E-wallets: Here's what you need to know
E-wallets allow you to operate multiple accounts at the same time. It also reduces the cost of doing banking transactions. It is faster and more streamlined user experience.E-wallets allow you to operate multiple accounts at the same time. It also reduces the cost of doing banking transactions. It is faster and more streamlined user experience.
The E-Wallet industry has grown by leaps and bounds after Modi government's demonetisation drive, even the roadside vendors are now accepting e-wallet payments.
Leading digital wallet companies have declared unprecedented usage and the industry looks set to grow into a $6 billion giant by 2020, reports Indiainfoline.
E-wallets are online money account through which one can make transactions without any hard cash or for a physical card. E-Wallets are similar to debit cards because they operate through pre-loaded money.
An electronic device or website that allows commercial transactions are generally termed as e-wallets. It is a system that allows users to purchase items using near-field communications technology.
The RBI classifies E-Wallets under “Pre-paid payment instruments” monitored under the Payment and Settlements Systems Act, 2005.
Here's what you need to know about e-wallets:
RBI has allowed three kinds of e-wallets. Those are--
These wallets are issued by companies to their clients for buying goods and services. These allow transactions only with that particular service provider. They do not allow you to withdraw cash.
Semi-closed wallets are used to buy goods and services (including financial ones) at specified establishments. These merchant sites or establishments have contracts with the wallet issuer to accept payment from the wallet. These wallets also do not allow you to withdraw cash, Indiainfoline reported.
Open wallets are similar to semi-closed wallets, they too allow the purchase of goods and services at sale terminals. These wallets allow cash withdrawal at ATM's or business locations.
How to get an E-Wallet?
You can get an e-wallet by following these steps:
- Most of the E-Wallets are mobile or desktop apps and you can easily download them into your mobile, tablet or PC.
- You need to fill some basic details like names, date of birth, email address, mobile number after you install your downloaded app. Optional bank details or PAN card information may be required to be filled up.
- The final step to register yourself for an e-wallet is to set up a pin or password. Once you generate a password, a One-Time Password (OTP) is sent to your mail id or mobile number for validation and the process is done.
- You need to link your debit card in some of the wallets in order to make payments.
How do they work?
You need to pre-load money into your E-Wallet for making transactions. However, the money you see in your wallet is just a digital representation.
According to the report, when you transfer money to another wallet by the same service provider, the ledger for the accounts held for both parties is updated with the transaction amount.
Likewise, when you pay a third party, like on paying mobile bills, the wallet company makes the payment to the vendor.
Banks will use IMPS to deal with your E-Wallet service provider.
How secure are e-wallets?
According to experts, E-Wallets are just as secure as cards, if not more. Indiainfoline says, tokenization to encrypt personal data, so it’s more difficult for hackers.
Some providers have also started bringing in a biometric verification to ensure security.
On the other hand, some e-wallets also put in an option of deleting wallet data in case the phone is lost.
Advantages of e-wallets
As this is neither hard money or physical cards, it minimises the risk of theft.
E-wallets allow you to operate multiple accounts at the same time. It also reduces the cost of doing banking transactions. It is faster and more streamlined user experience.