Different Types of Digital Wallets: How to Choose the Right One

Your guide to know everything you need to know about digital wallets present at one place

In today’s world, there is hardly anything that cannot be done through the internet. The E-commerce industry is growing every day and taking over the world. With this comes online payments, e-wallets, internet banking, etc.

E-wallets mainly have become a trend. You don’t need to carry any cash with you any longer. You can simply scan a QR with your phone and boom! Your payment is done. But a single e-wallet app cannot pay for everything. Then which types of e-wallets pay what, you ask?

This article is exactly what you need. It states all the different types of e-wallets, the technologies they use, when to use them, etc.

What is an e-wallet?

A digital wallet or an e-wallet is an app on your phone or desktop through which you can do payment through e-commerce. It is similar to an actual wallet in the sense, that it has some basic balance that you cannot use over. It also has a daily limit above which the transactions will fail.

Just like physical wallets store hard cash, e-wallets store electronic money. You can use this money to make payments on several things that you buy through different methods. They are also a lot safer than carrying around a wallet full of cash.

Classification of digital wallets

There are three main categories that all e-wallets can be classified into. They are as follows:

Closed Wallets

These are the apps that are specifically made by some business organizations.
Ex. Pizza Hut, Starbucks, etc.
These apps cannot be used to make payments outside of the organization.

Semi-Closed Wallets

These wallets can be used for specific payments only.
They have very limited reach in where you can use them to make payments.
The business or merchant needs to buy the specific payment method to be able to allow its customers to make payments through that.

Open Wallets

These wallets are generally issued by banks or in collaboration with banks
They can be used to pay for anything, at any place
They cover a very large area under which you can use them
You can use them freely to pay for goods and services, transfer funds, etc.

Types of Digital Wallets

Desktop Wallets
- Only applicable on desktops
- Help to secure the personal data present on the desktop
- Prevents desktop from hackers
- Acts as an anti-virus
Hardware Wallets
- Similar to Desktop wallets
- Need USB drive or other hardware storage to use
- Payment stays protected
Online digital wallets
- Can be used on both desktops and mobiles
- Helps to keep your data and account safe from frauds
Mobile digital wallets
- Specifically designed for mobile users
- Safeguards the electronic money
- Used in most retail stores
Paper wallets
- A form of cryptocurrency
- Helps ensure the safety of a large amount
- Protection of electronic currency
Aadhaar Enabled Payment System
- Available to Indians specifically
- Very flexible
- Allows you to withdraw and add cash at anytime
- Aadhaar card needs to have a registered mobile number
- Aadhaar is linked to the payment verification of the system
United Payment Interface (UPI)
- Can be linked to more than one bank accounts
- Most e-wallets use UPI service

Different types of e-wallets based on the technology they use

NFC Technology
- Near Field Communication (NFC) technology
- Contactless payments
- High level of security
- Easy connections to the server
- End terminals must be equipped with NFC to enable payment
Optical/QR Code
- Uses QR generated by the merchant’s outlet
- Can also scan barcodes
- Not enough security
- Area-specific reach
Digital Delivery Technology
- Focused on online stores payments
- Easy to install on all devices
- Difficult to be used at physical stores
SMS Based Payment System
- Does not require internet
- Limited reach
- Not very flexible

Different e-wallets used in India

PayTM
Google Pay
Amazon Pay
PhonePe

Advantages of an e-wallet

Reliable and easy to use
Quick transfers
Unlimited transfers
Simpler process compared to bank transactions
Frequent and faster payments
No need to carry physical money
Easy deposit and withdrawal of funds
Provides you with your Bank account details like balance, passbooks, etc.
Huge discounts and rewards on most transactions
Keeps a record of all transactions
No need to remember your bank details for any transaction (Except PIN)
Safer than cash transactions
Affordable

Disadvantages of an e-wallet

Internet is a must for most E-wallets
Causes security issues if hacked
Cannot make a payment if the server is down
Both the parties need to have proper connectivity
Has daily spending limits

Which is the Best e-wallet in India?

Several e-wallet apps are used in India like PayTM, Amazon Pay, Google Pay, PhonePe, MobiKwik, etc. You need to choose an e-wallet that caters to your need and is easy to use for you.