E-Wallet is an online money account which can make transactions without the need for a physical card. E-Wallets are similar to debit cards because they operate through pre-loaded money.
An E-Wallet can be an electronic device or website that allows commercial transactions. 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.
Now that you have a basic idea of what they are. Here are 5 things you need to know about E-Wallets.
- These are issued by companies to their clients for buying goods and services. These wallets allow transactions only with that particular service provider.
- They do not allow you to withdraw cash, however.
- These 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 also do not allow you to withdraw cash.
- Open wallets are similar to semi-closed wallets in that, they too allow the purchase of goods and services at sale terminals.
- However, these also allow cash withdrawal at ATM's or business locations.
You can avail of most E-Wallet services by following these simple steps: -
- Download the application onto your device: Most E-Wallets are mobile or desktop apps and can be easily downloaded onto your mobile, tablet or PC.
- Fill in the basic details: After app installation, you need to fill in some basic details. names, date of birth, email address, mobile number. Optional bank details or PAN card information may be required to be filled up
- Set up PIN/Password: The final step of registering yourself for an E-Wallet is to set up a PIN/password. A One-Time Password(OTP) is sent to your mail id or mobile number for validation and the process is done
- Link Cards: In some E-Wallets, you need to link a debit card or such to start payments.
- You pre-load the money into the E-Wallet for making transactions. Linked cards or bank accounts do this.
- However, the money you see in your wallet is just a digital representation. The actual money is stored in the service provider’s account held for you. The same is done for all users.
- 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.
- 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.
4. How are they made secure?
- Though some have raised concern about how secure E-Wallets are just as secure as cards, if not more.
- 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
- Some e-wallets also put in an option of deleting wallet data in case the phone is lost.
- Two-factor authentication via OTP is also a strong fraud.
5. What are their advantages?
- It minimizes risk of theft as there is neither physical money nor cards to be stolen
- It allows you to operate multiple accounts at the same time
- Reduces the cost of doing banking transactions
- Faster and more streamlined user experience.
E-Wallets have made digital payments easy and secure much to your benefit. Above mentioned information is helpful in understanding payments via E-Wallets, which also contributes to the cause of Digital India.