Decoded: Different types of digital wallets that exist now
Recently, Google launched its long-awaited Wallet app, that is expected to not only replace our physical wallets but also the highly popular Google Pay (Gpay) app. As of now, the Wallet app will be available only in the US and Singapore. However, by the end of this year, it is expected to reach 39 other countries, including India.
Unlike Google Pay, Google’s brand-new digital wallet is all set to provide its consumers with a wide range of services, such as storing information of their credit cards, event tickets and even digital car keys. According to media sources, this new launch has been the result of tough competition from brands like Apple and Samsung in the recent times.
Wait, what exactly is a digital wallet?
In simple terms, a digital wallet means a software-generated online service that allows people or organisations to make monetary transactions electronically. It securely stores payment information (such as card details) alongside personal information (such as name, contact number, identity proof) of individuals or businesses along with other value added services like gift coupons, for various modes of payments. Also known as an e-wallet, digital wallets come in the form of smartphone apps (convenient for its mobility and flexibility). However, they can also be used on desktop devices. To access digital wallets, one needs to install apps created by banks or trusted third parties. E-wallets are also considered to be a safer option than traditional wallets. Some examples are: PayPal, Paytm and Google Pay.
Types of digital wallets
There are three types of digital wallets: Closed wallets, semi-closed wallets and open wallets. Here’s understanding each one of them in details.
Closed wallet
A closed wallet is often developed by a vendor or a service provider for the sake of easy transactions with their customers. The ones who use closed wallets often avail already stored funds and can carry out transactions with only the issuer of the wallet. In fact, the money from returns, cancellations and refunds are often stored in these closed wallets. A popular example of closed wallet is Amazon Pay.
Semi-closed wallet
In case of semi-closed wallets, users can make transactions with only listed merchants and specified locations. In fact, the coverage of these wallets is limited. However, people can use it for both online and offline purchases. Merchants using the services of semi-closed wallets need to enter into signed contracts or agreements with the issuers of the wallets. Paytm is a widely trusted semi-closed wallet.
Open wallet
Banks often collaborate with other banks or trusted financial institutions to issue a kind of digital wallet known as the open wallet. Users who avail the services of an open wallet can use them for all kinds of bank-to-bank transfers, such as withdrawal of money from ATMs. Example: M-Pesa by Vodafone India and ICICI Bank.