The Ultimate Guide to Mobile Wallets in India: Types, Benefits, and Top Picks

The Ultimate Guide to Mobile Wallets in India: Types, Benefits, and Top Picks

Mobile Wallets: A Comprehensive Guide

Hello and welcome to my brand new channel, Easy Solutions. My name is VI, and today we are going to talk about mobile wallets. But before I do that, I want to take you back in time to a very special day. The day was 8th November 2016. Yep, this day was indeed special because I learned a new word: demonetization. That’s right. Now, this video is not going to be about demonetization, but the demonetization helped curb black money and corruption. Only time can tell, but it certainly acted as a catalyst for all the digital wallets. Since then, we have literally seen this space explode. We have seen mobile wallet companies register a soaring growth, with even pan shops accepting Paytm payments. Since then, the government has been pushing for digitization by introducing so many new services like UPI, IMPS, NWP, etc.

Now, these new terms are enough to confuse the best of us, especially when we don’t know what they mean or how they work. In this video, I will try to ease out this confusion by answering questions like: what are mobile wallets? With so many companies aggressively vying for your attention, which is the one that you should go for? After the introduction of UPI and Bmap, are they still relevant? And why are mobile wallets suddenly transforming into payment banks? What exactly is a payment bank? These are just some of the things that we’ll find the answers to.

Let’s get started.

What Are Mobile Wallets?

Let’s start with the most basic question: what are mobile wallets? Mobile wallets are nothing but the digital equivalent of your physical wallet. In your wallet, you put money and spend as you wish. Similarly, in mobile wallets, you load money by using net banking, debit cards, and credit cards. Then, you can spend this money on online and offline merchants that have tied up with your service provider. For example, Paytm and Freecharge have tied up with IRCTC so you can book train tickets using their app.

The higher the number of merchants these companies have tied up with, the better the user experience for customers like us. It’s simple, right? Just load money on a wallet, and you can spend it for e-commerce payments, for your school and college fees, for purchasing insurance, booking hotels and tickets, recharging your phone, DTH or data service, and paying electricity bills. The possibilities are endless.

Now, the Play Store is flooded with so many wallet apps, each having its pros and cons, and each app offering coupons, cashbacks, discounts, and whatnot. Before we make an actual comparison, let’s divide these apps into types so it gets easier for us to compare and analyze.

Types of Mobile Wallets

Let’s check out the types.

The first type is telecom-backed wallets. These are the wallets that are backed by big telecom operators. These are the apps that started out as wallets but have now obtained their licenses from RBI for payment banks. These are the first to be transformed into payment banks. We will talk about payment banks in a bit, but for now, you can think of them as a mini bank.

Airtel Money has already started its payment bank operations, and the rest will soon follow suit.

The second type is wallets by banks. Major banks such as SBI and HDFC had wallets of their own, but then NPCI, which is the National Payments Corporation of India—an organization that is backed by RBI and looks after all the retail payments in the country—launched UPI. UPI stands for United Payments Interface, and now almost all the bank-based wallets work on this interface. Hence, these wallets differ completely from the other two types because in these apps, there is no need to put money in wallets, as the money is directly transferred from one bank account to another bank account.

The third type is the flavor of the season: the independent wallets. These are the wallets that are most popular and most used by consumers. Demonetization acted as a steroid, and now we have companies like Paytm valued close to $5 billion. Paytm says that they clock 78 million active users a month, while Facebook India clocks 140 million. At the current growth rate, they can soon overtake Facebook India; at least that’s what their founder thinks. But with NPCI launching Bmap and UPI, we will see how these independent wallets fare in the future. If you are using Paytm or Freecharge, you might have received a mail saying your wallet will soon be transferred to the newly incorporated payment bank.

What Is a Payment Bank?

Before we compare and analyze these apps, let’s address this first. Now, what is a payment bank? A payment bank is nothing but a mini bank that operates on a smaller scale and does not involve any credit risk. In simple words, it’s just like a normal bank, except it cannot give loans or issue credit cards. Since these banks don’t have to open branches or invest in infrastructure, they can give high interest on savings accounts.

Airtel Money, which has already started its operations, offers a 7.25% interest rate, which is higher than all other banks. Its retail outlets double up as the payment bank branches. The savings account has a limit of 1 lakh, and this amount is completely insured by DICGC, ensuring 100% safety.

Some of the features of payment banks are: it is based on the principle of high volume, low-value transactions; it promotes paperless banking (so no checks, DD slips, etc.); it offers very good interest because of low cost of operations; it can sell financial products like life insurance, general insurance, and mutual funds; it facilitates transfer and remittance through mobile phones, thereby promoting the Digital India campaign; and its key objective is to achieve financial inclusion and increased access to financial services.

