Everything About e-Wallets

Posted on May 27th, 2022

These new-age wallets, which started way back sometime after 2010 by Google, have become essential for many of us. The most popular e-Wallets were launched by Apple Pay around 2014 in the United States. Right after their launch, their popularity quickly spread to the United Kingdom and China. Today, there are hundreds of e-wallets offered by different companies with newer and additional functions. Google Wallet, AliPay, Samsung Pay, Venmo, and PayPal, are a few of the other most popular digital wallets in the market presently.

When one thinks of digitalization in the fintech space, digital-wallets figure somewhere at the top of the list. These wallets enable quicker transfers, and easier online transactions, combined with a hint of gamification, where the user can avail of discounts or get cashback and coupons. 


The Concept

Digital wallets are like actual wallets, which only exist online. These wallets have two purposes – Storing information and enabling transactions.

The information that these wallets store depends on their functionality, for instance, some wallets only store bank account details, which are solely dedicated to making online transactions, transfers, and payments. Some of these wallets also offer to share more personal information like identity cards, tickets, reservations, coupons, loyalty cards, and even car keys! The purpose of these e-wallets is to free the user from carrying such items in their physical forms when they can be stored in their digital formats.

How e-Wallets Work

The most common method that companies, use is via a smartphone application. These applications are versatile and easy to install on almost all devices, making the entire setup process easy. 

After installation, the user feeds in the required information for all the features that they wish to use. Once the information is fed, the app verifies the information and asks the user for various permissions, like linking the wallet to the user’s bank account, etc. 

Once the verification is complete, the user is all set to use the new wallet. 

The Technologies Involved

To make them universally accepted, e-wallets use different technologies to enable transactions. 

The most common are QR Codes, which are unique matrix codes bought by vendors and companies. The user can scan these codes through their wallet applications on their phones and make payments to complete transactions, making the entire process much simple and quicker than ever before. 

Near Field Communication (NFC) is another technology used by e-wallets. When this option is selected on the user’s mobile device, information transfers from another device immediately get enabled. The two devices should be placed very close to each other to form a closed circuit.

The third type of technology used by e-wallets is Magnetic Secure Transmission (MST). In this the smartphone with the e-wallet generates an encrypted field which is read by the machine on the sales end. The concept is exactly that of what it used for card transactions. The card machine reads the magnetic chip embedded in the credit and debit cards, allowing successful transactions. MST works similar via smartphone, where the phone generates an encrypted field, which is read and processed by the sales machine.

Types of e-Wallets

Closed Wallets – A closed wallet is offered by websites or apps to make payments or purchases restricted to the issuer. The entire amount is stored on the user’s website or application account.

Semi-closed Wallets – These types of wallets allow users to use the stored amount not only with the issuer’s website or app, but also with merchants accepted by the issuer in the locations listed by the issuer.


Open Wallets – An open wallet has gradually become the most popular digital accessory for e-wallet users, where the users can either add money in their digital accounts or link their digital wallets with their bank accounts to make seamless transactions. There are no restrictions of accepted merchants and issuers, and they can be used everywhere where technology supports such transactions.

Crypto Wallets – Crypto wallets are crypto-dedicated, which the users can use to store their crypto purchases. These are secure and supported by blockchain technology, which enable transfers and payments from a single or different cryptocurrencies. These particular wallets are operated by keys, that are solely the owner’s property. 

Internet of Things Wallets – IoT enabled wallets are installed on devices other than smartphones and desktops like watches, jackets, smart cars, etc. These are yet to gain absolute popularity as they mostly work with virtual currencies which have a very high price.

Advantages of e-Wallets

Quick and Easy Transactions – The transfers made via e-wallets are faster and easier than other modes. The process is easy to setup and the transactions conducted through these are mostly one-way in nature, making it lesser prone to any kind of lag.

Secure – With all parts of the information and personal data heavily encrypted, these transactions are very secure. All transactions require codes and passwords to be entered by the user, and they are additionally verified by using biometrics like facial features and fingerprints.

No Penalty for Low Amount – Unlike bank accounts, where overdrafts can incur heavy penalty, e-wallets do not follow the same rule. If there is a low balance, the user will get alerted and the transaction will not go through. The user would have to add the required amount to complete the transaction.

No Minimum Amount – Digital wallets allow small transactions to go through, as there are limits for minimum amounts. There are limits for big amounts, which can be customized according to the user if the issuer offers such a function, but the user would not incur any fees for small amounts.

No Usage Limits – There are no usage limits for using digital wallets countless times. The user does not have to worry about overusing their e-wallets.


Closing Thoughts

Digital Wallets are major participants of the disruptive wave of digitalization that has taken over the financial sector. Their versatility and quickness brings a high level of convenience to the users. Having everything in one secure place makes much more sense than carrying physical cards and identity cards everywhere. 

If you are yet to explore the usefulness of e-wallets, now is the time.

Related Articles

Have any questions?