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E-wallet transactions have been constantly on the rise, especially with the advent of UPI.
In fact, mobile wallet transactions volume crossed 4 billion in FY 2021, a significant increase from about 32.7 million transactions in 2013.
But how do e-wallet payment processing works? How does this process differ for P2P transactions as compared to P2M transactions?
Here’s how.
For P2M transactions, a payment processor manages transaction processes by acting as the middleman between merchants, financial institutions, and consumers. It also authorises transactions and ensures that merchants get paid on time in the process.
How An e-Wallet Works In The Case Of P2P Transactions
In the case of peer-to-peer e-wallet transactions, the third party payment processor is the one that primarily acts as the wallet. Everything flows through the payment processor.
Let’s take PhonePe as an example.
- A user adds funds in their Paytm wallet from their bank account using a digital payment method such as UPI, net banking, credit or debit card, etc.
- The user then enters the receiver’s phone number of Paytm ID to make the payment.
- Money is deducted from the user’s Paytm wallet and deposited in the receiver’s Paytm wallet within microseconds.
In the entire process, a user is not redirected to a third party site to complete the transaction.
Consequently, transactions get settled instantly.
How An e-Wallet Works In The Case Of P2M Transactions
The case is a little different in the case of peer-to-merchant transactions. Let us explain the concept using the illustration given below.
Let’s take ABC Corporation as an example. ABC Corp. uses Cashfree Payments’ payment gateway to process customer transactions.
In this case, here’s how e-wallet payment processing will happen.
- A customer checks out ABC Corp.’s website or mobile application.
- They enter the necessary details and select an e-wallet as a mode of payment.
- Once the customer processes the payment, funds get deducted from their e-wallet and transferred into Cashfree Payments’ wallet that acts as a wallet for ABC Corp.
- The funds are then settled by Cashfree Payments to ABC corps in T+1 days.
A user just needs to ensure that their e-wallet has sufficient balance to let the e-wallet service provider process the payments.
To simplify, in the case of peer-to-merchant transactions an intermediary is always involved.
- The intermediary collects funds from all digital sources – UPI, cards, payment links, etc. from various customers into its wallet.
- It then subsequently sends a collective amount to the merchant’s account in T+1 days (or as agreed upon)
The process is planned to simplify the lives of the merchants. Neither do they have to constantly keep an eye on payments being received, nor reconcile statements. Payment aggregators like Cashfree Payments do the needful.
Are you a business looking to collect e-wallet payments from customers? Talk to our experts today!