So, basically, this transformation of mobile wallets into payment banks is actually a good thing, and it was necessary to overcome the threat of UPI and Bmap. Consumers will have an option to continue using their wallet as it is or they can earn interest by keeping money in a payment bank.

You may be having questions like, is Paytm or Freecharge app going to change? The answer is no. The user experience is more or less going to remain the same, and the app will continue to function as it does. So then, what is going to change? Their wallet business will get transferred to a payment bank, but they will keep running as it is. So all in all, this will give an added boost to mobile wallets, as consumers will also have the option to earn interest as well as the added bonus of safety.

Now that you guys know what your wallets will get transformed into, you might still have a question: how can you choose a wallet from so many options, or should we just install Paytm as the default setting? Let’s find out.

Comparison of Mobile Wallets

Okay, here’s a comparison chart that shows the transaction limits and charges. As we can see, the maximum transaction limit for Paytm is 25,000 per month, for Freecharge it’s 20,000, and it’s more or less the same for other wallets. The point to note is that these limits are for non-KYC customers, so if you get KYC done (that is, fill the Know Your Customer form), then this limit can be increased up to 1 lakh. With most of the wallets upgrading to payment banks, filling the KYC form is going to be a standard requirement.

Now, the second parameter is the maximum amount that can be transferred to a bank in a month. So if you are receiving money from people, you might at some point want to transfer it to your bank account. These are the current limits.

The third parameter is the maximum amount that can be stored in a wallet at a time. This limit is governed by RBI and is set at 20,000 for all wallets.

The fourth parameter is the transaction fees that you are required to pay if you want to transfer money to your bank account. Now, these are the limits that are mentioned by the companies on their websites. I have to say that Paytm, Freecharge, and Mobiquik are very opaque as far as transaction limits and charges are concerned. Both Oxygen Wallet and Airtel Money have mentioned all the limits and charges in one place, while information is available in parts in the case of the first three.

I tried to get in touch with them, and Paytm replied saying there are no charges for transfers to bank until 31st January, while Mobiquik said there is no transfer fee currently, but they reserve the right to change it when they wish. So there is always an element of surprise consumers can look forward to. I wish these companies were a little more transparent by displaying all the updated transaction limits and charges in one place so that consumers are not charged any convenience fees without their knowledge. But the good thing is, when your wallets get upgraded to payment banks, these limits and charges won’t matter as your wallet itself will become a bank.

Top Five Mobile Wallets in India

Without further ado, let’s have a look at the top five mobile wallets in India, in no particular order. The apps were rated based on factors like stability, acceptance, user experience, and customer service.

The first one is Paytm. There’s no point in the list if I don’t include this one. Founded in 2010, it is the fastest-growing wallet app in the country, with 147 million wallet users and a Play Store rating of 4.4. Though I have seen that customer service is not that great, it still deserves to be at the top because of high acceptability and ease of use.

Next on this list is Freecharge, which is known for its excellent user experience and regular offers. It has a user rating of 4.3. I’ve been using this app since 2014, and I have to say this is my personal favorite. The app is clean, clutter-free, and easy to use. It offers lots of cashbacks, and also if your mobile gets stolen or in case of any fraudulent transactions, wallet balance is insured up to 20,000.

Another popular wallet that has to be on this list is Mobiquik. They have more than 40 million smartphone users and a user rating of 4.2. They have a BBPS license from RBI, which makes them best for paying utility bills.

Fourth on this list is the Geomoney app, with more than 10 million downloads and a user rating of 4.2.

And last but not least, Airtel Money, which is the first to start a payment bank in India, offering a high interest rate of 7.25%.

Rather than getting confused by so many options, consumers can actually use this to their advantage, as more competition only means better deals for consumers. If you are only using one or none of these apps, you are missing out on deals other apps are offering.

The Role of UPI

Then comes UPI. As you can see, none of these apps are running on the UPI interface. I can make another video on that if you guys want, but for now, I can only say that UPI has a certain edge over these wallets, as it is interoperable. For example, if you are using Paytm, you can only transfer money if the other person is using the same app. In the case of UPI, you can transfer money from one bank account to another bank account using just a virtual payment address (VPA) that is just like your email address, thereby completely eliminating the need for using a wallet.

Hence, there are news reports like these in the media. Though each of these articles holds some weight, I don’t think mobile wallets are going to die anytime soon. I agree there are certain drawbacks while using these apps, and their customer service leaves much to be desired. But all the mobile wallets that are in the top must be doing something right so that so many people are using them.

India is on the brink of a digital revolution, and these wallets are playing their part by providing digital banking solutions within everyone’s reach. Demonetization might have forced people to use e-wallets, but I don’t think people are using digital payments out of fear. Digital is a sign of progress, not obligation.

 

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