Digital Wallet Payments: A Practical Guide For Global Businesses

In 2025, 4.5 billion consumers used digital wallets. That’s more than half of the global population, and the number is projected to reach 5.2 billion by 2026.

The growing adoption of digital wallets suggests that customers now expect fast, secure, and seamless checkout. For merchants, this means that digital wallets are no longer just a payment option but a competitive advantage.

As more consumers choose businesses that support the payment methods they use daily, those that don’t support digital wallets risk losing customers to competitors and missing growth opportunities in local and international markets.

What is a digital wallet?

A digital wallet, also known as an e-wallet, is a software application or online service that enables customers to store payment information and complete transactions digitally, without physical cash or cards.

At its core, a digital wallet is an electronic version of the physical wallet. Users can store their credit and debit card numbers, bank account numbers, and, in some cases, loyalty cards and e-vouchers as encrypted payment credentials.

Although users can access digital wallets on laptops, tablets, and smartwatches, they primarily use them via mobile apps (mobile wallets).

What are some examples of a digital wallet?

The best examples of digital wallets include PayPal, Apple Pay, Google Pay, and Samsung Pay. These are global digital wallets that are widely used across multiple countries.

However, there are several region-specific digital wallets, such as PicPay and Mercado Pago in Brazil, Alipay and WeChat Pay in China, and Paytm and PhonePe in India. 

When planning to offer digital wallets as a payment method, businesses must understand customer preferences in each market. Offering a limited selection of global wallets may work in some markets, but in others, consumers have specific preferences. To convert those consumers, businesses should support the digital wallets they already use.

Learn how Unlimit helps businesses integrate the right digital wallets for their market to scale globally.

What are the different types of digital wallets?

Based on where users can spend funds, digital wallets are of three major types:

• Open wallets: allow transactions to any merchant that accepts them. Customers use it for online purchases, contactless in-store payments, peer-to-peer transfers, and ATM cash withdrawals.
• Semi-closed wallets: allow transactions within a defined network of merchants that have agreements with the wallet provider. These wallets have a more limited acceptance network than open wallets.
• Closed wallets: allow transactions within the issuing company’s ecosystem. For example, Amazon Pay is a closed wallet for Amazon’s customers. Customers can load funds into these wallets and use them exclusively to make Amazon transactions.

How do digital wallets work?

Digital wallets simplify payments by securely storing payment information and transmitting it at checkout.

Step 1: Setup

After users download a digital wallet app, they create an account, secure it with a PIN, password, fingerprint, or facial recognition, and link it to their credit and debit cards, bank accounts, or prepaid balances.

Users then designate one card or bank account as their primary payment method, and the wallet automatically uses it unless the customer chooses otherwise at checkout.

Step 2: Payment

Users can pay with digital wallets in several ways, depending on the wallet type, device, and merchant setup:

• Tap-to-pay: Using Near Field Communication (NFC) chips, offline shoppers tap their mobile device or smartwatch against a compatible card reader to complete the payment
• QR code: Customers scan a merchant’s QR code using their digital wallet app, enter the amount if required, and authorise the payment
• Prepaid Payment Instruments (PPI): Users preload funds into the digital wallet and spend directly from the available balance, enabling instant payments
• In-app checkout: Users choose their digital wallet option at online checkout and approve the transaction
• In-store card simulation: Certain digital wallets, such as Samsung Pay, use Magnetic Secure Transmission (MST) to mimic a physical card swipe for older terminals.

Step 3: Authorisation

The payment terminal or app transmits encrypted transaction data to the payment processor, which then routes the request to the issuing bank or card network for authorisation. In other words, the system never shares the actual card or bank account number with the merchant during a transaction, making digital wallets a secure payment method.

If the issuer approves the request, the system completes the transaction and displays a confirmation on the customer’s device and the merchant’s system.

Why do customers prefer digital wallets?

Digital wallets are the fastest-growing payment method worldwide, with consumers in the Asia-Pacific region being the largest users, accounting for 74% of e-commerce sales and 54% of POS sales. 

