Digital Wallets in India

A digital wallet saves card details of the user and lets him/her make purchases online. For example, a MasterPass digital wallet asks customers to first register for the service by entering card details. The information then has to be verified through an OPT authentication process, post which, registration will be complete. After this process is complete, one can choose the 'Buy with MasterPass' option as a payment mode on e-commerce websites that have this option. The payment can be made by entering the MasterPass card ID and password and the transaction will be authenticated through a 3D-secure pin or OTP.

Types of Digital Wallets in India

India offers a wide variety of digital wallets that cater to different payment needs. These can be categorized into the following types:

• Closed Wallets: Issued by specific merchants for transactions only with them. Example: Amazon Pay, Ola Money.
• Semi-Closed Wallets: Can be used for online and offline purchases at listed merchant locations. Example: Paytm, PhonePe, Mobikwik.
• Open Wallets: These are issued by banks and allow users to make purchases, withdraw cash at ATMs, and transfer funds. Example: SBI YONO, ICICI Pockets.
• Crypto Wallets (Emerging Type): Used to store and transact in cryptocurrencies. While not mainstream, they’re gaining interest among tech-savvy users. Example: CoinDCX, WazirX Wallet.

Each wallet type has specific use cases and regulatory guidelines, and users can choose one based on their personal or business needs.

How to Set Up a Digital Wallet

Setting up a digital wallet in India is quick and easy. Follow these simple steps:

• Download the App: Visit the Google Play Store or Apple App Store and download the digital wallet of your choice (e.g., Paytm, PhonePe, Google Pay).
• Register Your Mobile Number: Use your mobile number that is linked with your bank account for verification.
• Complete KYC (if required): Submit basic identification documents such as PAN, Aadhaar, or Voter ID, depending on the wallet type.
• Link Your Bank Account or Add Money: Either link a bank account for UPI-based payments or add money using a debit/credit card or net banking.
• Set Up a PIN or MPIN: This step adds security for transactions and app access.
• Start Using the Wallet: You can now send/receive money, pay bills, recharge mobile, book tickets, and much more.

How to Pay Using a Digital Wallet on an E-commerce Site?

1. Log into the e-commerce site. Add the respective product to a cart
2. Under payment mode, select 'Wallet'
3. Choose the respective wallet
4. Make payment.

Using Digital Wallets for Online Payments

When payment is made through a digital wallet for goods and services, the time taken will be lesser when compared to credit or debit card payments. Digital wallets can be used for paying utility bills, DTH plans, and mobile bills or to recharge a prepaid connection. Purchases can also be made on e-commerce sites through digital wallets. Most e-commerce sites have tie-ups with many of the digital wallet companies and hence allow customers to make payments through the same.

Security Features in Digital Wallets

Digital wallets in India are built with multiple security layers to ensure safe and secure transactions. Key features include:

• Two-Factor Authentication: Most wallets require OTP verification and a PIN/password for each transaction.
• MPIN & Biometric Login: Users can enable fingerprint or face recognition for quick and secure access.
• Tokenization: Card details are replaced with encrypted tokens, minimizing the risk of card data theft.
• Transaction Alerts: Instant SMS and in-app notifications for every transaction help in monitoring unauthorized activities.
• Device Binding: Many apps allow use only on a registered device, reducing misuse risk.
• Auto Logout & Session Timeout: The app automatically logs out after inactivity, protecting from unauthorized access.

Applications of Digital Wallets

1. Digital wallets can be used to make online purchases from e-commerce websites
2. To pay various utility bills such as electricity bill, prepaid recharge, booking movie tickets, telephone bills, etc
3. Can be used to order food online
4. Can be used for travel bookings
5. Online fund transfer can be made through a digital wallet
6. Many financial products such as mutual funds and insurance can be purchased.

Advantages for E-commerce Sites

1. There are no geographical limitations when it comes to e-commerce sites. Once can purchase goods from any location
2. Saves the consumer time and energy
3. Helps the buyer search for a product online and compare prices without having to physically go to different shops
4. Easy to compare prices online
5. Rewards, cash rewards, coupons and attractive deals offered by e-commerce sites.