A guide to digital wallets
With convenience at their vanguard, digital wallets have been slowly seeping into the payments scene in India. The e-commerce boom has led to the adoption of digital wallets by consumers as the preferred mode of payment. The ascendancy of the digital wallet has reached a high point in India with the introduction of de-monetisation.
Digital wallets started out with mobile recharges, but now they have moved on to a whole range of services that include shopping, food ordering, utility, travel and more. As the era of cashless transactions is dawning on us, digital wallets are getting more and more useful.
1. What is a Digital Wallet?
A digital wallet is the digital equivalent of your physical wallet. It is a virtual wallet which lets you pre-load any amount of cash which can be used to make transactions. It also allows you to keep cash stored in your digital wallet, just like your bank account. All you need to do is create an account with the wallet provider using your phone number. Once the account is created, you can add money using your Credit or Debit Card.
2. Types of Wallets
Digital wallets can be classified into three types – closed wallets, semi-closed wallets and open wallets. Let us discuss each of these types.
Such wallets are typically issued by ecommerce companies, and consumers are lured with attractive offers and cash backs. You can use it exclusively to buy stuff from one company only.
Semi-Open or Semi-Closed Wallets:
These wallets allow you to purchase products and services from all merchants that have a tie-up with them. However, they don’t allow cash withdrawals or redemption.
Open Wallets are issued by banks only. You can use these wallets to make payments at a wide range of stores and businesses and withdraw cash from ATMs. You can even send money to a mobile number or a bank account. These are by far the most convenient and flexible kind of wallets.
3. Benefits and disadvantages
The advantages of digital wallets are that you can do transactions much faster, and with convenience and security. You don’t have to enter your card details or pin numbers for every transaction that you make.
In case of closed and semi-closed wallets, the disadvantages are that you are limited to where you can shop. You also need to be connected to the Internet to use these wallets. You don’t earn any interest on the money you keep in your wallet. You have to constantly replenish the wallets and can use only as much as you have loaded onto it.
Finally, you run the risk of someone misusing your wallet if you lose your phone, since many services don’t require additional level of authentication.
4. The Road Ahead
With the significant increase in smartphone users and more consumers relying on the digital lifestyle, the future looks rather bright for digital wallet companies. In fact, the growth of smartphone users and its ability to enable internet penetration across the country is the biggest driver of digital wallets.
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