So many things have changed in the past decade, the trends, food preferences, lifestyle and most importantly the comfort levels of people. Everyone looks for the easiest way to do things, the easier the better. No one really has the time for anything. And the most visible change is the shift to an online world. Everything we can imagine is right in our fingertips now. The virtual world is ready to offer anything we need to us. Shopping, meetings, work, and even schools have become online now. In such a scenario how much more convenient would it be if the banking was online too?
That’s where e-wallets come in. The term e-wallets may not be new since apps like Google Pay and Paytm have become a part of everyone’s life. The traditional methods of finance and banking have diminished, it’s the time of virtual banking now.
But, what exactly is an e-wallet?
E-wallets are an online software providing service that can be used for online transactions through devices such as a computer or a smartphone. E-wallets can be used for tasks such as shopping, payment of bills etc… and is very similar to credit/debit cards. Transactions made by an e-wallet can be secured using a pin or a password. It’s a type of pre-paid account and you can store cash in it for future needs. There are mainly two ways in which we can use an e-wallet, one by depositing cash as digital currency and store it for future use or by linking the e-wallet platform to the registered bank account.
An e-wallet has mainly two components, the software and information component. The software is what provides the necessary encryptions and security for carrying out the transactions since a lot of personal information is involved in it. The information component is the database of the user such as the address, billing information, payment methods etc…
There are mainly two types of e-wallets;
E-wallets can be either hot or cold. Hot wallets are wallets that are connected over the internet and can make quick payments are generally free while cold wallets are offline and can be used for storing and holding cash.
E-wallets use various apps and platforms to carry out their transactions such as UPI [Unified Payments Interface], BHIM UPI [Bharat Interface for Money] apps such as Paytm, Google Pay etc… These are all platforms that helps us to carry out digital transactions, just like credit and debit cards use MasterCard and Visa as their platforms.
Apps like Paytm needs the users to deposit cash in the app in the form of digital currency for using them while apps like Google Pay links or connects the account with our bank account and makes payment via the bank.
All apps that facilitate online payments use a common platform called UPI for the transactions that provide the safety and security for the user data. UPI is an payments system developed by National Payments Corporation of India that facilitates inter-banking transactions. UPI is regulated by The Reserve Bank of India and can transfer funds from one bank to another instantly via a mobile platform.
It’s the UPI that enables bank to bank transfers in any application whereas without UPI we cannot link the application with bank account. For example, Google Pay is a digital wallet platform and a online payment system developed by Google. Google Pay needs the users to link their google account with their bank account in order to make payments and the payments can be made directly from the bank account. But Paytm is not a UPI based system and thus it is an e-wallet that required certain amount in the Paytm wallet in order for usage. At the same time, we have Paytm UPI, which support bank transfers.
There are so many other applications that promote the same idea such as Amazon Pay, BHIM etc… even though they are provided and managed by different companies, the essence to it and the platform they use is the same.
How secure are e-wallets?
Using an e-wallet reduces the need of filling delicate and personal data into various websites as the information required for the payments are automatically stored and entered in the specified fields. They also make sure the payee or payer have genuine credentials and can limit frauds to a certain extent thus digital wallets increase the credibility of a transaction. The data that we give in the digital wallets are encrypted and secure in such a manner that it is not visible to others.
What are the pros and cons of using digital wallets?
The pros of using digital wallets are;
- They help to make in app payments, recharges, booking etc. on the same platform
- Just in the touch of finger you can make payments anywhere in the world
- Many apps provide various incentives and offers for the users in the form of discounts etc….
- They provide security to the transactions [ like fingerprint activation to open app, OTP for confirming payments etc…]
- They facilitate fast and efficient money transfer
- Its more convenient to use as it gets rid of unnecessary hassle during payments
- They are cost efficient since they are free of cost
- It provides access to various types of cards other than credit or debit cards [like loyalty cards, reward cards etc…]
The cons of using digital wallets are;
- The e-wallet we are using may not be compatible everywhere, in places where they are not popular, we may have to stick to the traditional way
- Since most of the transactions take place over the internet there are some considerable security issues that we need to worry about
- Using a digital wallet increases the dependency on the device in which its installed
- Using a digital wallet is easier and more convenient thus it may promote more reckless spending
In today’s world we can see that the concept of digital wallets or e-wallets have gained high popularity especially since the COVID19 pandemic which limits many services. They promote the idea of going cashless. Various apps for food delivery and shopping have switched themselves only to use online payment in order to rise against the present situation. This has indirectly increased the popularity and need of such platforms.
More than just being easier and fit for the modern lifestyle e-wallets have given the people a sense of control over their transactions. They are the beginning to a new era of digital technologies where even the material aspect of money is being converted into an idea over the web.
And in this fast-moving world we can only expect that its popularity rises and as far as digital wallets are concerned its here to stay, by the flow in time there maybe more innovative and useful updates that may eliminate all the cons and lead to a safer and more convenient platform for online payments.