From the simple premise that each payment transaction contains a payer and a payee, much has evolved to create a complex web of global service providers and software that define today's payments ecosystem. What once was the province of internal accounting departments and largely national banks has expanded to include:
- Payments networks
- eCommerce gateways
- Payments processors
- Payments platforms
- Payments facilitators
- Payments aggregators
Now you can add to that list, digital wallet platform. It simplifies the payments process using digital wallets to distill the payment process back to its core essence through wallet-to-wallet or account-to-account (A2A) transfers between a payer and a payee.
A digital wallet platform is a horizontal, global solution that manages the movement of payments -- inbound and outbound -- for both payer (remitter) and payee (beneficiary) while also automating many of the ancillary services associated with payment distribution.
Payments-as-a-Service (PaaS) offerings using such a platform integrating digital wallet architectures can be a logical extension for nearly any software with a payment component. And can be easily embedded as a white-label solution for B2B and B2C use cases.
Where does the digital wallet platform fit in the payment ecosystem?
The digital wallet is at the center of any payment. The digital wallet works like a traditional wallet - funds go in and funds go out of a central location. And because the funds are actually held in different currencies in over 60 banks globally, low-cost currency exchange is handled in real-time, enabling the easy conversion of funds received from multi-national customers to be converted from the currency of payment into the currency of preference of the company receiving payment. Or to convert from a company’s primary currency to a partner’s local currency prior to distributing.
But a digital wallet platform is not the endpoint for a payment. Endpoints are external to the payments platform. Just like the real world, where the wallet is where cards and currencies are placed so they are easily accessible, a digital wallet stores funds for easy access. Payer/payee preferences can be set to allow the end-user to select when, where and how to receive their payment: ACH, wire transfer, paper check, digital prepaid, digital gift card, etc.
This architecture enables multiple incoming and outgoing endpoints which means there are many ways both to pay and to be paid. Importantly, it fits seamlessly into the existing payments ecosystem supporting both use cases that bypass banks, payment networks, payment processors and facilitators as well as use cases that begin and/or end with them. Digital wallet platforms enable payment aggregation without the need for merchant IDs.
What are the key benefits when using a digital wallet platform?
SPEED: Digital wallet-to-wallet payments are effectively completed in real-time from funded accounts so that payments can be received instantly.
CROSS-BORDER: Digital wallets allow for instant cross-border payments; both payer and payees can have multiple currency-specific wallets within their account. And on-platform currency exchange at cost-effective rates making global payments simpler, faster and cheaper.
SECURITY: Because a digital wallet is not an endpoint in the payment process it is both more readily scalable and more secure. The platform, of course, is hosted in the cloud and must meet SOC 2 Type 2, GDPR, CCPA and a host of security mandates to encrypt and protect transactional and user data.
COMPLIANCE: The platform incorporates automated services that comply with various regulatory mandates required to render payments such AML and KYC strictures as well as to provide tax data required for payee reporting including 1099 creation as required.
FLEXIBILITY: Both many-to-one and one-to-many payment use cases can be facilitated using a digital wallet platform to enable multi-workstream payment workflows that better support the ecosystems that new business models service.
CHOICE OF PAYMENT METHODS: Any account holder can transfer funds directly to their bank account, or to a virtual or physical prepaid debit card, instantly via a Rapid Bank Transfer using their own debit card or converted to digital gift cards or shared with fellow workers, friends or family via account-to-account (A2A) transactions.
LOWER COST OF PAYMENTS: Digital payments via digital wallets bypass both traditional banks and payment networks and their associated fees; they become external endpoints -- and often not required at all.
Digital wallets are a real-time, direct payment method made simple by using stored funds that remove intermediaries. While digital wallet platforms provide multiple benefits that other payment processes do not, the true benefits, as with any technology, are best rendered by smart applied design.
Digital Wallet Platforms can be used for almost any B2B/B2C payment use case. Contact us today to learn how we can help streamline your payment disbursement process.