Open wallets vs. closed wallets

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 only become more important, as 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 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?
• What are the advantages of open wallets for businesses?
• What are the advantages of closed wallets for businesses?
• How do you choose between open and closed wallets for your business?
• How does Stripe support wallet-based payments?

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.

What are the advantages of open wallets for businesses?

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

• More customers: Since open wallets work across different stores and platforms, you’re not asking customers to commit to your own system. If people already use Apple Pay or Google Pay, they can check out without extra steps. That can lead to fewer abandoned carts.

• Lower operating costs: To run your own payment system, you need to manage security, compliance, maintenance, and more. Open wallets plug in to existing networks so you get all the functionality without the associated operating costs.

• Built-in security: Open wallets have top-tier security measures and work with cards from key players such as Visa and Mastercard, which have their own fraud prevention protocols. This means less risk for you and more confidence for your customers.

• Easier global expansion: Many open wallets work across borders, so if you’re selling internationally, you might not have to adopt different payment methods in every country.

• Loyalty and rewards: Even though you’re not running your own closed system, you can still integrate rewards and perks. Customers get the flexibility of using their preferred wallets, and you still get to offer incentives to keep them coming back.

What are the advantages of closed wallets for businesses?

Closed wallets can be ideal for businesses that want to keep customers spending within their systems. Here’s why:

• Customer retention: Once someone loads money into your wallet, they have fewer reasons to shop elsewhere. Unlike a credit card or open wallet, which permits spending at other businesses, a closed wallet keeps their spending locked into your store, app, or platform.

• Fewer payment fees: Every time someone pays with a credit card or open wallet, they pay a percentage to third-party processors. A closed wallet lets the customer bypass some of those costs.

• Faster checkouts: A closed wallet can make checkout faster because it eliminates redirects, random transaction failures from a bank, and the need for outside approvals. Instead, you handle the payment process yourself.

• Better customer data: Since every transaction happens within your system, you get a direct look at how and when customers spend. That’s valuable for customizing offers, predicting demand, and fine-tuning pricing.

• Built-in incentives: You can offer cash back, credits, or perks that work only within your platform. Unlike with traditional discounts, where a customer might save money and use it to shop elsewhere, these incentives keep them engaged with your business.

• Easier refunds: Instead of sending money back to a customer’s bank, you can issue wallet credits. This makes refunds easier to manage and gives customers an incentive to return to your business.

How do you 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. Select one of them based on whether the following statements apply to you.

Open wallets

• You want the easiest checkout experience. Open wallets let customers pay instantly without additional setup. That can lead to fewer abandoned carts and faster transactions.

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

• You don’t want to handle 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.

• You sell high-ticket items or products that aren’t bought regularly (e.g., furniture, luxury goods, travel). It might not make sense to ask people to store money in a closed wallet for these items. They’ll want payment flexibility.

• You sell internationally. Open wallets often support multiple currencies and global transactions, which makes them ideal if you have customers in different countries.

Closed wallets

• You want to keep customers’ spending locked into your business. If your goal is to increase repeat purchases, a closed wallet ensures that once customers load funds, they can spend them only with you.

• You have a strong subscription or loyalty model. If your business relies on frequent transactions (e.g., coffee shops, gaming apps, ridesharing), a closed wallet makes checkout much easier and encourages ongoing use.

• You want to decrease payment processing fees. Handling payments in-house means you can reduce fees from third-party processors, which add up for businesses with high transaction volumes.

• You offer a lot of refunds or store credits. Instead of losing money when you issue refunds, you can keep funds within your system by offering store credits.

• You’re building 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 does Stripe support wallet-based payments?

Stripe makes it easier for businesses to accept digital wallets online, in an app, or even in person. Stripe works with multiple systems, including:

• Apple Pay

• Google Pay

• Samsung Pay

• Click to Pay

• WeChat Pay

• Alipay

• Cash App Pay

This mix gives companies the flexibility to serve global markets and mobile-first customers while providing a speedy checkout process. Here’s how customers can pay using digital wallets integrated with Stripe:

• Web and mobile payments: The customer chooses their wallet at checkout, then confirms payment using Face ID, Touch ID, or their device’s PIN. Stripe securely processes the payment.

• In-app purchases: If you have an app, Stripe’s mobile software development kits (SDKs) let you add digital wallets with minimal development work. Customers can pay instantly with their stored payment info.

• QR codes: Stripe generates a QR code at checkout. The customer scans the code and confirms the payment with their wallet app. Stripe verifies the payment in real time.

• Payment links: Stripe generates a payment link that the customer opens on their phone or computer. They then pay via the digital wallet of their choice.

There are some major benefits to accepting digital wallets with Stripe, including:

• A faster, more convenient checkout process for customers, which can lead to more conversions

• A lower risk of fraud compared with traditional card payments, thanks to Stripe’s fraud detection tools and digital wallets’ use of tokenization and biometric verification

• Access to global markets, since Stripe supports popular Chinese payment methods Alipay and WeChat Pay

If you’re already using Stripe, enabling digital wallets is simple. In the Stripe Dashboard, click on “Payment Methods” and enable specific digital wallets. If you use Stripe Checkout, Apple Pay is automatically enabled. For a custom checkout, you can use Stripe’s Payment Request API or Stripe Elements to integrate wallets with just a few lines of code.

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.