Digital wallets have changed how people pay, but not all of them work the same way. You can use some anywhere that accepts them (e.g., Apple Pay, Google Pay), but others work only within a specific brand’s environment (e.g., Starbucks app). The former gives customers flexibility, while the latter keeps spending locked into a single business.

Both types of digital wallets create a faster, more convenient checkout experience for customers, but the right type depends on how you want people to engage with your brand. This choice will become more important because the number of digital wallet users worldwide is forecast to rise from 4.3 billion in 2024 to 5.8 billion by 2029—a 35% increase led by high adoption rates in China, India, and the United States.

Below, we’ll discuss each type of digital wallet, how they compare, and how to decide which works best for your business.

What’s in this article?

• What is an open wallet?
  
• What is a closed wallet?
  
• Advantages of open vs. closed wallets for businesses
  
• How to choose between open and closed wallets for your business
  
• How Stripe Treasury can help
  

What is an open wallet?

An open wallet is a type of digital wallet that lets you store payment methods (such as credit cards, debit cards, and gift cards) and use them across different businesses or platforms. You can use it anywhere that accepts the wallet and payment network.

What is a closed wallet?

A closed wallet is a digital wallet that can be used only within a specific platform or brand. You can’t use the money stored in it for anything other than the company’s services. You load money in, but you can spend it only with that company.

Advantages of open vs. closed wallets for businesses

Open wallets give businesses a lot of flexibility when it comes to payments. Here are some of their benefits:

How to choose between open and closed wallets for your business

To choose between an open wallet and a closed wallet, consider how you want customers to interact with your business and what kind of control you want over payments.

Open wallets

Choose open wallets if you want to:

• Maximize conversion: If your priority is reducing abandoned carts, opt for open wallets. They provide an easier checkout experience, leading to fewer abandoned carts and faster transactions.

• Attract new customers: Open wallets make it easier for first-time buyers since they don’t have to commit to your system.

• Offload payment logistics: Open wallets manage fraud prevention, compliance, and transaction processing, so you don’t have to. That means less administrative work and lower operating costs.

• Support high-ticket or infrequent purchases: It might not make sense to ask people to store money in a closed wallet for these items. They’ll want payment flexibility.

• Sell across borders: If you sell internationally, open wallets often support multiple currencies and global transactions. This makes them ideal if you have customers in different countries.

Closed wallets

Choose a closed wallet if you want to:

• Enforce customer lock-in: If your goal is to increase repeat purchases, a closed wallet ensures that once customers load funds, they can spend them only with you.

• Optimize high-frequency transactions: If your business relies on frequent transactions, or you use a subscription or loyalty model), a closed wallet makes checkout much easier and encourages ongoing use.

• Increase margins by lowering fees: Handling payments in-house means you can reduce payment processing fees from third-party processors, which add up for businesses with high transaction volumes.

• Retain capital: If you offer a lot of refunds or store credits, opt for closed wallets. Instead of losing money when you issue refunds, you can keep funds within your system by offering store credits.

• Build a branded experience: A closed wallet lets you fully control the payment flow, integrate rewards, and customize the experience without relying on an external provider.

Many businesses use a hybrid approach: they offer open wallets for new and casual customers while encouraging frequent buyers to use closed wallets with added perks. For example, Starbucks accepts some open wallets but pushes customers toward its own wallet with rewards and exclusive deals.

How Stripe Treasury can help

Stripe Treasury is a set of application programming interfaces (APIs) that allow you to embed flexible financial services such as financial accounts, money movement, and risk management directly into your platform or application.

Treasury can help you:

• Expand product offerings: Offer your customers access to innovative financial products such as business financial accounts, debit cards, and programmable money movement—all seamlessly integrated into your user experience.

• Enhance the customer experience: Provide a unified, frictionless experience for your customers by consolidating financial services directly within your platform.

• Increase revenue opportunities: Generate new revenue streams by monetizing the financial services you offer, such as account fees, card interchange, and more.

• Reduce operational complexity: Use Stripe’s infrastructure and compliance expertise to rapidly launch new financial products without the overhead of managing a banking charter.

• Maintain security and control: Retain visibility and control over your customers’ financial data and transactions through Stripe’s secure, developer-friendly APIs.

• Scale with confidence: Treasury’s infrastructure is designed to support high-volume, enterprise-grade financial services as your business grows.

Learn more about how Stripe Treasury can help you innovate and grow your business, or get started today.

Apple Pay is a service provided by Apple Payments Services LLC, a subsidiary of Apple Inc. Neither Apple Inc. nor Apple Payments Services LLC is a bank. Any card used in Apple Pay is offered by the card issuer.