Mobile payment (also referred to as mobile money, mobile money transfer, and mobile wallet) generally refer to payment services operated under financial regulation and performed from or via a mobile device. Instead of paying with cash, cheque, or credit cards, a consumer can use a mobile to pay for a wide range of services and digital or hard goods. Although the concept of using non-coin-based currency systems has a long history, it is only in the 21st century that the technology to support such systems has become widely available.
A mobile wallet is a type of virtual wallet that stores credit card numbers, debit card numbers, and loyalty card numbers. It is accessible through an app installed on a mobile device, such as a smartphone or tablet.
Mobile payment is being adopted all over the world in different ways. The first patent exclusively defined “Mobile Payment System” was filed in 2000.
In developing countries mobile payment solutions have been deployed as a means of extending financial services to the community known as the “unbanked” or “underbanked”, which is estimated to be as much as 50% of the world’s adult population, according to Financial Access’ 2009 Report “Half the World is Unbanked”. These payment networks are often used for micropayments. The use of mobile payments in developing countries has attracted public and private funding by organizations such as the Bill & Melinda Gates Foundation, United States Agency for International Development and Mercy Corps.
Mobile payments are becoming a key instrument for Payment Service Providers (PSPs) and other market participants, in order to achieve new growth opportunities, according to the European Payments Council (EPC). The EPC states that “new technology solutions provide a direct improvement to the operations efficiency, ultimately resulting in cost savings and in an increase in business volume”.
Types of Mobile Wallets
The following are the main types of mobile wallets:
- Open wallets
An open wallet is used directly by a bank or through a third party. Open wallets allow customers to use the funds in the mobile wallet for making payments for transactions or withdrawing the funds deposited to the account in cash. An example of an open mobile wallet is PayPal, which allows users to make payments for in-store and online purchases and still withdraw the funds in cash.
- Closed wallets
Closed wallets are linked to specific merchants, and users can only use the funds to make payments for transactions initiated with the specific merchant. Users cannot use the money to make payments for transactions with other merchants and third-party service providers or withdraw the funds in cash. An example of a closed wallet is Amazon Pay.
- Semi-closed wallets
Semi-closed mobile wallets allow users to use the funds in the wallet to make payments for transactions with multiple merchants, as long as there is an existing contract between the merchant and the mobile wallet company. Users can also withdraw the funds into a bank account. However, semi-closed wallets do not allow users to withdraw funds in cash.
Such wallets are easily accessible and can be used at any place or time. You just need your mobile phone and a good internet connection to use these wallets. Since you’re never going to leave your cell phones at home, you always have access to cash in any urgent situation.
In addition for being convenient, the payments on mobile wallets are quickly processed. A user can pay through such wallets easily and without going through much hassle. A mobile wallet takes information of your debit/credit card, making it easy for you to add money or make payments directly. This easy accessibility and usage help users to accelerate the whole process.
You can not only make payments through these wallets but can also transfer money, pay bills, shop online etc. These wallets can be used in multiple ways in a fraction of your time.
Robust security features:
Mobile wallets provide extensive safety and security to your stored money. Most users switch from physical wallets to mobile wallets for an extra layer of protection. Mobile wallets also reduces the chances of money being stolen or lost. Each mobile wallet comes with robust security features to keep all the financial transactions safe and secure.
Mobile wallets host several other benefits like loyalty programmes, cashbacks, rewards etc. Mobile wallets like Phonepe provides great benefits and cashbacks for purchases made or paid through its wallet. At the same time, a person can also save money through heavy discounts and offers.
Disadvantage of Mobile Wallet
- Very few merchants and shopkeepers are listed with the mobile wallet service provider.
- The mobile wallet technology is easy to use for those who are techno-friendly and require a high-speed Internet connection. So, we can say that mobile network connectivity is the biggest impediment.
- It does not cater to the needs of the entire population. Most of them are using simple cell phones. Plastic money and m-commerce have not yet caught up completely throughout the entire nation.
- Mobile Wallet has a limit for depositing the money and money that to be spent on the daily basis.
Eg: Phonepe, Paytm, Mobikwik, , Freecharge etc.