written by Khatabook | January 10, 2022

What are Mobile Wallets and how do they work?

A mobile wallet is exactly that, a wallet that lives on your smartphone rather than in your pocket. Your credit and debit card information is securely maintained with the bank, allowing you to make payments to people and vendors from your mobile device, whether at a mall or grocery store. There are numerous advantages to having an m-wallet. So, let's know more about m-wallet that is a move towards a cashless India.

Did you know?

India’s first mobile wallet was called Oxigen Wallet which was launched in July 2004!

What is a mobile wallet?

A mobile wallet is a device that allows you to carry cash in a digital form. You can use your mobile device to attach your credit card or debit card information to a mobile wallet application, or you can transfer money to a mobile wallet online. Using your smartphone, tablet, or smartwatch, you can make purchases instead of a conventional plastic card. An individual's account must be linked to it to load money into a digital wallet. Many apps such as Jio Money, Freecharge, Paytm, ICICI Pockets, Mobikwik, SpeedPay, Oxigen, Airtel Money, SBI Buddy, Citrus Pay, Vodafone M-Pesa, Axis Bank Lime, and others all have their e-wallets.

Requirements of a mobile wallet app

  • Choose between a Zero KYC (Know-Your-Customer) or Full KYC wallet; 
  • Choose between a Consumer or Merchant wallet; 
  • Provide a mobile number; 
  • Download an app to your smartphone

Reasons to switch to a mobile wallet

Here are seven reasons why you should use a mobile wallet:

  • Convenience: Transactions can be done promptly with mobile wallets. You're done with a few taps and clicks here and there. There will be no more long lineups or ATM trips to withdraw money. There's nothing like getting what you want in a timely and convenient manner to give you a sense of accomplishment.
  • Easy and quick: Using a mobile wallet eliminates the need to repeatedly enter your card number, expiration date, CVV code, and other information each time you make a transaction. Your information is saved when you enter it, and your payment is processed with a single click. Furthermore, instead of reaching through your bag for your wallet in a store, you can pick up your phone, which is always accessible, scan the Bharat QR code, and you're done. 
  • Easily accessible: Having all of your card information in one location makes day-to-day transactions go more smoothly. Plus, your phone is always within reach, functioning as more than just a means of communication.
  • Multiple uses: A mobile wallet can be used for a variety of activities, including bill payments (DTH, energy, water, broadband, cable, and so on), purchasing plane, bus, or train tickets, purchasing cinema tickets, and even transferring money. A mobile wallet’s reach has grown significantly in recent years.
  • Never miss a payment: Your hectic and inconsistent schedules may cause you to forget when your expenses are due. In such situations, a mobile wallet can come in handy. Set up autopay, and the app will pay your bills on the due date you specify. This allows you to go about your days without having to worry about anything.
  • Security: Unlike your traditional wallet, your mobile wallet cannot be stolen. Even if you lose your phone, the security settings on your mobile wallet ensure that only you have access to it. As a result, no one will be able to reach in and take your debit card. Furthermore, the account number is not communicated when data is provided via a mobile wallet for payment purposes. To enhance security, encrypted payment codes are used instead.
  • Promotions, Reward Points, Cashback, bonuses, gifts, and other incentives: Mobile wallets frequently provide promotions, Reward Points, Cashback, bonuses, gifts, and other incentives that can save you money.

Also Read: How Secure is BHIM UPI? | A Complete Guide

Advantages of Mobile Wallets

1. Access control

Secure access is one of the advantages of a mobile wallet. The user must unlock the mobile device with a password or fingerprint before paying. To open the mobile wallet, users must type a passcode, use their fingerprint, or use a face scan.

Anyone who uses the mobile device to make a payment without supplying the essential security credentials will be unable to do so in the event of theft. It makes mobile wallets safer than carrying actual credit cards or cash, which can be readily stolen.

2. Easily accessible and practical

Users will find it easier to make payments using  mobile wallets because they are easily accessible and convenient. Consumers prefer them over lugging real wallets and cash to stores for in-store purchases because they are more convenient. Users can utilise the funds to pay bills and make purchases on the go once credit card information is linked to the mobile wallet.

Features of a Mobile Wallet

The consumer-business interaction is rapidly becoming digital. Businesses are altering their operations to meet the ever-changing needs of their consumers and the increasing use of mobile phones and devices, from e-commerce platforms to chatbots. Fintech companies are growing in the financial sector. They provide digital platforms and solutions to make financial services readily accessible to the public. 

These start-ups develop game-changing technologies and services that are inexpensive and easy to use. The payments industry is one of the most innovative parts of the financial industry. Companies and individuals are adjusting to online and offline transactions using devices such as a mobile wallet on devices like smartphones, tablets, and smartwatches.

  • The mobile wallet is either an app that can be downloaded to a smartphone or a function already incorporated into the device. 
  • Credit card, debit card, coupon, or reward card information is stored in a mobile wallet
  • The wallet maintains payment information by associating a personal identity format such as several keys, QR codes, or an image of the owner to each card stored once the app is launched and the user inputs payment information.
  • When a user makes a payment to a merchant, the mobile app employs a near-field communication (NFC) technology, which communicates between devices via radio waves. 
  • NFC communicates payment information to the merchant's POS (point-of-service) terminal using the user's identity format. 
  • Data is typically transferred when a user waves or holds an NFC-enabled mobile device over the store's NFC reader.

