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What Is a Stored Value Wallet?

A stored value wallet is a type of digital wallet where users preload funds into a virtual account, which can then be used for future transactions such as purchases, transfers, or payments within a specific ecosystem or, in some cases, more broadly. The key feature is that the wallet holds a balance—essentially acting like a prepaid account—rather than simply storing payment credentials like a credit card number.

How Stored Value Wallets Work​

  • Loading Funds: Users add money to the wallet using various methods, such as bank transfers, credit/debit cards, or cash at physical locations.
  • Spending: Once funded, the wallet balance can be used to pay for goods and services, often instantly and sometimes only within a particular network or brand (closed-loop), or across multiple merchants (open-loop).
  • Peer-to-Peer Transfers: Many stored value wallets allow users to send money to others within the same platform.
  • Balance Management: Users can monitor their balances, top up as needed, and sometimes earn rewards or loyalty points for using the wallet.

Types of Stored Value Wallets​

  • Closed-Loop: Usable only at a specific merchant or within a particular ecosystem (e.g., Starbucks app, metro cards).
  • Open-Loop: Usable at any merchant that accepts the wallet's network (e.g., prepaid Visa or Mastercard wallets).

Key Benefits​

  • Convenience: Quick payments without needing to enter payment details each time.
  • Security: Funds are stored digitally, often with enhanced security features.
  • Budgeting: Preloading funds helps users control spending.
  • Financial Inclusion: Useful for those without traditional bank accounts.
  • Loyalty Integration: Many stored value wallets incorporate rewards programs, especially in closed-loop implementations.

Business Benefits​

For businesses implementing a stored value wallet:

  • Reduced Payment Processing Costs: Eliminates or reduces interchange fees.
  • Customer Loyalty: Creates a direct financial relationship with customers.
  • Working Capital: Access to interest-free working capital from preloaded funds.
  • Customer Data: Gather valuable insights on shopping behavior and preferences.
  • Brand Engagement: Increases customer touchpoints and engagement opportunities.

Examples​

  • Starbucks app (closed-loop)
  • Venmo or PayPal balances (can function as both stored value and payment credential wallets)
  • Prepaid debit cards
  • Transit cards
  • Accrue's wallet solution for brands

Stored Value vs. Payment Credential Wallets​

Unlike payment credential wallets (like Apple Pay) which primarily store credit card information and simply pass those details to merchants, a stored value wallet actually holds funds. This means:

  1. The transaction can be processed without connecting to the traditional banking network at the time of purchase
  2. Users must actively decide to load funds in advance
  3. The user's relationship is with the wallet provider, not just the payment method

Summary​

A stored value wallet is a prepaid digital account that holds funds for future use, offering convenience, security, and flexibility in digital payments. For businesses, it represents an opportunity to build stronger customer relationships, gather data, and reduce payment processing costs.