When two balls collide, the sum of their momenta did not change. This time the partner is a wall.
The wall does not move, so the only thing to be settled is the velocity of the ball. Applying the definition of the coefficient of restitution as it stands gives v' = -ev.
The speed is multiplied by e and the direction is reversed. At e = 1 the speed is unchanged and only the direction turns. At e = 0 the ball sticks to the wall and stops.
Notice that one equation was enough. The partner does not move, so there is no pair to solve together.
The momentum before the bounce is mv and after it is -emv. These are not the same.
Look at the two bars in the figure. The direction has reversed, and the length has shrunk by a factor of e as well. Far from a sum holding still, the one momentum there is has changed.
This does not mean the conservation law has stopped working. It is being applied to the wrong thing. Momentum is conserved in a system that receives no force from outside, and a ball considered by itself is receiving a force from the wall.
So this ball is not on its own. It has a partner outside it, namely the wall.
Where did the momentum the ball lost go? Into the wall.
The change for the ball is \Delta p = -emv - mv, that is, -(1 + e)mv. By action and reaction, the wall receives momentum of the same size in the opposite direction.
The third bar in the figure is the sum of the two, and it does not move. Take the wall into the system and momentum is conserved after all.
The wall shows no sign of moving because its mass is larger by an enormous factor. The wall is joined to the building and the building to the Earth. Given the same momentum, a large m in p = mv leaves a v far too small to see.
Look at the kinetic energy as well. Before it is \dfrac{1}{2}mv^2; after it is \dfrac{1}{2}m(ev)^2 = \dfrac{1}{2}mv^2e^2.
Taking the difference gives \Delta K = -\dfrac{1}{2}mv^2(1 - e^2). The 1 - e^2 that appeared with two balls shows its face here as well.
At e = 1 it is 0. Only the direction turns, and no energy is lost. The smaller e is the more is lost, and at e = 0 all of it goes.
The wall carried off momentum, but it does not carry off kinetic energy. The wall does not move, so no work is done on it. What is lost becomes heat, sound and a dent.