A quick guide to understand mobile wallets and mobile payments

What is mobile wallet?

Mobile wallet is an app that connects different types of payment methods, such as credit card, debit card and digital currency. It also helps in connecting additional things such as coupon codes, loyalty cards etc. These days, consumers are dependent on their mobile devices. They prefer using their mobile devices as their wallets. Whether it is storing card/vouchers or buying products, users want their devices to act like one stop destination.

How big the mobile payment industry is?

Mobile payment industry is very big and it is growing at a rate of 60% every year. In a survey, it was found that more than 5 billion people use mobile phones for financial transaction. A recent report noted that 39% of users in the USA make payments through mobiles. Because of this growth and potential, we can expect the mobile payments industry to meet the increasing demand of users. And so are top mobile application developers putting more resources in this domain to lap on the expanding opportunity.

What are the types of mobile payments?

There are different types of mobile payment options. In earlier days, customers used to take help of mobile technologies that allow them to store payment information on their device along with a PIN to complete the transaction. Mobile wallet made the task much easier by allowing users to store all the payment information including credit cards, debit cards, vouchers and coupons.

Open Payment

Open system mobile payment can be used for buying products, transferring funds using card, cash withdrawal at ATMs etc. Open wallet services are extended in collaboration with authorized banks. For example — State Bank Buddy, M-Pesa etcare open wallets that allow users to make financial transaction directly through their mobile devices.

Closed Payment

Closed wallets are issued by e-commerce companies and businesses, where the merchant locks some amount in case of returning or cancelling the order. Closed wallets can be used to buy goods and services from that particular merchant. However, this type of mobile payment option does not allow cash withdrawal or redemption. For example –ecommerce portals like FlipKart, Amazon, MakeMyTrip etc offer closed wallets.

Various categories of Mobile Payments

Semi-closed Payment

Semi-closed payments are provided by companies that are tied up with different merchants. This type of mobile wallet allows users to perform financial transactions at a few locations only. Moreover, it does not permit cash withdrawal or redemption. For example — PayTm, Mobikwik, Citrus, Oxigen etcare semi-closed wallets that allow users to purchase products and services, but not redeem.

Semi-Open Payment

Semi-open payment system allows users to transact with merchants at POS that have been tied up with the service provider. For example — Airtel Money is semi-open payment system that allows users to transact with the merchant, but not redeem the money.


There is a huge demand for mobile wallets as people prefer making payments through their mobile devices. Many countries across the globe are promoting cashless transactions, as a result of the demand of mobile wallets will increase drastically in coming years.



Get the Medium app

A button that says 'Download on the App Store', and if clicked it will lead you to the iOS App store
A button that says 'Get it on, Google Play', and if clicked it will lead you to the Google Play store
Rahul Singh

Rahul Singh

I live, breathe and dream mobile apps. My interest lies in pursuing and getting to know the best app development technologies, processes and platforms.