The concept of Mobile Wallet

Mobile Wallet is a pre-paid instrument in which you can deposit money.
This money can be used easily for big or small purchases.
The payment through these wallets is easier than directly from the bank account.
The mobile wallet creates an account to keep your money, immediately.
In a normal wallet, you keep the money to use for the purchases and payments. In this wallet, you keep money in the form of currency notes.
Whereas, Mobile wallet also keeps your money and you can use it for the purchases and payments.
The only difference is the ‘form’ of money. It does not keep currency notes. Rather it keeps money in the digital form which can be also used for the payments.
The mobile wallets basically work through mobile apps. However, You can also access your mobile wallet through the web page.
Types of Mobile Wallet and Examples
There are scores of mobile wallets. You can use any of them for making payments. However, These wallets have some differences as well. In fact, the RBI has classified the mobile wallets in 3 categories.
Closed Mobile Wallet
These mobile wallets are linked to a company or merchant. The money kept in such wallets can be used only for purchase from that merchant.
You would not get back money from this wallet either in the bank account or cash.
Any merchant or e-commerce site can give this facility.
When you purchase an online gift card from a retailer such as Shoppers Stop, Big Bazaar etc. The money is kept in the e-wallet. You can use this wallet only for the purchases from that retailer.
You have also noticed that when you return an item to the Myntra, Jabong etc, the refund amount is kept in a wallet. You can use that money for further purchases. Such wallets are the closed wallets.
Examples
Bookmyshow
Myntra
Jabong
Ola Money
Semi-Closed Mobile Wallet
This type of mobile wallets can be used with more than one merchants. But, the wallet and merchant should have a contract for the payment arrangement.
The merchant can be a seller of goods, services or financial products. It can also have the remittance facility.
The banks or Non-Banks can issue this type of wallet with the authorization of RBI.
You would not get back the money in cash. It does not give cash withdrawal facility. However, you can get back the money in your bank account. The wallet can charge a fee for that.
Examples
Paytm
Freecharge
Mobikwik
Phonepe
Open Mobile Wallet
This mobile wallet can be used for any type of purchases and transactions. It can be goods, services, financial services and remittance.
A prior contract is not necessary for the transaction.
Only banks can issue such wallets. Banks can also issue such wallet in a partnership of a third party.
Users can withdraw the amount from the ATM or business correspondents
Examples
ICICI Pockets
Vodafone M-Pesa
PayZapp
What Can You Do Through the Mobile Wallets
Anything and Everything! Right from the simple online purchases, bill payments to mutual fund transactions. Even, you can use mobile wallets to pay at a shop. I have listed some important uses of mobile wallets
Recharges of mobile, DTH and broadband
Bill payment of mobile, electricity, water etc
Purchases of goods from offline retailers
Movie and travel ticket booking
Investment in mutual funds and gold.
Premium payment of insurance policies
How Does Mobile Wallet Work
The working of the mobile wallet is not very complex. It takes money from you and keeps it. Further, it pays to the merchant whenever you buy anything. These are the steps of mobile wallet use.
You deposit money to your mobile wallet account. You can pay the amount through net banking, debit card or credit card. The mobile wallet company also pays some commission to card issuer company for the payment facility.
The mobile wallet company puts your money in an escrow account. This is an account which does not give full authority to the mobile wallet company. Rather, the money goes directly to the merchants. The mobile wallet company only gets the interest from this account. The wallet company has the management rights of this account but never gets the money.
When you do a transaction a mandate is sent to the merchant about the payment. But the merchant does not get the money immediately. However, merchant honors the mandate as per the contract.
The aggregate settlements of merchants happen in a fixed interval. The mobile wallet company directs the bank to transfer money from the escrow account to the account of the registered merchant.
Benefits of Mobile Wallets
The mobile wallets have numerous benefits over the physical wallets.
Can’t Lose
Your physical wallets can be snatched, pickpocketed or lost. But this can’t happen with the mobile wallet.
Of course, you can lose the mobile but, your mobile wallet would remain safe because of the password.
‘Change’ Solution
You would not bother for the change. As you can pay the correct amount through the mobile wallet. Suppose, you have to pay the bill of ₹456.23, You can pay the exact amount through the mobile wallet. It is not possible with the cash.
User-Friendly
Mobile wallets are convenient than the net banking is as there are fewer steps for the payment. Sometimes, one or two taps are sufficient for the recharges and bill payment.
Extra Layer of security
You do not disclose your sensitive data of bank account, debit or credit card. Today, you have to pay at several sites, but you don’t trust each of them. In such a scenario the payment from the wallet is better.
Rewards
The mobile wallets companies give you many rewards for using their services. However, it would not last forever.
Demerits
There are some demerits of the mobile wallet as well.
Only tech-savvy people can use this platform. Also, you need a smartphone with an internet connection to use the mobile wallet.
There is a limit to deposit in the account. Also, you can’t spend more than a fixed amount in a day.
You would not get the interest on your deposit. The payment through the UPI gives you the interest as your money remains in the bank account.
If your smartphone battery drained, you would not be able to make payments.
Popular Mobile Wallets of India
There are scores of mobile wallets in India.
The Paytm has established itself. In fact, most of the people get to know about the mobile wallet because of the Paytm.
Besides Paytm, Free Charge, Phonepe, Mobikwik, PayZapp, Mpesa , Airtel money, JioMoney and Pockets are also popular mobile wallets.
Most of these mobile wallets also give you the fund transfer facility through the UPI.