Till about a decade ago, we stood in long queues to withdraw cash from a bank and then waited painfully in other queues to pay our utility bills. With the advent of credit and debit cards many of our cash related problems got simpler. The internet allowed us to pay bills at the click of a button. Today there is a big buzz around ‘e-wallet’ and talk of the death of cash payment. Now it is possible to leave your wallet at home and get through a typical day with the help of a digital wallet, thanks to the revolutionary technologies we are seeing as we advance to a cashless world. Today’s lesson by Prof. Simply Simple attempts to explain you the concept of ‘e-wallet’.

1. e-wallet

2. e-wallet
Till about a decade ago, we stood in long queues to withdraw cash from a
bank and then waited painfully in other queues to pay our utility bills.
With the advent of credit and debit cards many of our cash related
problems got simpler. The internet allowed us to pay bills at the click of a
button.

3. e-wallet
Today there is a big buzz around ‘e-wallet’ and talk of the death of cash
payment. Now it is possible to leave your wallet at home and get through
a typical day with the help of a digital wallet, thanks to the revolutionary
technologies we are seeing as we advance to a cashless world.

4. What is an e-wallet?
e-wallet

5. E-wallet or digital wallet is
an online prepaid account
where one can store
money, to be used when
required.

6. e-wallet
As it is a pre-loaded facility, consumers can buy a range of products from
airline tickets to grocery; make payments to retailers, transfer money to
other accounts and many other things without swiping a debit or credit card.
These e-wallets can be loaded with cash through a mobile payment provider,
online banking or through telecom operators.

7. e-wallet
When e-wallet is used with mobile it’s called Mobile Wallet. It is a virtual
wallet which is like a prepaid account of a mobile phone.
Several companies, especially those in the e-commerce and
telecommunication services sector, have introduced e-wallets

8. Types of e-wallets

9. Let us see the formula of the Current Account Balance (CAB)
CAB = X - M + NI + NCT
X = Exports of goods and services
M = Imports of goods and services
NI = Net income abroad [Salaries paid or received,
credit / debit of income from
FII & FDI etc. ]
NCT = Net current transfers [Workers' Remittances
(unilateral),
Donations, Aids & Grants,
Official, Assistance and
Pensions etc]
CURRENT ACCOUNT DEFICIT
Broadly, there are three
kinds of e-wallets.
e-wallet

10. e-wallet
CLOSED WALLET:
A closed wallet is one that is issued by a company to a consumer for buying
goods and services exclusively from that company. These instruments
do not permit cash withdrawal. Several online shopping portals offer
such closed wallets. It is basically an account where money gets
credited in case of a refund due to cancellation or return. Flipkart,
Jabong and MakeMyTrip are some examples.

11. e-wallet
SEMI-CLOSED WALLET:
A semi-closed wallet can be used for goods and services, including financial
services, at select merchant locations or establishments that have a
contract with the issuing company to accept these payment
instruments. Semi-closed wallets do not permit cash withdrawal or
redemption by the holder as well. Oxigen Services, Citrus Payment
Solutions, MobiKwik and Paytm offer these wallets.

12. e-wallet
OPEN WALLET:
Such wallets can be used for purchase of goods and services, including
financial services such as funds transfer at merchant locations or point-
of-sale terminals that accept cards, and also cash withdrawals at
automated teller machines (ATMs). These kinds of wallet can only be
issued by banks. An example of open wallet is M-pesa by Vodafone
India Ltd in partnership with ICICI Bank Ltd.

13. What are the benefits?

14. e-wallet
 Easy to get started.
 Ease of use without having to enter your debit/credit card details for every online
transaction.
 For some sites there is no minimum amount and you can deposit a small amount.
 You can pass on the benefits of your e-wallet to your friends and family as well.
 There is no chance of a decline of payment since e-wallet is a prepaid account.

15. What are the risks?
e-wallet

16. e-wallet
 Revealed passwords can lead to theft. However, transacting through these
digital wallets is usually secured.
 Closed & Semi-closed wallets usually do not provide the facility of refund; the
amount is only redeemable against a purchase.

17. What happens to the money
stored in your wallet?
e-wallet

18. Treatment of money
stored in these payment
options depends on the
type of wallet.

19. e-wallet
Here is a quick grid for your understanding.
Closed Wallet Semi-Closed Wallet Open Wallet
Where the money goes?
To the company’s account To escrow account To bank account
What happens to the money?
The company earns
interest on it till the
customer uses the money
to make a purchase
There is either no interest
earned or interest is
earned based on the
average balance calculation
approved by RBI
It earns interest, which is
shared between the
payment service provider
and the bank depending on
the agreement
Note: Currently the money in your e-Wallet doesn’t earn interest.

20. e-wallet
In India, where people have more mobile phones than bank accounts, mobile
wallets are the future of cash. This also means the physical wallet is one step
closer to becoming redundant.
So brace for a cashless world as we accelerate towards becoming a digital
nation.

21. Let us see the formula of the Current Account Balance (CAB)
CAB = X - M + NI + NCT
X = Exports of goods and services
M = Imports of goods and services
NI = Net income abroad [Salaries paid or received,
credit / debit of income from
FII & FDI etc. ]
NCT = Net current transfers [Workers' Remittances
(unilateral),
Donations, Aids & Grants,
Official, Assistance and
Pensions etc]
CURRENT ACCOUNT DEFICIT
Hope you have understood the
concept of ‘e-wallet’.
e-wallet

22. Please give us
your feedback at
professor@tataamc.com

23. DISCLAIMER
The views expressed in this lesson are for information purposes only and do not construe to be
any investment, legal or taxation advice. The lesson is a conceptual representation and may not
include several nuances that are associated and vital. The purpose of this lesson is to clarify the
basics of the concept so that readers at large can relate and thereby take more interest in the
product / concept. In a nutshell, Professor Simply Simple lessons should be seen from the
perspective of it being a primer on financial concepts. The contents are topical in nature and
held true at the time of creation of the lesson. This is not indicative of future market trends, nor
is Tata Asset Management Ltd. attempting to predict the same. Reprinting any part of this
material will be at your own risk. Tata Asset Management Ltd. will not be liable for the
consequences of such action.
Mutual Fund investments are subject to market risks, read all
scheme related documents carefully.