fintech expertise to increase the project’s capacity and accelerate the product’s time to market. To learn more about the project, read the original case study.

Summary

Digital wallet development requires resources, expertise, attention to detail, and a deep understanding of the needs, habits, and problems of the target audience. But if you get it right, the effort will be rewarded, because the market for mobile payment solutions is growing rapidly, as is the number of users who are taking new approaches to their daily financial operations.

Want to develop a digital wallet from scratch, or looking for a couple of specialists to fill the skills gap on your team? Whatever your goal, we have the resources and expertise to help you reach it. With a team of experienced fintech engineers, designers, business analysts, project managers, and other specialists, we can help you turn your idea into an impactful, secure, and outstanding digital wallet that users will love. Contact us to find out what benefits our expertise can bring to your project.

Originally published at Itexus blog on September 29, 2022.