The FinTech sector has been undergoing continuous developments to provide the industry for modern-day clients and support all the basic services that were once required by a bank visit to now happen at the comfort of mobile.
However, with evolution, users no longer need to go to their bank to deposit money, transfer, check their account balance, or even update their passbooks all in one platform to see recent transactions.
Digitizing payments now offers 24/7 access to financial services to customers, and previously, this was restricted to banking hours only. With the advancement of technology, many new services have emerged in the banking business. At the top of the list are mobile banking and Wallet as a Service (WaaS or digital wallets).
Know a fact by 2020. Online or digital wallets were the most popular payment option for both e-commerce (44.5%) and point-of-sale (POS) (25.7%) transactions. It outnumbers all other payment methods, including credit cards, debit cards, bank transfers, deposit addresses, and cash, and its dominance is only likely to increase in the next five to ten years.
Every tiny job that used to happen within the four walls of a bank now occurs within the four sides of a smartphone screen. All this with the help of the FinTech Era due to the introduction of Wallet-as-a-Service (WaaS).
This post will look at WaaS and its function in the FinTech sector. As a bonus, you’ll figure out how WaaS affects you, and also, you’ll know its advancement and many more.
What is Wallet as a Service (WaaS) or E-wallet?
WaaS or e-Wallet is an online transaction all in one platform that combines safe storage and payment acceptance gateways. They may be used on a computer or a smartphone.
Conversely, they function similarly to debit or credit cards. They are, however, entirely digital and do away with the need to carry a physical wallet.
The concept behind WaaS
WaaS applications like Apple Pay, Samsung Pay, Google Pay, and multiple parties’ applications are being downloaded and used far more than their mobile banking counterparts, even though they are not directly tied to digital bank applications.
The rising user base of wallet applications and their use show this growth. And the rise of WaaS is a worldwide phenomenon.
Every mobile consumer that completes a purchase on their device has the same narrative to tell. 57% of users (60 million individuals) have used a mobile wallet in the United States alone.
You may be asking what is causing this extensive expansion. The cause for this is simple: having a single platform helps transactions go much faster because you don’t have to go through the laborious process of adding a beneficiary every time you need to pay someone.
Wallet as a Service has become the most widely utilized feature of the FinTech industry due to the rapid transaction capabilities they provide, both between individuals and between people and corporations.
It’s time to look at the technology that powers this widely accepted idea.
So, how does the wallet infrastructure apply to retailers, entrepreneurs, businesses, and institutions looking to get into the market?
It depends entirely on the asset type and revenue structure selected for the WaaS.
WaaS applications like Apple Pay, Samsung Pay, and Google Pay are being downloaded and used far more than their mobile banking counterparts, even though they are not directly tied to banking apps.
The rising user base of wallet applications and their use show this growth. And the rise of WaaS is a worldwide phenomenon.
Every mobile consumer that completes a purchase on their device has the same narrative to tell. 57% of users (60 million individuals) have used a mobile wallet in the United States alone.
Wallet-as-a-Service: Digital Assets types and payment methods
The most common digital assets categories allow customers to store their money and be confident that it is safe whether it is for crypto leading. WaaS includes infrastructure layers such as advanced MPC, blockchain infrastructure, blockchain data, governance layer, Omni layer, and other rest APIs all in one platform. However, there are different types of digital wallets.
Let’s take a look at each one!
1. Closed wallet apps
These apps hold funds for users and only enable transactions with the wallet of market makers, such as Amazon Pay. Any money received due to returns, refunds, or cancellations is converted and saved in the Wallet.
Businesses who provide items and services stand to benefit the most from a closed wallet app, with some earning a little interest in the multiple currencies in the Wallet.
2. Semi-closed wallet
This option provides both merchants and users more flexibility by allowing customers to conduct transactions, and blockchain events at pre-identified establishments and locations, such as PayPal.
This platform is a centralized web-based e-money storage system used for both offline and online transactions. This grants these platforms an e-money license, allowing them to emit e-money into virtual wallets maintained centrally by PayPal which allows the transfer of funds.
3. Open Wallet
This is a simple and safe approach accepted by most shops, such as crypto wallet, Visa, or Mastercard. It is often established by banks or organizations linked with banks.
It performs all of the functions of a semi-closed wallet, but it also allows for internet purchases, deposit address contactless in-store payments, and even cash withdrawals at some ATMs and other physical places.
