More than 3.4 billion digital wallets are already in use worldwide, powering close to $9 trillion in annual payments. By 2026, digital wallet adoption is expected to rise to 5.4 billion users, cementing e-wallets as one of the most dominant financial tools on the planet.

Yet, despite these transaction volume surges, margins remain as thin as ever. Payment processing has become a scale game, with high-volume, low-yield written all over it.

How do banks, fintechs, and payment providers turn these high-volume, low-margin transactions into sustainable profit? Is there a way to effectively move beyond transactions and build ecosystems that drive loyalty, data, and new revenue streams?

The answer lies in how wallet ecosystems are designed.

Closed vs Open-Loop Wallet Ecosystems

Closed-loop and open-loop wallets represent two distinct approaches to digital payments, each shaped by different priorities around control, scale, cost, and even customer experience.

Closed-loop wallets operate within a defined and controlled network. Transactions are restricted to the issuer’s own environment or selected partner merchants.

This structure offers tighter control over the payment experience and allows organisations to bypass traditional card networks, reducing transaction costs. Closed-loop models are especially effective for loyalty-driven use cases like retail chains, transit systems and internal enterprise ecosystems.

As the issuer manages the entire infrastructure, fraud prevention and security controls can be both centralised and monitored closely.

Open-loop systems take a different approach. Instead of restricting transactions to a proprietary network, they connect to global payment schemes, e.g. Visa, Mastercard or UnionPay.

This enables its users to transact across multiple merchants, industries and geographies, as open-loop wallets are built for interoperability and scale.

Open-loop wallet use cases range from P2P transfers and cross-border payments to e-commerce transactions and multi-merchant ecosystems. Their global acceptance makes them highly attractive for banks and fintechs that want to expand beyond a single brand or network.

Due to this reason, its transaction fees tend to be on the higher side, and fraud prevention is a more complex affair in a decentralised environment with multiple partners and jurisdictions.

The key difference between these two models can be boiled down to a trade-off between efficiency and expansion.

The future of wallet ecosystems is not purely open or closed. More institutions are adopting hybrid approaches. Many begin with a closed-loop model to refine operations, build engagement and test value propositions in a controlled environment.

Over time, they extend into semi-open or fully open-loop structures to unlock new revenue streams and geographic expansion. Technological advances, open API frameworks, embedded finance capabilities, and evolving consumer expectations are accelerating this change.

Understanding how and when to transition between these models is ultimately what determines whether a wallet becomes a cost centre or sustainable revenue engine.

Strategic Middle Ground with Semi-Closed Wallet Models

Semi-closed wallets extend usability beyond a single proprietary network while still maintaining structured partnerships and defined boundaries.

It’s a strategically important phase, as it allows institutions to test elements of interoperability and broader merchant acceptance, minus the full complexity of a global scheme integration.

By collaborating with select external merchants, transit operators or service providers, organisations can expand customer utility while preserving the many advantages they already have in a controlled ecosystem, including factors like lower transaction costs and strong loyalty mechanisms.

This requires careful execution. Your business must establish commercial partnerships with external merchants and integrate their wallet with multiple payment gateways. The infrastructure under the hood needs to support seamless interoperability across different systems, allowing multi-merchant transactions without letting the user experience dip.

Loyalty programs have to remain unified across the ecosystem, and real-fraud detection capabilities must match transaction growth.

If all of these boxes are ticked, a semi-closed model serves as a strategic middle ground where ecosystem control begins to evolve into a scalable opportunity.

Building an Open-Loop Ecosystem for Issuers and Acquirers

Moving into an open-loop ecosystem next requires deeper alignment across strategy, operations and technology. For issuers, launching an open-loop wallet begins with building a robust, future-ready platform.

This means integrating global payment networks, enabling digital and virtual card assistance, and ensuring that the wallet interacts with no hiccups with diverse financial systems across regions. The wallet must support multi-currency transactions, cross-border capabilities, and real-time processing while maintaining a consistent user experience.

Its infrastructure has to be able to support advanced fraud detection, secure tokenisation, and regulatory alignment across jurisdictions. Without these implementation steps in place, expansion can introduce operational strain.

Steps for Implementation for Issuers

Issuers should pay attention to integrating global payment networks, providing digital card issuance and ensuring interoperability across diverse financial systems. These factors will ensure that issuers successfully launch an open-loop wallet.

Step 1: Start with Closed-Loop Wallets

Many issuers begin by launching closed-loop wallets within their ecosystems, allowing them to test features such as wallet funding, QR/NFC payments, and loyalty program integrations. For example, retail chains can introduce wallets for in-store use while offering rewards for frequent usage.

Step 2: Introduce Virtual Card Issuance

Issuers should enable real-time virtual card issuance linked to the wallet for online and in-store payments. BPC’s SmartVista card management solution, for instance, provides instant card issuance capabilities, allowing customers to begin transactions immediately upon onboarding.

This feature is critical for attracting tech-savvy users who demand instant access. For example, leveraging the BPC platform, GoTyme was able to start issuing cards within a few minutes of customers engaging the terminal, which led to a surge in customers over the next few years. Now Tyme possesses over 12 million customers and continues to expand.

