Understanding the Three Types of Digital Wallets: Closed, Semi-closed and Open

As digital payments mature, not all wallets offer the same level of flexibility. The infographic above breaks down where different wallet types can send funds — but what does this mean in practice? Here’s a quick guide to the three core models shaping today’s digital wallet landscape.

Closed Loop Wallets

A closed loop wallet is issued and controlled by a single merchant. Funds stored in the wallet can only be used with that issuing brand, meaning it effectively locks spend into one ecosystem. These wallets are typically used to improve customer retention, speed up checkout and reduce payment processing costs.

Examples include: Amazon Pay Balance, Starbucks’ in-app wallet, or retailer-specific gift card wallets.

Semi-closed Loop Wallets

Semi-closed wallets sit in the middle ground. They allow payments to any merchant or partner operating within a defined network. While users can’t send funds outside this network, they still benefit from a broader choice of acceptance points than closed wallets. This model is especially popular in markets where payments regulation requires tighter oversight of who can accept digital wallet transactions.

Examples include: Paytm Wallet in India, GCash partner merchants in the Philippines, or GrabPay transactions inside Grab’s network.

Open Loop Wallets

Open-loop wallets offer the greatest level of interoperability. Users can store cards, hold funds and make payments to virtually any merchant or service that accepts standard card networks. These wallets behave much like digital versions of a physical wallet, supporting cross-network payments and often enabling peer-to-peer transfers as well.

Examples include: Apple Pay, Google Wallet, Samsung Wallet and most neobank wallet apps.

As digital wallets evolve, understanding these distinctions helps businesses decide which models best support their payment strategy — whether that’s retaining customers within a brand ecosystem, enabling controlled network transactions or offering fully interoperable payment experiences.

As a Senior Research Analyst within Juniper Research’s Fintech and Payments team, Thomas provides up-to-date trends analysis, competitive landscape appraisals, and market sizing for financial markets. His most recent reports have covered areas including Digital Wallets and A2A Payments.