Mobile Wallets - All You Need To Know

User Sandeep


4 Mins Read

An Introduction to Mobile Wallets

Mobile Wallets is a relatively new concept which is being embraced with open arms in India. Simply put, a mobile wallet is a mobile-based virtual wallet, where you preload a certain amount in your account created with the mobile wallet service provider, and spend it at online and offline merchants listed with the mobile wallet service provider.

Right from recharging mobile phones to refilling the taxi money to online bill payments - the advantages of mobile wallets are many. A few people have even started using these to buy a drink at Cafe Coffee Day and refuelling at gas stations. The numbers speak for themselves:


Types of Mobile Wallets

As per RBI, mobile wallets (or e-wallets) are of 3 different types – Closed Wallets, Semi-Closed Wallets and Open Wallets.

Closed Mobile Wallets can be used only for a particular company’s (or online merchant) goods and services. No redemption or cash withdrawal is possible with such wallets. Examples of closed wallets would be the ones offered by MakeMyTrip, Jabong, etc. where your respective MakeMyTrip or Jabong account gets credited with the refund amount in case of any order cancellation or product return. You can use the refund amount only to make purchases from that merchant itself.

Semi-Closed Wallets also do not allow redemption or cash withdrawal. They can be used to transact for goods and services at several different merchant locations that have the required tie-ups with the wallet issuing company. For example, Paytm, MobiKwik, PayUMoney, Oxigen, etc. are all Semi-Closed Wallets and they are perhaps the most widely used mobile wallets in India currently.

Open Wallets are those that allow redemption as well as cash withdrawals (from automated teller machines / business correspondents) in addition to the other features offered by Semi-Closed ones. A perfect example is the Vodafone powered M-pesa wallet.


Catalysts driving mobile wallet adoption

The growth in the digital payment landscape can be broken down into a few pivotal factors that came in together at the same time to fuel the burgeoning growth:

With the ecosystem becoming mature and more and more players, suppliers and vendors entering the market, the day is not far when payments even at Kirana stores might be done using a Digital wallet. As said by Paytm - 

“We wish to tie-up with organised retail partners, your local kirana shops and create app-cash points, so these merchants will accept Paytm payments, but also give you top-ups and in some cases do the eKYC as well. The idea is to drive up our offline merchant payment points as well. We plan to have 50,000 of these by the end of the year.”


The problem will arise when the funding runs out and all these mobile wallets will have to depend on their own profits to finance further expansion, fund the discounts and scale. The players are currently subsidising the user while burning VC cash, with the whole industry hoping that they reach the critical mass before running out of funds, and move on to the next stage of improving revenue per user.

We have fingers crossed but for now, let’s order food at half the price, enjoy free movie tickets, hail cheap cabs and get cashbacks on utility bills.

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