BackDe-jargoned: mobile wallets
It is a virtual money wallet that can be used to make instant payments
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Mobile wallets are making headlines these days. Domestic e-commerce companies, such as Flipkart, plan to launch a wallet soon, while a few payment gateways, such as Paytm and Mobikwik, offer semi-closed wallets already. Telecom operators also offer this facility. Internationally, too, Apple Inc. is said to be introducing an iPhone wallet on 9 September, which will have tie-ups with Visa Inc., MasterCard Inc. and American Express Co.
According to many experts, mobile wallets are going to be the next wave of change in the way people make payments.
What is it?
Simply put, it is a virtual money wallet that can be used to make instant payments, same as with a physical wallet. It is an application stored in cellphones, which enables users to make payments for utility bills, book tickets, transfer money and other such transactions. It can also be used to make instant e-payments while shopping, in physical stores or at e-stores.
How does it work?
Mobile wallet is a store of money transferred into it. Once the application is installed in the mobile phone, a user is registered and know-your-customer (KYC) documents are submitted, a user can transfer money to this wallet and then make payments. For KYC, one can either provide a document such as passport, driving licence, voter’s identity card or Aadhaar card, which serve as both identity and address proof, or submit different proofs for both. For example, Permanent Account Number card for identity and bank account statement for address proof. There are other options available as well.
The outlets where payments can be made depend on the type of wallet—closed or semi-closed. Closed wallets generally allow payments only at particular merchants, while semi-closed wallets allow payments to a group of establishments that have agreed to accept payments through the wallet.
What’s good and what’s not
Since a mobile wallet is used as a phone application, it is more convenient to use than a Web-based payment method such as paying through a website. The payment can be made over the mobile network as well as through a message using the unstructured supplementary service data platform. The other advantage is that one can make payments without using cash, or debit and credit card, even while in a store. This protects the user from card data being misused through phishing or cloning. Also, since the application requires a mobile personal identification number (MPIN) to make transactions, even if the mobile phone is lost or stolen, without the MPIN, a transaction will not be possible.
There are, however, daily and monthly limits to the number of transactions, which may be a hurdle while making big purchases. Also, the fact that it cannot be used at all outlets is a worry. Finally, even if the a mobile wallet has money stored in it, it will not earn any interest, while money in a bank savings account earns 4-7% interest, depending on the bank.
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