Gone are the days when people used to stand in long queues to withdraw cash from their bank accounts. With the emergence and widespread popularity of digital wallets, even ATMs are finding it difficult to attract people.
The Why’s and How’s of Digital Wallets
When it comes to using digital wallets or virtual cash, you will need to keep numerous aspects in mind. Wallet services came into existence as effective alternatives for internet banking and cash transactions. Senders won’t have to bear the hassles of knowing IFSC codes, account numbers, or other information. You can make payments for recurring activities like ordering food, travels, utility bills, and mobile recharge simply by using your debit cards or wallet balance.
Knowing the various types of wallets
Depending on operations and needs, users will come across distinctive wallet types. Some of the most popular ones include:
Semi-closed wallets: Unlike closed wallets, these types of wallets allow payments other than that of the parent company. You can use the apps to make payments at coffee shops, shopping centres, and other locations. Paytm is the perfect example of a highly functional semi-closed wallet with numerous Paytm wallet offers on almost everything.
Closed Wallets: Consumers can only make payments and complete transactions for purchases made through the parent company. BookMyShow happens to be a good example.
With these digital wallets, consumers have the opportunity to make swift and hassle-free payments. It’s here that we come across the concept of UPI introduced by the government.
UPI or Unified Payment Interface is quite different from digital wallets. The system aims at revolutionizing internet banking thus ensuring unmatched experiences for users. We can call it a wallet-like payment system which stays at the top of IMPS net-banking standards. It’s an integral part of the Immediate Payment Service system where fund transfers become easier than ever. With a unique and secured VPA or Virtual Private Address, you can operate through UPIs, and the fund transfer is direct.
The difference between the two
1. Operational difference – You need not put money in UPI as you do in mobile wallets. With the Peer to Peer network with banks, your UPI account is linked with your bank and is debited when you make payment through a UPI app.
2 – Ownership – While mobile wallets are primarily owned by private players (like Paytm or MobiKwik), UPI is an initiative by NPCI, controlled by RBI
3 – Ease of use – With mobile wallets (where the mobile number is your account identity), the recipient needs to have installed the same mobile wallet as used by the sender. With UPI, this barrier is removed as sender can send to any bank account using VPA or Virtual Payment Address – your UPI account identity.
4 – Transfer limits – With mobile wallets a non-KYC customer can transact only for a maximum of Rs.10,000. For UPI the limit is Rs.1,00,000.
Mobile wallets have gone main stream just like credit and debit cards. A primary reason for this astounding success is the cash preferring mind-set of Indian people. Just like cash, mobile wallets offer ease of quick payments without additional steps like going to ATM or knowing IFSC and bank account details (in case of NEFT). While UPI is getting a considerable push with the ‘less cash’ vision of government of India and the Prime Minister, mobile wallets will continue to remain in force for a long time. In the next few years however, UPI will be sure to gain an upper hand thanks to its ‘any bank’ transaction facility – an advantage that mobile wallets do not have currently. Click here to find out more about UPI!