Digital wallets have made carrying physical cards and cash less necessary, but the differences between various types are nuanced. Some are intended solely for specific merchants, while others offer far more flexibility. The main types include closed wallets, semi-closed wallets, open wallets, and crypto wallets, each serving specific purposes and making visits to compatible merchants quicker.
Whether users are tapping to pay at a store or sending money to friends, these tools offer significant convenience depending on what and where they are buying. Breaking down each type reveals how they function in daily life. Closed wallets are controlled by a company or store, allowing users to top-up funds usable only with that specific brand.
Regular Starbucks customers are familiar with this model, as are users of Uber Cash, Amazon Pay, Walmart Pay, and Target Wallet. Semi-closed wallets are more prominent outside the US, allowing purchases across a range of pre-approved shops, online retailers, delivery, and ride-share services. Examples include India's Paytm, the Philippines' GCash, and Grab Pay available throughout Southeast Asia.
Open wallets function as a digital version of a physical wallet, barring loose cash. Depending on the device and location, this can include different forms of ID like driving licenses and passports. Smartphone owners are familiar with Apple Wallet or Samsung Wallet, while Google, PayPal, and Venmo offer similar features for online ordering, tapping to pay, and sending money, often locked behind biometric security like Face ID and fingerprint scans.
Not forgetting crypto wallets, these are a separate entity with two types traders should know: hot and cold. Hot wallets are typically accessed through a phone or computer, allowing exchange, trade, or transfer of crypto, though their internet connection makes them susceptible to online attacks. Cold wallets do not depend on an internet connection and can be utilized via a USB drive or smart card, keeping private keys offline for enhanced security, though access requires pairing with an online device.
Source: Engadget · Summarized by HeadlinesBriefing