👉 Read Also: 6 payment trends to watch out for in 2022
Technologies behind a wallet-as-a-Service application
Wallet as a Service is a warm wallet in the current trend of the FinTech industry. Overall, it provides all one platform for the crypto market, blockchain products, and blockchain automation. The different types of technologies behind a wallet-as-a-Service application:
Online Payment
WaaS software functionality is crucial because it allows users to make payments, and crypto exchanges using the Wallet. To pursue WaaS, the app must be integrated with a third-party payment provider like Authorize.net or Braintree. However, this is a key feature of a digital wallet app.
Point-of-Sale System Integration
The majority of today’s digital wallet all-in-one platform apps include the ability to accept cross-platform payments. It implies that the app allows users to conduct contactless payments using their wallet app with the aid of technologies like RFID and NFC. Even though it is not yet common, this is highly convenient and might become quite popular soon.
Peer-to-peer Payment
Peer-to-peer payment systems are one of the technologies that have contributed to the popularity of digital wallets. Two users should be able to transfer and receive money using the web and mobile applications.
Mobile app for product development businesses typically leverages Braintree and Stripe APIs to offer peer-to-peer payment features in their apps.
QR Codes
QR codes have become linked with WaaS and mobile payments today. A QR code on top of an item has become commonplace at various retail shops throughout the world.
Technology provides the cashless and cardless payment economy with a whole new meaning. In terms of integration, the ZXing library, which is utilized for data production and recording, is the library that developers swear by.
The convenience with which users can log in and log out and the ease with which they may add beneficiaries and enter credit/debit card information for each transaction puts digital wallets ahead of banking applications.
Wallet as a Service: Is it the Next Big Thing in the Fintech Industry?
Including a Wallet as a Service in a product or service opens up new possibilities for digital wallet solutions. But, in practice, most merchants are unlikely to be able to establish one from the ground up.
Creating an embedded wallet in-house would require merchants to reinvent themselves as financial services firms, or crypto leading firms to obtain the necessary regulatory approvals, and ensure ongoing compliance, except for the exorbitant cost of putting together the right tech stack, development, and deployment. Even tech behemoths like Amazon and Google aren’t interested in this.
However, there is another option. There are payment service providers who offer a full, ready-to-use wallet-as-a-service that merchants can white-label and use without investing the time and money in building it up or obtaining their financial services license.
How do you choose the best payment services company to work with?
To choose the best payment services company to work with as your WaaS. Consider the following three crucial questions:
How does the company integrate WaaS technology into your existing systems?
Most reputed payment service providers provide robust APIs that operate with various technologies. However, the quality of assistance is important in ensuring that your integrated Wallet goes live promptly and without a hitch.
To get started, Skrill and Neteller, for example, provide full integration guidelines, crypto APIs, marketing material, and significant technical documentation. And our highly skilled crew is always willing to assist.
What kind of Permits do WaaS Payments the Company have?
It should go without saying that a reputable payments services provider should have the necessary licenses for key management to allow merchants to provide their integrated wallets in any nation where they do business.
They have great ties with regulators worldwide, but also give regulatory advice when entering new markets.
What is the Company’s Risk and Compliance Function?
Fraudsters always find a way, even if digital wallets are safer than cards or having private keys. And losing consumers’ sensitive financial information may spell doom for a company’s image.
Their APIs provide mechanisms to guarantee that merchants comply with regulatory requirements and security standards and comprehensive tools and knowledge to assist them in detecting suspicious behavior and stopping it in its tracks.
👉 Also, Check-Out: 5 Biggest Cybersecurity Threats for Banking in 2022
Wallet as a Service: An unmissable opportunity for the FinTech Industry
Embedding payments and other financial goods inside API key, known as embedded finance, is the hottest trend in fintech for market marker right now, and for a good reason, crypto leading an all-in-one platform.
Customers obtain the financial product they need, at the exact moment, without leaving the app they’re using because payments and other financial services products are baked into the user journey. It’s more straightforward, practical, and, most importantly, a smooth and effortless experience.
On the other hand, embedded finance benefits merchants, and customers are more likely to complete their purchases when friction points at the checkout are removed.
There are an endless number of applications and use cases for embedded finance.
But, in our opinion, wallet-as-a-service — which allows merchants to integrate a full-fledged digital wallet into their user journeys — is one of the most intriguing and under-appreciated use cases.
By including Wallet-as-Service, an all-in-one platform offers better value and convenience to your clients and more personalized service, and deeper integration into their lives.
But only if you pick the right companion.
You can swiftly and cost-effectively roll out your integrated Wallet across markets with Paysafe, safe in the knowledge that you’re compliant, with your client’s data, and enable business securely.
