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What are Digital Wallets?

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Digital wallets are widely accepted and have become crowd-pleasing among people. They are not only the popular mode of payment but game changers in the financial landscape of India. Nowadays, they have become the go-to option for most individuals. There is a massive demand for cashless transactions. Some of the questions that pop up are related to what they are, how they work, and what factors we should consider before choosing the best UPI. In the following post, you will read something interesting about digital wallets in India, their functionality, different factors to consider when choosing the right digital wallet for your needs and much more. 

What are digital wallets?

Let’s get an unclouded idea of what digital wallets are. In simple words, digital wallets are like e-wallets or mobile wallets. They can be your online pouch where you can keep and use your money when required. We usually keep cash and cards in a physical form, but digital wallets enable you to keep money digitally. The best part is that you can add money to your digital wallet using your debit, credit card or Internet banking and pay via UPI. Once done, use these mobile wallets to make payments for various purposes like shopping, paying bills, buying gifts and more. You can even transfer money to your friends and family using this seamless and secure system of handling finances. 

Exploring the three types of digital wallets

Digital wallets have gained popularity. Individuals in India highly appreciate them because of their secure and user-friendly nature. With various options, users can select the wallet that suits their requirements and personal preferences. In India, there are three categories of wallets available.

  1. Closed wallets: The first type is a closed wallet, usually provided by e-commerce companies. These wallets can only be used for purchases within that platform. They offer convenience to shoppers by allowing easy checkout without the hassle of entering payment details every time. For instance, you can add money to your Paytm wallet. Use it within the Paytm ecosystem for recharges, bill payments and online shopping on their platform.
  2. Open wallets: The second type of wallet is an open wallet, which is widely accepted across various platforms. You can use these wallets for both online and offline transactions. As an example, you can add money to your PhonePe wallet. Utilise it on the PhonePe platform and other merchants’ platforms like Myntra, Amazon, BigBasket, etc. Open wallets often come with features such as cashback rewards and loyalty points, making them popular among users.
  3. Semi-closed wallets: Lastly, semi-closed wallets are typically issued by banks or financial institutions. These wallets allow transactions on a limited and reserved number of platforms. They are often linked to the users’ bank accounts. They also offer added features like bill payments, mobile recharges, and more. 

How do digital wallets work?

When you decide to use your digital wallet for payment, money is deducted from your wallet. It is then transferred to the account of the merchant you’re dealing with. In a protected format, these wallets store your payment details, such as credit or debit card information or bank account details. Once you have set up your wallet, you can easily purchase at any merchant accepting this payment method. Whether booking movie tickets, ordering food online or shopping online, using your wallet to make payments is a breeze with a few taps. Even better, your payment information is stored securely in a format minimising any risk of theft or hacking. Many digital wallet companies offer fraud protection and other security measures to ensure the safety and security of your transactions. In India today, wallets are available that don’t require a bank account; instead, you can conveniently add funds by making cash deposits or linking them directly to your mobile number.

Factors to consider when choosing a digital wallet 

When it comes to choosing the type of wallet, there are a few factors you should consider. Here are some key pointers. 

  1. Security: Ensuring the safety of your payment information is crucial when using a digital wallet. Choosing a provider that utilises security measures like encryption and two-factor authentication to protect your data is essential.
  2. Fees: Different digital wallet providers may have varying transaction fees, such as a percentage of the transaction amount or a flat fee. Consider these fees when selecting a provider to ensure you get the best deal.
  3. User Friendliness: Look for a wallet that’s easy to use and navigate. The user interface should be intuitive and straightforward, even for those who may not be tech-savvy.
  4. Merchant Acceptance: Check which merchants accept the wallet you’re considering. Some wallets may only be accepted by specific merchants, which could limit your options when making purchases.
  5. Customer Support: It’s important to have access to customer support in case any issues arise with your wallet. Look for providers that offer support channels such as phone, email or live chat.
  6.  Additional Features: Explore wallets that offer perks, like cashback rewards or discounts as a bonus.

The best digital wallets in India

When it comes to mobile wallets in India, numerous options are available in the market. However, a few stand out due to their user interface, seamless transactions and strong security. Here are some of the wallets in India.

  1. Paytm: Paytm is extremely popular in India, boasting over 350 million registered users. It offers payment options like recharges, bill payments and money transfers. Paytm also has a feature called Paytm Postpaid that allows users to make purchases now and pay later.
  2. PhonePe: Another known digital wallet in India is PhonePe, with over 250 million users. It provides payment options, including UPI payments, bill payments, and mobile recharges. PhonePe also stands out with its PhonePe Switch feature, which enables users to access apps and services.
  3. Google Pay: Developed by Google itself, Google Pay is a wallet that facilitates payments through UPI. Users can also pay bills and recharge mobiles. Send money to friends and family using this platform. Google Pay prioritises transactions with its feature called Google Pay Protect.
  4. Amazon Pay: It is a wallet offered by Amazon that enables users to make payments for a wide range of services, such as mobile recharges, bill payments and online shopping. It also provides cashback and discount offers to its users.
  5. MobiKwik: Another wallet option that offers multiple payment choices, including UPI payments, bill payments, and mobile recharges. It features MobiKwik Blue, a wallet where users can securely store their money for various transactions.
  6. CheqUPI: The Cheq UPI App allows foreign travellers to download and use it at nationwide merchants. With the Cheq UPI wallet, you can instantly add funds using your International Debit or Credit Card or through a bank transfer. Additionally, it helps you keep track of your expenses and maintain records. When choosing a digital wallet, it is crucial to consider factors such as acceptance, fees, and security measures. With so many options available, find and select a digital wallet that suits your needs and preferences.