Due to society’s increased use of online and electronic payments, the online global financial system is booming, and digital wallets are increasingly becoming a necessity as a way to maintain online payment processing compliance.
Instead of plugging credit card numbers into an unknown eCommerce platform, a user can instead log in to their digital payments account and choose which bank account, debit card, or credit card that they want to pay with. Not only is their banking information kept more secure, but users can rely on this payment solution as a buffer and mediator when completing online transactions.
Users can use a digital wallet to send more ACH transactions and contactless payments than previously capable.
If you’re visiting Sila, then you’ve probably learned by now that our powerful API can be used to open up financial networks and to create a new piece of financial innovation, like a digital wallet payments app. Sila’s SDK can allow developers, business owners, and innovators to build a fully functioning and white-labeled digital wallet for use in a number of sectors and throughout a range of integrations and needs.
If you are interested in building your own digital wallet service, then you’re in the right place. This article is aimed at presenting how a digital wallet works, how digital wallets built with Sila’s API can be used, potential security concerns, and how to get started creating your very own digital wallet.
How a digital wallet works
A digital wallet is a digital asset platform that enables a user to register their own account and submit personal payment information, such as debit card numbers, credit card numbers, and bank account numbers and transit numbers, in order to use these accounts for payment.
With a digital wallet, your financial cards can be housed in a secure digital space and used when you want to make a transaction electronically (which can be done both online and at a point-of-sale [POS] system). The digital wallet can also be used to collect digital currency to be used directly from that eWallet if you desire, that way money does not have to be transferred in or out of the wallet, especially if you are looking to avoid fees or international transfer costs.
In order to use a digital wallet, you must register with that company and fill in the appropriate information. The company will want to verify that it is you through secure bank account linking and know your customer and identity verification procedures.
This process usually looks something like this:
If you are linking a bank account, you let the digital wallet know that you want to add a bank account. They will then redirect you to the login and link the information of that bank account.
Once you log in, your bank account may ask some standard security questions and verify that you’re okay with sharing your private information with this company.
In other cases, if you are linking the bank account in order to enable ACH debits or ACH credits, then you will need to verify a micro-deposit of money made by the bank (usually around $0.11 and $0.15 cents).
Verifying the bank account or credit card may take a few days, but once that is approved, you are good to go.
Once you are approved through this platform, you can use digital wallet payments wherever it is accepted. The digital wallet will usually have a mobile wallet payment app that can be used at a POS, which allows the card to be held up to a compatible payment terminal and make the purchase using the app. You can withdraw cash from your mobile wallet at an ATM, where compatible. Most often, though, individuals and businesses will use the digital wallet in order to process an online payment.
Digital wallets are largely known through brand recognition. PayPal, Google Pay Wallet, Apple’s Passbook, Square Wallet, Venmo, CashApp, and many more, are known in the fintech industry as being reputable digital wallets and online payment processors.
Best uses for a digital wallet created with Sila’s API
Here at Sila, we recognize that digital wallets are the way of the future, and we want to expand their use from what they are capable of now. Digital wallets are smart pieces of fintech innovation that expand the definition of a financial institution; however, they are limited in a few ways:
If you want to use a digital wallet so your company can process transactions, you most likely must go with one of the recognized brands and are forced to comply with their rules, fees, and timelines.
Some digital wallets might only be able to process up to a certain dollar value in transactions, therefore limiting how much money can be sent by a single company.
International transfers are seriously impacted when it comes to digital wallets. For example, while some have international transfer capabilities, like PayPal and Square, others do not. Venmo is a strictly U.S.-only digital wallet, and you must be in the geographical U.S. in order to download the mobile wallet app on your mobile device.
Currency conversions are limited, and only allow users to transfer a few currencies.
Based on these needs, we decided to create an option that gives business owners and software teams the ability to create their own financial products, like a payment gateway and other fintech applications.
With the Sila API platform, an app can be created that allows ride-share users, for example, to send each other money. A company like Uber would be able to create its own digital wallet using the SilaUSD cryptocurrency token. Instead of using a digital wallet app that only processes credit cards, the riders and drivers would each have the white-labeled Sila Digital Wallet app.
Here’s the example:
A single rider mobile payment could convert their own currency into the SILAUSD token. Payment is charged by the driver. Once the transaction is complete, the SILAUSD token is removed (debited) from the rider’s account and deposited into the driver’s account. The driver can then issue (credit) the SILAUSD token in their own currency. Transfer wait times and fees associated with ACH payments, banking transactions, and currency conversions are completely avoided.
All that is needed is a very nominal fee to process the payment (around $0.15 cents) and then the Sila token would need about one to two business days in order to be fully issued to the driver. That’s it!
Security for digital wallets created with Sila’s API
You navigate to an eCommerce website and see something you’re interested in. You put that item in your digital cart and navigate to check out. As you go to pay, you hesitate. You’ve just learned about this brand and you’re not entirely sure you trust them. At this moment, you wish that there was a payment facilitator or emblem there that you trust so that you know that you can give your money to this website and not be scammed.
Because of scenarios like this, innovators started to build digital wallets. If when you navigated to the eCommerce website in the above scenario and saw a Square emblem or PayPal button, then you might feel better about the company, and furthermore you might use your account via Square in order to process this payment.
Well, these digital wallets have been built, fine-tuned, and have grown thanks to consumer protection laws, fintech privacy laws, and the needs of the market. And they work fairly simply to the consumers’ point of view.
Digital wallets were built to increase the security of payment processing online, so it is inherent that the Sila API is super secure. However, the Sila API does provide additional security due to:
Its secure bank account linking and KYC/KYC partner.
Its use of cryptocurrency partners, the Ethereum-based SilaUSD token, to process payments and verify that the payment is processed through the publicly available blockchain.
Providing international users with a $250,000 FDIC insured bank, Evolve Bank and Trust, as a means of holding their business money in a U.S. bank.
The use of smart contracts to verify that the financial process has taken place, automating this process, and minimizing fraud for a number of financial transactions.
The Sila API being an ACH API. All money will be cleared through the ACH Network, one of the most secure networks to send money electronically.
Just like a traditional bank and other financial institutions approved within the U.S.’s Automated Clearing House system, the Sila API partners ensure that all money that passes through the Sila API is approved by NACHA and abides by NACHA Operating Guidelines, Offices of Foreign Assets Control (OFAC) guidelines, KYC/B guidelines, and Regulation E of the Electronic Transfer Act. KYC and KYB verification and secure banking account linking also ensure that the private data collected in order to do this is always securely stored and stored with encryption by the respective partners.
How to create digital wallets with the Sila Money API
Through our virtual Sandbox and with the support of our API Documentation, your team of developers can begin to create a market-ready digital wallet through Sila. All our endpoints are tested by our engineers through verification and sandboxing, and your dev team can test the API’s responses, return codes, and other verifications in an offline environment to get used to the app’s capabilities.
By creating an integrative and affordable white-labeled digital wallet, your company can reduce the time to market and the amount of funding needed to build the next startup. See today why Sila is right for your business needs!