Fraudulent actions, such as identity theft, are tougher to initiate using mobile wallets. While a credit card can be quickly stolen or copied, smartphones are more difficult to obtain. If an access password or fingerprint check is installed on a stolen smartphone, it may not be easy to access. Encrypted keys are also possible in mobile wallets. Mobile wallets are especially beneficial to retail organisations with significant transaction volumes per day because they help cut waiting and payment times. This is a win-win situation for both clients and the company.

How to Use a Mobile Wallet?

It's simple to set up to use your favorite mobile wallet after you've decided on one. 

  • Begin by downloading the mobile wallet app to your smartphone, tablet, or another suitable device from the app store. 
  • Then open the app and begin adding information to your wallet, such as credit cards, debit cards, coupons, reward cards, and so on.

  • While numerous cards' information can be loaded into wallets, only one card will be the default payment method. If users want to conduct a transaction using a different card, you must first change the default card.
  • Find retailers who accept your preferred payment gateway when making an in-store transaction. 
  • A contactless payment indication is mainly used to identify merchants who accept mobile wallet payments (usually a sideways Wi-Fi symbol).
  • Users must tap or wave their device to the NFC-enabled terminal when making a payment. 
  • Following the payment, a notification is delivered to the merchant, informing them of the transaction. 
  • For the payment to be transferred from the consumer's account to the merchant's account, the merchant must heed the message alert.

Process of paying from mobile wallet of Paytm to merchant’s bank account:

What is required for the transaction?

  • Self-service and Assisted mode
  • Smartphone or internet
  • Use MPIN

Transaction Cost

  • Remittances to bank accounts are charged at 0.5% to 2.5% of the fixed fee.
  • Data charges can be paid in self-service mode.

Services Provided

  • Add money 
  • Bank A/c 
  • Pay merchant 
  • Barcode reader 
  • All Cards 
  • Cash-In 
  • Accept Money 
  • Pay money 
  • Another wallet (mobile number) with the same provider 
  • Manage Profile 
  • Notifications

Different Types of Mobile Wallets

The most common forms of mobile wallets are as follows:

1. Open wallets

An open wallet is used directly by a bank or indirectly through a third  party. Customers can utilise the funds in their mobile wallet to make payments for transactions or withdraw the monies transferred to the account in cash using open wallets. PayPal, for example, is an open mobile wallet that allo ws users to pay for in-store and online purchases while still withdrawing cash.

2. Closed wallets

Closed wallets are associated with certain merchants, and users can only use the funds to complete transactions with that merchant. The money cannot be used to pay for purchases with other merchants or third-party service providers, nor can it be withdrawn in cash. Amazon Pay is an example of a closed wallet.

3. Semi-closed wallets

Semi-closed mobile wallets allow users to utilise their funds in the wallet to pay for transactions with different merchants as long as the merchant and the mobile wallet company have a contract in place. Users can also deposit money into their bank accounts. On the other hand, semi-closed wallets do not allow users to withdraw funds in cash. For example, the mobile wallet known as the Citrus Cash app can be used for recharge purposes, at multiplexes. However, cash withdrawal is not possible from this m-wallet.

Also Read: All About UPI– United Payments Interface

Conclusion

mobile wallet contains credit and debit card numbers, and also loyalty card numbers. It can be accessed via a mobile device, such as a smartphone or tablet that has an app installed. In-store payments are made with mobile wallets, a more convenient payment method than paying with cash or carrying actual credit cards. In stores listed with mobile service providers, mobile wallets are accepted as a form of payment. Google Pay, Apple Pay, and Samsung Pay are mobile wallets. Users can download the software from app stores or have the wallets installed on their smart devices. 

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FAQs

Q: What are the disadvantages of mobile wallets?

Ans:

Mobile wallets are only available to those with a stable internet connection. The number of merchants accepting mobile wallets is increasing, yet it is still insufficient. Because each mobile wallet has spending and depositing limits, it cannot be used for high-value purchases.

Q: What are the benefits of mobile wallets?

Ans:

You won't have to be concerned about carrying cash with you. When you're short on change, no one is going to give you a sweet or two instead of a one-rupee coin. Using an online wallet, you'll tender the exact amount, down to the last paise.

Q: What are the functions of Mobile Wallets?

Ans:

For each of their registered users, mobile wallets create an escrow account. An escrow account is a holding account for money held by a third party on behalf of two transacting parties, the customer and the merchant.

Q: What are Mobile Wallets?

Ans:

These are mobile-based virtual wallets that let you store money after registering with a service provider and use it to make online and offline payments to merchants affiliated with the service provider. EWallets, m-wallets, and digital wallets are all terms for mobile wallets.

Q: What are India's major Mobile wallets?

Ans:

Several online wallet providers have developed in India's still-developing mobile wallet market. Paytm, PayU, MobiKwik, Free charge, and Oxigen are the most well-known.

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