Progressive Payment Solutions

Mobile Wallets: Everything Your Business Needs to Know

What are mobile wallets? How do they work? And how can your business accept payments from them? We’ll answer these questions and more below. 

There’s a chance you lived at a time when all phones did was make phone calls. Now, you may be reading this article on your smartphone.

Our mobile devices only continue to become a central part of our lives, and mobile wallets are just one more example of that happening.

But what are mobile wallets? What are the most common examples of them? And how can your business accept them? 

What is meant by mobile wallet

Basically, a mobile wallet is like a digital counterpart of a regular wallet. It may contain digital forms of payment or identification on your mobile device in various secure applications.

Digital forms of payment include credit and debit card information, along with gift cards or points/loyalty rewards that can be used at different places of businesses. 

However, we keep much more in our wallets than just money.

That’s why there’s likely digital version of whatever you keep in your physical wallet just waiting to be loaded: things like bus, plane, or train boarding passes, concert or theater tickets, hotel key cards, and healthcare IDs have all become commonplace items in our digital wallets–and this list grows every day.

So how do they work? Find out as we examine how these wallets get put to use. 

How a mobile wallet works

Just like a real wallet, a digital wallet lets you store, access, and use personal or financial information to make the important things in life happen. Even though they contain more than just money, we’ll focus on the payment functions of a digital wallet in this article.

It all starts with your bank account or credit card account. This account can be linked to various mobile wallet applications. These mobile wallets are issued from a huge array of companies, but these all have one thing in common: they let you use that mobile wallet to make a payment.

These mobile wallet applications make this happen by allowing you to load, transfer, or pay with the funds from your bank account or credit card via various technologies that are used by different mobile wallets. 

One popular way mobile wallets let you pay is via Near Field Communication, or NFC technology. This is a secure point-to-point connection via a unique radio frequency that communicates specific financial information to complete the payment transaction.

Another way mobile wallets work is via financial software that enables friends or customers to send money directly from one mobile device to another (most often smartphones). This transfer of funds takes place instantly and is often free if it’s between friends and family.

Still another way to pay is using a mobile wallet to make QR code payments, where the POS displays a code that the mobile wallet can scan using the camera. Upon scanning it, the two devices sync and securely transmit the payment information.

How these transactions work or who uses them can vary, depending on their popularity or how widely they’re accepted. What are some of the most popular mobile wallets? We’ll take a look at that next.  

Examples of mobile wallets

Here’s where mobile wallets really start to differ from their real world counterparts: a traditional wallet holds physical items, whereas a mobile wallet can hold–and can do–much more. 

Here’s the four main types of mobile wallets, along with some common examples:

Closed wallets

If your wallet is tied to only one company or brand, then it’s a closed wallet that only lets you use the funds in that wallet for transactions with them.

For example, funds loaded into the Starbucks app can only be used at a Starbucks. So why do closed wallets exist? From the company or brand’s perspective, they help retain their customers since those funds only are used with them. Not just that, but they also lower merchant fees that come from accepting other forms of payments.

What’s in it for the customer? Usually, rewards programs. Loyalty rewards, points, or cashback programs motivate customers to use a company’s closed mobile wallet. Thus, the more a user spends money via that brand’s mobile wallet, the more they earn in rewards at that place.

Open wallets

On the other end of the spectrum are mobile wallets that offer a full range of payment opportunities at virtually any business that can accept credit card payments, along with ATM withdrawal, financial service options, and bank account management.

Because they are so widely used, it’s not surprising to learn that these open wallets are always linked to banks or financial institutions. Thus, a banking license or partnership with a financial institution is necessary to develop one. 

Let’s look at a few popular examples: 

For instance, when people think of mobile wallets, they likely think of Apple Pay–which is an open wallet, since it is accepted at virtually any business with an NFC-enabled POS. How does it work? When you go to checkout, you open your iPhone/Apple Watch and hover it near the NFC reader at the POS to initiate the transaction. From there, the two machines quickly communicate the necessary information. 

Another very popular example of an open wallet is PayPal: using their app, you can transfer funds from a bank account, debit or credit card to another PayPal account owner. Not only that, but you can also use their Debit MasterCard to retrieve funds from any ATM in the United States. 

Semi-closed wallets

Semi-closed wallets are almost the same as open wallets, but with one big difference: they don’t allow users to withdraw cash directly. This is because they’re not linked to banks or financial institutions.

However, they can still be used to pay for many different businesses or services. For example, services such as retail payment or bill pay is something Google Pay excels at. You can not only use it to pay for your gas, but also set it up to automatically pay your electricity bill.

Crypto wallets

Here’s where a mobile wallet is completely different from anything a traditional wallet could do: store your cryptocurrencies. This is basically an app that stores private and public keys that allow you access and management of crypto such as Etherium.

While the private keys (what actually allows access to your cryptocurrency) are stored on a web-hosted platform or mobile app, the public keys allow you to enable other users to gain access to them if you want to use them for a transaction

Some crypto wallets allow you to store and manage multiple kinds of cryptocurrencies (like a Coinbase wallet), while others let you focus on just one (such as Bitcoin Wallet).

Advantages of mobile wallets


One main security advantage that mobile wallets offer is the fact that they’re fully digital: nothing physically can be stolen. And because many of the technologies are encrypted or end-to-end, there’s literally no one else permitted to interfere with transactions.


All of the mobile wallets we mentioned are completely touch-free. That means there’s no transmission of germs or viruses such as COVID-19.

Along with that, there’s also nothing for muggers or thieves to steal. Of course, you can be the victim of cyber-theft from hackers, but the vast majority of these threats can be mitigated with the right security measures. 


Mobile wallets let you quickly pay with the touch of a phone or even a smart watch. That means you always have a way to pay, even if you forget your physical wallet at home. 

On top of that, you also have a complete registry of every transaction from the associated account, which makes keeping track of records a breeze. 

How to accept mobile wallet payments

The most common mobile wallets used for payments will be open or semi-open wallets like Apple Pay or Google Pay. These wallets are used to pay via NFC technology.

We wrote a whole article on how your business can accept NFC payments, but we’ll boil it down here into two basic components your business needs to accept NFC payments: 

  1. You need to have an NFC-enabled reader to receive payments. 
  2. You need a credit card processor and a plan that enables them to accept digital e-wallet payments, which includes NFC payments.

Progressive Payment Solutions has helped countless businesses receive and set up the equipment needed to accept mobile wallet payments. Contact us today to get started. 


Mobile wallets have only one thing in common with a traditional wallet: they let you store and use your money.

From there, however, they are completely different: they let you use credit cards, debit cards, bank account funds, or even cryptocurrency to make fully-electronic, encrypted payments.

Progressive Payment Solutions wants to empower you to make the best decisions for your business, which is exactly why we create articles like this to keep you in the know.

We also offer the best service and the lowest payment processing rates in the industry, along with programs that let you eliminate processing fees. Want to find out more? Then give us a call today. 

Looking to Save Money on Payment Processing?


Download free guide with advice from experts!