Digital wallets have become a common way for consumers to pay in stores and online, but the category covers several distinct formats that serve different purposes. The four main types are closed wallets, semi-closed wallets, open wallets and crypto wallets, each built around a different level of flexibility and control. The differences matter for shoppers deciding where to keep their funds and how quickly they can complete a purchase. Users are also advised to make sure a device is charged before leaving home without cards or cash.
Closed wallets are run by a single company or store, which lets customers load money that can only be spent with that brand. Examples include Starbucks, Uber Cash, Amazon Pay, Walmart Pay and Target Wallet, all of which keep funds in one place for spending at that retailer. Semi-closed wallets sit between closed and open systems, allowing purchases across a range of pre-approved shops, online retailers, delivery and ride-share services. They are more prominent outside the US, with examples including India's Paytm, the Philippines' GCash and GrabPay, which is available in Southeast Asian countries such as Malaysia and Thailand.
Open wallets function as a digital version of a physical wallet, minus any loose cash on hand. Depending on the device and location, they can also hold forms of ID such as driving licenses and passports. Smartphone owners are likely familiar with Apple Wallet or Samsung Wallet, while Google, PayPal and Venmo offer similar features for storing cards digitally. These services let users order products online, tap to pay at compatible stores and send money to friends and family, and they are often protected by biometric checks such as Face ID and fingerprint scans, which make it harder for a thief who steals a device to make payments.
Crypto wallets divide into hot and cold formats. Hot wallets are typically accessed through a phone or computer and allow users to exchange, trade or transfer cryptocurrency. Because they are connected to the internet, they offer instant and seamless transactions but are far more susceptible to online attacks. Cold wallets do not depend on an internet connection and can be used via a USB drive or smart card, keeping private keys offline for enhanced security, though they can only be accessed when paired with an online device.
The tradeoff between the two crypto formats comes down to speed versus protection. Hot wallets suit users whose main focus is speedy transfers and transactions, while cold wallets are best for protecting cryptocurrency at the cost of immediate convenience. For US consumers, the closed wallets from Starbucks, Uber, Amazon, Walmart and Target are the most likely entry point, while the semi-closed model remains more common in other markets.
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