Customers are increasingly choosing digital wallets over other payment methods because they:

• Eliminate the need to manually enter card or bank details, which speeds up the checkout process
• Encrypts and tokenises the payment information and uses biometric authentication to protect sensitive financial information when paying online or in unfamiliar stores
• Removes the need to remember multiple passwords and PINs by storing payment information in a single, central location
• Offers built-in rewards, promotions, and loyalty features to customers.

How to accept digital wallet payments from customers?

Step 1: Analyse customer and market preferences

Businesses should review customer demographics and device usage, and research locally dominant wallets in target regions to identify which digital wallets customers are most likely to use. For example, American customers widely use Apple Pay and PayPal. In contrast, Indian customers prefer using UPI-based wallets such as PhonePe and Paytm.

Step 2: Choose a payment processor

A payment processor provides the hardware and software businesses need to accept digital wallet payments.

Choose a provider that supports the wallets the target audience prefers, offers additional payment methods (especially when planning expansion into new markets), and provides features such as payment links, instalment payments, fraud protection, and reporting.

Step 3: Set up a merchant account

After choosing a provider, create a merchant account with the payment processor. This typically involves verifying the business’s identity and ownership, submitting compliance and Know Your Business/Know Your Customer (KYB/KYC) documentation, and linking the business’s bank account for settlement.

Step 4: Integrate the payment system

Businesses can use the payment processor’s API keys or SDKs to integrate digital wallet payments into their websites, e-commerce platforms, mobile apps, or POS systems. They can configure which wallets appear at checkout and how the system displays them to customers.

Many payment processors offer plug-and-play integrations for popular platforms, reducing development effort.

Step 5: Test and launch

Before going live, test transactions across different digital wallets. Verify payment authorisation, settlement, and refunds, and handle errors to ensure a smooth checkout experience across devices and channels. Once everything is working as expected, launch digital wallet payments to customers and continuously monitor performance.

Advantages and disadvantages of digital wallet payments for businesses

Digital wallets are growing at an annual rate of 18% and rapidly replacing other payment methods worldwide. For businesses, offering digital wallets as a payment method offers significant advantages.

Advantages

• Digital wallets eliminate manual data entry to speed up the checkout process, giving customers fewer reasons to abandon their carts
• They integrate smoothly with most payment systems, reducing the technical burden on businesses
• Digital wallets use biometric authentication, advanced encryption, and tokenisation to secure payments and reduce the risk of fraud and data breaches
• They leverage local payment rails and optimised routing to improve payment authorisation rates.

Beyond these advantages, supporting region-specific wallets helps businesses meet local consumer preferences and stand out as they expand into new markets.

Disadvantages

• Supporting multiple digital wallets across regions may require additional technical effort and ongoing maintenance without the right payment processor
• Not all customers use digital wallets, and the same digital wallets may not be relevant everywhere, so businesses have to adapt their payment mix as they expand
• An unstable internet connection or a defective electronic POS network can prevent customers from completing digital wallet payments.

Start accepting digital wallet payments with Unlimit

As digital wallets become the preferred payment method across markets, businesses need a payment partner that helps them keep pace with changing customer expectations and expansion plans.

Unlimit’s unified payment solution helps businesses:

• Improve approval rates and reduce declines by smart routing wallet transactions through local payment rails
• Remove fragmentation and multiple intermediaries by connecting to leading local and global wallets through a single API
• Reach customers worldwide by accepting payments in over 150 currencies and through more than 1000 payment methods
• Launch wallets across regions, leveraging our local licenses and regulated infrastructure in more than 200 locations across LATAM, APAC, EU, India, and Africa
• Protect transactions with strong security measures, such as encryption, tokenisation, and PCI DSS compliance
• Get funds settled in preferred currencies, easily track digital wallet payments and gain insights into transaction data through a unified merchant dashboard
• Reduce costs with a flexible pricing model tailored to fit business needs and transaction volumes
• Minimise business disruption with regional customer support teams that understand local regulations and payment practices.

Learn how Unlimit can help businesses start accepting the right mix of payment methods and support their global growth strategy.

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