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The Indian payments industry might just be in its golden era. Somewhere during this age of rapid growth, different types of e-wallets in India have changed the country’s entry payment economics.
Why do we say so?
Well,
- In FY 2021 itself, e-wallets recorded transactions valuing ₹1520.65 billion1
- The e-wallet market may cross USD 429.2 billion mark by the year 20272
So, is the evolution of e-wallets in India, in fact, a revolution?
Then, let’s find out what is an E-wallet!
What Is an E-wallet? Meaning of E-wallet
The e-wallet meaning or definition is quite simple and can also be derived from the name itself.
It stands for electronic wallet and is also known as a digital wallet. It is a software-based substitute to a traditional cash wallet – only with a higher range of capabilities and functions.
Typically, it’s a mobile app that enables users to load cash in virtual wallets, hence also called mobile wallets. After that, use the loaded virtual cash to make quick electronic transactions at multiple online and offline POS sites.
All of this is possible anytime, anywhere, up to a ticket size of ₹2 lakhs.
Different Types of e-Wallets In India
At present, citizens of India have the option to choose between three primary types of e-wallets. These are open wallets, closed wallets and semi-closed wallets.
So, let’s understand the differences between the three types of e-wallets as mentioned below:
| Open Wallets | Closed Wallets | Semi-closed Wallets | |
| Examples | ICICI Pocket, M-pesa by Vodafone Idea, etc. | Clear Trip, MakeMyTrip, BookMyShow, etc. | Paytm, PhonePe, MobiKwik, etc. |
| Purpose | This e-wallet type can be used for all kinds of transactions. | This e-wallet type can be used to make purchases exclusively on the e-wallet offering entity’s website. | This e-wallet type provides ease of buying commodities including financial services at listed merchants and locations only. |
| Flexibility | Transfer and withdraw funds easily. | Cannot transfer or withdraw funds. | Can transfer funds. Cannot withdraw cash or redeem by the wallet holder. |
| Issuers/ Wallet developed by | Companies sell products or services to consumers. | Can transfer funds. Cannot withdraw cash or redeem it by the wallet holder. | NBFCs and Fintech institutions. |
| PPI Licence mandate | A PPI licence is not necessary. | Not compulsory to have RBI authorization or PPI Licence | Can work without a PPI licence. (Not true in the case of non-bank entities and Fintechs.) |
| Transaction type | The e-wallet type allows peer-to-peer and peer-to-merchant transactions. | Transactions exist only between the wallet holder and the issuer. | Transactions exist only between listed merchants. For example PhonePe and Vodafone Idea, PhonePe and IGL, etc. |
However, with the release of RBI’s mandate on PPI interoperability, the lines of difference between these e-wallet types will soon disappear.
Related Post: Working of e-Wallet Payment Processing
Example
So, for a better understanding, here’s an e-wallet example for you.
With PPI interoperability in the picture, a person with a semi-closed wallet like Paytm or MobiKwik will now be able to do the following activities as well through their digital wallet app.
- Withdraw cash from an ATM or at a POS location
- Transfer money to other types of e-wallets (self and peers)
On the other hand, open wallets may be able to withdraw cash from an ATM. Usually, banks issue open wallets and facilitate all functions that semi-closed wallets can do but also provide cash withdrawal service.
Wrapping Up:
E-wallets have added to the ease and speed of transactions. Moreover, different types of e-wallets enable customers to shop online/offline, book tickets, pay bills, etc. They can link their bank account or card and add money to their mobile wallets. Thereafter, they can avail of various products and services by paying through these digital wallets.
Although most e-wallets are free from any fees, especially for lower amounts, however, some of them may incur some charges, perhaps after a certain permissible limit.
Needless to say, with the massive innovations happening in this financial space, it will be interesting to see what comes next.
