Types of E- Wallet

Introduction

The payment system in the banking world has seen a huge transformation over the past few years. The rise in technological advancements gave rise to new financial applications, enabling the processing much smoother and convenient. These digital tools reduced the need for carrying cash to any external locations.

Thanks to smartphones, it has facilitated transactions virtually anywhere via the internet. This kind of framework led to the origin of e-wallets in the financial space, enhancing the access to multiple financial resources. So, what exactly are these wallets? Are they a game-changer in the payment platforms?

Define E-Wallet

E-wallet or electronic wallet is a financial product that provides digital banking services to the customers like paying bills, sending and receiving funds, and other transactions. You can simply connect the digital wallet to your bank account or respective card to carry out the transactions. The best part of using a digital wallet is that you can track your outlays. This will aid you in analyzing your financial health and keep you one step ahead in budget planning. E-wallets can reach to every nook and corner of the world, enabling people to access innumerable financial services and products like never before.

How does an e-wallet work?

As the name suggests, this payment platform stores all the financial information of the person. The data hoarded into the wallet includes credit and debit transactions, personal details, one can operate e-wallets via their smartphones or laptops or desktops. All you need is an electronic device and internet connection to accomplish the task.

You can use the e-wallets at eateries, shopping malls, cafes, and pretty much at all the places. This financial facility improved the way people transact offline and online. E-wallets are designed with robust infrastructure and come with various secured methods like end-to-end encryption, two-factor authentication, OTPs, etc.

These digital banking platforms use technologies like NFC (near field communications), MST (magnetic secure transmission) and QR codes to communicate with the users’ devices. Upon swiping at the point-of-sale terminal, the respective technology reads the user’s personal data stored in the wallet. If the details are true, the sale takes place and the wallet proceeds the final transaction.

Moreover, e-wallets save more time while conducting the financial transactions as opposed to that of traditional mode. These digital wallets are not just for payments but can also be used for storing other information such as event tickets, gift cards, coupons, membership cards, keys, license, and much more.

Types of E-wallets

There are different types of e-wallets catered to different purposes. Below are a few of them listed along with their attributes.

• Open wallet − This is a common wallet offered by banks and other financial entities. People can use this platform to transact both at online and offline spaces. However, to initiate the transactions, both the parties (sender and receiver) should have their accounts registered on the platform.

• Closed wallet − This app is mostly used by organizations to operate their businesses, sell products, receive and send payments, etc. The user can only use the available resources in the wallet for transactions. If the processing fails or rescinds in the middle due to some technical glitches, the funds will be retrieved to the account.

• Semi-closed wallet − This type of wallet comes with mixed features of open and closed wallet. Users can use this wallet only at select places or locations. The usage and coverage is very limited to certain areas only. You and the merchant have to enter into an agreement to use the services of this wallet.

• Crypto wallet − If you are a cryptocurrency user, then this wallet allows you to store all your private and public keys, crypto certificates, etc. This wallet is broadly classified into two categories: software-based hot wallets and physical cold wallets. The former one can be operated with the help of the internet, whereas, the latter one can be used offline via USB stick.

Benefits of using E-wallets

E-wallets act as a one stop solution for all your financial needs. Some wallets come with a password facility for accessing or processing any financial transaction, whereas, others operate via OTPs and QR codes. There are myriad benefits of using E-wallets.

• Eliminates the need for carrying chunks of cash everywhere. Plus, you don’t have to reveal any information to the external sources.

• You are a tap away to access the funds in your account. You can use the e-wallet to make or receive payments from different channels.

• Whether you are residing in an unbanked or underbanked zone, you can still get access to several financial products and services offered by the respective bank.

• E-wallets act as a quick fix when you forgot your physical cash at your home.

• Unlike traditional platforms, e-wallets have a layer of security, protecting users from unauthorized access.

• You can use these wallets at any place, and anytime at your convenience.

Drawbacks of using E-wallets

Though e-wallets have several advantages, it has its shared disadvantages as well.

• Not every merchant uses e-wallets or is advanced or updated with the current technological trends in the financial markets.

• The user should have a smartphone along with the internet access. So, when you are in an unbanked or underbanked region, accessibility of funds via e-wallets can be arduous in the first place.

• Though e-wallets come with built-in security infrastructure, there are chances of losing your financial information if you lose your device on the go. Once it gets into the wrong hands, you may also lose all your funds in your account. Sometimes, it’s difficult to trace your device when lost in unrestricted areas.

Conclusion

E-wallets made banking super easy, as with just a tap, all the transactions can be performed in a flash. Whether its payments or receiving funds from another party, this facility makes it happen irrespective of the location the receiver and send reside. The best part of e-wallet is that they can be easily operated in underbanked and unbanked zones as well.

FAQs

Q1)What is a subtle difference between e-wallets and internet banking?

Ans)E-wallets have a certain predetermined limit set by the RBI, but whereas, with internet banking, the person can use to the extent of their bank balance.