Step 3: Expand to Global Networks

To transition from closed-loop to open-loop ecosystems, issuers must integrate their wallets with global payment networks like Visa, Mastercard, AMEX, Diners, or UnionPay. This integration ensures widespread acceptance across regions and industries, enabling cross-border payments and enhancing customer convenience.

For example, Nubank’s integration with Brazil’s PIX and international networks allowed it to offer multi-currency wallet features, boosting user adoption.

Step 4: Features and Customer Engagement

Offer value-added services such as P2P payments, budgeting tools, PFM and personalised offers. Revolut’s wallet is an example of how issuers can enhance customer retention through such features, reaching 45 million users in 2024.

Step 5: Security is the Key

Implement AI and ML-driven fraud detection tools, tokenization, and biometric authentication to ensure secure transactions of your service and ecosystem. Security is a critical factor in building trust, particularly when expanding into global markets.

Steps for Implementation for Acquirers

For acquirers, the transition to open-loop ecosystems centres on one core objective: merchant enablement. A wallet may be interoperable, but without widespread acceptance, its value is still cut short.

The acquirer’s role is to ensure merchants can accept open-loop wallet payments across physical stores, online platforms, and emerging digital channels.

Step 1: Start with Closed-Loop Merchant Acceptance

Acquirers can initially focus on building a network of merchants within their ecosystem who accept closed-loop wallet payments. For example, a shopping mall could implement a wallet for payments across its stores with minimal or no acquiring fees to encourage merchant adoption.

Step 2: Enable QR Code Solutions

As acquirers transition to open-loop ecosystems, implementing interoperable QR code payment solutions is essential. BPC’s SmartVista allows QR payments and acceptance, providing a seamless way for merchants to accept various payments from both closed-loop and open-loop wallets.

Next-generation acquiring platforms like SmartVista support integration with multiple global wallet systems, allowing merchants to accept payments from a broader customer base.

Step 3: Integrate Open-Loop POS Acceptance

Acquirers should enable merchants to accept payments via open-loop POS networks that support various methods, including QRs, NFC, contactless payments, and tokenised card transactions.

Step 4: Provide Merchant Analytics and Tools

Acquirers must offer tools for real-time transaction monitoring, customer analytics, and loyalty program integration. This ensures merchants can track performance and optimise their strategies to increase footfall and customer engagement.

Step 5: Collaborate with Technology Providers

Partnerships with technology providers like BPC allow acquirers to access APIs and SDKs that streamline merchant onboarding and payment processing. These integrations make it easier for merchants to accept open-loop payments and expand their offerings.

Step 6: Support Cross-Border Transactions

Upon successful approval, the specified amount is deducted from the wallet balance or linked payment source. Users receive a confirmation notifying them that the payment has been completed.

What Lies in the Future of Wallet Ecosystems?

Functionality, intelligence, and global integration will define the next phase of wallet evolution. This is not a surprise, given the fact that wallets are expanding far beyond their original purpose as transaction tools and becoming comprehensive financial platforms.

One visible shift is cryptocurrency integration. As of 2024, the global cryptocurrency market was valued at $2.2 trillion, spotlighting consumer interest in digital assets. Wallets are already incorporating crypto storage, trading and payment capabilities.

As global commerce hits new highs, consumers and businesses both expect frictionless international transactions. Wallets that support quick and efficient currency conversion and cross-border payments reduce the complexity that is usually associated with global trade.

Research from Convera suggests that cross-border payments could reach $290 trillion by 2030, underlining the scale of this opportunity that awaits.

Wallet ecosystems that can support multi-currency flows efficiently may be the ones at the centre of this growth. However, scale alone is no longer a guarantee of success.

Imran Vilcassim, BPC’s Global Chief Commercial Officer, Digital Banking, shares that wallet growth is no longer the North Star, but rather unit economics are.

“For banks and fintechs, the path to profitability lies in moving beyond a ‘land grab’ for users and toward a shared ecosystem of value. Success requires deliberate orchestration: leveraging the trusted infrastructure and capital of banks alongside the agile distribution and user centricity of fintechs.”

Imran shares that regardless of operating in a high-engagement closed loop or scaling through open-loop interoperability, the winners will be those who industrialise fraud and compliance.

Sustainable revenue goes beyond the transaction, he says, and is about the operational discipline that turns high volume into high margin.

Build the Right Wallet Ecosystem Before You Scale

Designing a successful wallet is all about choosing the right model, expanding at the right time, and building an ecosystem that can grow profitably across markets and use cases.

Institutions that understand when to use closed, semi-closed, and open-loop strategies are the ones turning wallets into long-term platforms for engagement and revenue.

For a deeper look at the implementation pathways, infrastructure choices, and real-world case studies shaping this evolution, download BPC’s “Your Essential Guide on How to Build Closed and Open-Loop Wallet Ecosystems.”

Featured image edited by Fintech News Singapore based on image by freepik on Freepik