Whether it’s paying monthly utility bills or booking a movie ticket, chances are you’ve heard about e-wallets or mobile wallets. Post November 8, the day Prime Minister Narendra Modi announced the government’s decision to demonetise Rs. 500 and Rs. 1,000 notes, the scramble for alternative modes of money transfer has led many to the concept of mobile wallets. And, if you’re one of those seeking to embrace the technology, here are answers to some of the questions germane to the issue.
The basic one — what is an e-wallet?
An e-wallet is a virtual wallet that allows people to store their money and use it for people-to-people transactions and making purchases. It does away with the need to input personal information and serves as a platform for both offline and online purchases.
The different types of mobiles wallets are:
Closed system: These are generally issued by businesses for use at their establishments only. These instruments do not permit cash withdrawal or redemption. Ola Money, Airtel Money are such payment instruments.
Semi-closed system: These instruments are redeemable at a group of clearly identified merchant locations or establishments. These do not permit cash withdrawal or redemption by the holder. Paytm and MobiKwik are popular semi-closed systems.
Open system: These can be used for purchase of goods and services and also permit cash withdrawal at ATMs. They are generally issued by banks.
How do I set up an e-wallet?
E-wallets need two things: a smartphone and a stable Internet connection. Closed and semi-closed payment instruments, like Airtel Money and Paytm, can be downloaded on smartphones. Funds can be parked in the wallet and transacted when required. Money stored in e-wallets can also be transferred to bank accounts and these transactions generally come with a fee.
How different is it from Unified Payment Interface?
UPI is a cross-bank money payment system. UPI apps of banks can be downloaded on smartphones and used to transfer money between two accounts. While money can be withdrawn or sent to a bank account using an e-wallet, it is not strictly a bank-to-bank-payment service. Money can also be sent to an e-wallet of another person or merchant who has the option to link it to his/her bank.
How do I benefit from using it?
The obvious advantage is that the e-wallets do not require you to input personal information or use your debit/credit cards during transactions. The system is flexible — there’s very little restriction in terms of the amount of money that can be deposited.
And, cashbacks.
Most closed and semi-closed payment systems have cashback offers that incentivise users to use their wallets. Cashback is the money returned to the wallet after a transaction. It is usually in terms of a percentage of the transaction, generally varying from 1%-5%.
Are there any extra charges? What’s the catch?
There’s no fee charged for loading money into the wallet, purchases from merchants and wallet-to-wallet transfer. But there is a charge on wallet-to-bank transfers.
For transferring money to a bank account, Paytm charges 1% of the total amount deducted from the wallet. Using Mobikwik, users can transfer up to Rs. 4,000 per month to another wallet or bank account in a single transaction and Rs. 10,000 per month. With Paytm, customers can transfer a maximum amount of Rs. 5,000 in a single transaction and Rs. 25,000 per month. Oxigen, another popular e-wallet service, allows a maximum of Rs. 5,000 per transaction and a transfer of Rs. 10,000 per month.
The maximum amount that can parked and utilised using an e-wallet is Rs. 10,000 per month. For customers willing to go through the KYC procedure, the limit is Rs. 1,00,000.
The money deposited in the wallet does not earn interest. But given that these wallets carry relatively smaller amounts, it might not be a deterrent.
E-wallets are safer than carrying cards or cash. However, one of the major risks is the possibility of losing your smartphone having personal information. Also, not many physical establishments have started accepting these wallets.
