E-Wallet | How Does It Work | What Are It’s Uses And Applications


E-wallet is digital form of your traditional leather wallet.  Everyday your real wallet becomes more and more bulky by adding stuff in to it like your credit card, debit card and cash. E-wallet makes your work easier here. It is also known as digital wallet. E-wallet stores your credit card, debit card or bank account information securely and allows you to use it whenever you need it. You can you digital wallet for merchant payment, online shopping and many a times for sending money across users. Paytm, Freecharge, MobiKwik, M-Pesa, Oxygen are some popular example of E-Wallet.

E-Wallet has many forms. It either stores your bank information or you can top-up balance in it like you recharge your phone balance. You can spend money from it at various locations. By using e-wallet you reduce the fear of losing your wallet. Though many merchants do not accept payment via e-wallet but it’s getting lot of traction these days on e-commerce sites, shopping malls and some outlets.

Types Of E-Wallet / Digital Wallet

E-wallets are widely categorised into three categories based on what principle they work.

  1. Closed Wallet : A closed wallet is a software or application which is issued by a company exclusively for it’s customers. Myntra a venture managed by Flipkart has it’s own wallet where the money only related to it’s transactions are managed. You can either use those money on myntra itself or you can transfer to your bank account.
  2. Semi Closed Wallet : Semi closed wallets are same as closed wallets but they can used to buy products and even perform financial transactions at predefined vendors. These vendors are in contract with your wallet service provider. Semi closed wallets do not allow you to withdraw cash. Paytm is semi closed wallet which can be used at multiple locations. It can be used to pay utility bills, shop at various websites and can even be used to pay bills at some vendor shop.
  3. Open Wallet : Open wallets can be used to purchase goods and even perform financial transaction including withdrawing cash. They can also be used to transfer funds. You can consider your debit and credit cards as open wallets.

How does E-Wallet Work

E-wallet work on very simple concept. Either they store your bank related information or you can top-up money into it. The one which we say, store your bank information are not third party apps but are issued from bank itself. These are most secure and do not compromise your personal and banking information in any case. Then there are third party apps like Paytm or Freecharge which temporarily stores your money in electronic form and allow you spend that money in selected stores.

While we are dealing with money and financial aspect the most important factor is security and reliability. The E-wallets take care of high security so that there should be no way to breach the system. And then comes reliability, which means the service should be readily available 24*7.

Uses of E-Wallet

You can use E-Wallet for shopping of goods or services, payment of utility bills and you can even perform financial transactions. Normally you should get some amount of cashback if you use e-wallet. We don’t know how they are able to provide that cashback. E-wallet comes really handy while performing online transactions.

Paytm, Oxigen wallet, M-Pesa, Chillr, Freecharge are some famous e-wallets.

E-wallets are going to be future. India is heading towards cashless economy. And we are in real need of such options for payments and to perform our financial operations. Unified Payment Interface is also an option for performing your financial transactions.


Let us know what you feel about e-wallets by commenting below. And feel free to write us your queries.

Happy Learning!

2 thoughts to “E-Wallet | How Does It Work | What Are It’s Uses And Applications”

  1. I have doubt regarding E-vallet. suppose I send money from my bank to paytm wallet. the money goes to my mobile number or bank managed by paytm. I am asking what happening in backend.

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