Digital Wallets and Selected Policy Issues

"Digital Wallet Landscape

A digital wallet is a software application that stores payment or account details to facilitate traditional payments that use bank and credit card details and/or cryptocurrency transactions. In addition, wallets facilitate peer-to-peer transfers, which have grown rapidly in recent years (Figure 1). This In Focus discusses three types of digital wallets and addresses selected policy issues.

Functionality and Scope of Use

Digital wallets are generally used for (1) payments to merchants through the use of near-field communication or QR codes for in-person purchases; (2) peer-to-peer transfers of funds through an app, via text message, or QR codes; (3) storing value from a linked bank account or debit card on an app-based account; or (4) storing, providing access to, and transacting in cryptocurrency. (For more on cryptocurrency, see CRS Report R45427, Cryptocurrency: The Economics of Money and Selected Policy Issues.)

Digital wallets generally require the use of internet connected hardware, such as a smartphone. Some, including Apple Pay and Google Pay, may work only with certain devices and associated operating systems. Others, such as the PayPal or Cash apps, can be downloaded and accessed from a range of devices, irrespective of operating system. For conceptual simplicity, it can be helpful to think of digital wallets as belonging to one of three groups: retailer specific, general purpose, or cryptocurrency.

 Retailer-specific mobile wallets are offered by a retailer for use to purchase its goods and services. They allow individuals to store payment card information, upload funds to digital or registered gift cards, or prefund a balance on an app for future transactions..."
Digital wallets