A closed wallet is a digital wallet where users can only use the stored funds to make transactions with the issuer of the wallet.
Understanding Closed Wallets
Based on the provided information, a closed wallet is a type of digital storage for funds that has specific limitations on where the money can be spent. Unlike wallets that allow transactions across various merchants or peer-to-peer transfers, a closed wallet restricts spending to only the specific entity that issued the wallet.
Key Characteristics
- Restricted Spending: The primary defining feature is that funds can only be used for transactions with the issuer. You cannot transfer money out to another wallet, a bank account, or use it with unrelated third-party merchants.
- Source of Funds: Money often gets into a closed wallet through mechanisms like credits from cancellations, returns, or refunds.
- Issuer-Specific Ecosystem: These wallets are tied directly to the service or platform provided by the issuer.
Practical Examples
A well-known example of a closed wallet, as mentioned in the reference, is Amazon Pay. When you receive a refund or credit from Amazon, it might be stored as a balance in your Amazon Pay account, which you can then use for future purchases on Amazon.
This structure makes closed wallets simple for users within a specific ecosystem but limits their utility elsewhere. They are primarily designed to keep funds within the issuer's platform, often facilitating returns or encouraging repeat purchases.
