Digital wallets seem to be everywhere, and it makes sense. Digital wallets carry an unmatched potential within the financial world. Now, instead of carrying around a wad of cash in a physical wallet or a thick wallet filled with plastic, anyone with a smartphone can access a digital wallet on the cloud or an app and pay for purchases from their phone or smartwatch.
With the future of fintech also looking bright, it makes sense that fintech entrepreneurs consider digital wallets as a financial feature in their tech and product stack.
Not sure where to start? This article will present how digital wallets work and 13 of the best use cases for digital wallets:
How Digital Wallets Work
White-labeled mobile wallet platforms enable users to securely access an online wallet where cash, credit, and other forms of currency can be stored. They can hold digital currency, including cryptocurrency, credit card payment methods, debit card payment methods, gift cards, tickets for things like flights, and loyalty cards.
Digital wallets operate through partnerships with other financial services, like open banking service providers, banking platform connections, and BaaS infrastructure. Depending on the type of infrastructure you currently have, you can create or add on a virtual wallet.
Secure API connections really make digital wallets thrive. Secure APIs can be used for all aspects of the digital wallet, such as KYC, bank account linking, and ACH transfers.
When users access that wallet, their identity is first confirmed. Then they are allocated a wallet ledger that only they can access. With API partnerships, users can connect their bank account so that they can upload and transfer money to and from the digital wallet.
13 Really Good Digital Wallet Use Cases
No longer are digital wallets only available from large wallet providers like Apple Wallet, Samsung Pay, Google Wallet, or PayPal. Now, more individuals can create digital wallets for their clientele to use.
Here are some really good use cases for digital wallets:
1. Merchant Payment Services
Merchant payments are the number one reason why businesses add digital wallets as a financial feature. Payment functionality makes it easier to buy items online and offline using credit cards and debit cards kept securely in digital wallets.
These features make payments simpler, safer, and very cost-effective.
You may think that there is a lot of competition in the marketplace. However, personalized and white-labeled merchant payments can become popular in niche settings. You could offer this feature as part of your sales process so that your mobile shoppers don’t have to sign up with another digital wallet or payment processing app.
Instead, make payment processing seamless.
2. Shared Online Accounts for Allocating Project Funds
Digital wallets can be used for shared accounts online. For example, perhaps you want to offer a shared business account for marketing purposes. If you have a budget for marketing purposes you can put them in a jointly accessed digital wallet.
Shared accounts can be difficult to tap into because of security requirements. If you are planning a trip with friends or you want to open up a shared business account, it might be time-consuming when using traditional banks. A digital wallet can help here.
3. Bill Payment Solutions
Digital wallets can be used to facilitate bill payments. Whether this is for paying the water, electrical, or phone bills, digital wallets can make this functionality far simpler. Automate bill payments, offer split-bill functionality, and pay your debt on time.
Bill payment apps are actually scarce. Most customers have a number of credit cards with different banks, nonbanks, or creditors. Therefore, it would be vital to come up with a bill payment solution to bring them all together. Not all banks offer bill payment as well, so with a digital wallet app, you can be providing a key feature for customers.
Digital wallets with smart contract technology can automate bill payment too, so you don’t have to miss your next bill!
4. Contactless Payment and Point-of-Sale (POS) Technologies
Contactless payments make POS transactions far easier. With a digital wallet, you can enable contactless POS purchases to make the payment process far easier.
With a digital wallet app and smartwatch connectivity, customers can use their watch or their phone for a contactless POS purchase for ease and convenience.
5. Automated Savings
Automation in digital wallets can help people increase their savings. It’s good to have a savings account for emergency purposes or a budget for a specific purpose. But sometimes it can be hard to save on your own. Automation in digital wallets can make this a lot easier.
Consider a digital wallet with smart contract technology, which allows customers to file automated savings. Automate your digital wallet savings plan with the Sila API.
6. Increased Engagement and Personalization
A business may want to offer a digital wallet as a way to increase personalization and increase engagement. Through the digital wallet, you can offer a mobile payment method and another method for digital payments.
If you regularly offer digital payment services or you want to add this service to your clients, then a white-label digital wallet can increase engagement and add a touch of personalization.
7. Digital Loyalty Schemes for Mobile Payments
A digital wallet can be a way of adding a loyalty program. Loyalty programs encourage people to buy more with your business. If you offer some type of points or credits per transaction (or cent) then you can collect the loyalty points in the digital wallet, boosting spending and engagement.
Certain digital wallet APIs can also partner with other financial services, like ACH money transfers, loyalty card issuance, or payment processor.
8. Offering Rewards, Coupons, And Discounts
Further with the loyalty schemes, digital wallets can be a way of offering discounts, coupons, and rewards. If you have the rewards, coupons, or discounts located in your digital wallet app, then your customers are more likely to spend with your business.
Consider linking digital wallet payments with discounts and brand-specific rewards.
9. Secure Hosting For Financial and Banking Data
Mobile wallets offer high security for payment data. So if you already collect bank account information or bank account data, then adding on a digital wallet will make this data more secure.
Digital wallet APIs use a number of encryption techniques to keep hackers away from this sensitive data. Mobile apps can also connect to biometric verification available on a mobile device for high-level security.
10. Budgeting and Financial Planning
A mobile wallet app can be used for budgeting and financial planning services too. Families, account managers, and business partners can all use digital wallets for secure, automated, scheduled, and/or collaborative budgeting purposes.
11. Shared Savings and Pooling
In addition to joint accounts, digital wallets can also be used for shared savings and pooling money. Perhaps you want to go in on a project but you want to save with others and you don’t want to open a bank account with them. Digital wallets can use secure identity verification, secure bank account linking, and enable groups of people to pool money together.
12. Debt Repayment
Digital wallets can be used as a funds collection account for debt repayment. Much like saving and bill payment, paying off debt can be a challenge. A digital wallet can be a useful tool for paying down debt, automating payments, and getting financial health back on track.
Banks, neobanks, and other businesses can also offer debt repayment as a strategic advantage against competitors.
13. Financial Advice
Digital wallets can be used by neobanks and other products to offer financial advice. Create a financial advice app that also facilitates funds collections, debt or savings automation, and can link to other financial partners. The options are endless!
Build Your Next Digital Wallet With Sila
Sila can help you build your next fully secure digital wallet. Access our fintech stack for seamless connectivity with financial services.
Within seconds, build a financial app that is capable of:
- Hosting a digital wallet
- Sending ACH money transfers
- Verifying customer identity
- And sending money using blockchain technology