Have you ever used an online wallet to make payments? If you’ve shopped online, chances are that you have.
Traditionally, digital payments are made through a payment gateway. The portal asks you to enter your bank account or credit card details (perhaps even enter a password), and then you’re sent an OTP (One-Time-Password) to your phone or email, which you then enter in the portal to finish your payment.
These are cashless payments that don’t even require a physical copy of your debit or credit card. All you need is a working internet connection. It’s revolutionary.
However, the major drawback of this system is that every time you have to make a payment, you need to enter all your account or card details and go through the entire payment process once again.
This is how all payments usually happen: you pay cash, or swipe your credit card, or exchange a cheque to complete the transaction.
While the above mentioned payment processes take a few seconds, entering all your account or card details takes more than a few minutes.
And then there’s the issue of waiting for OTP (if at all it does arrive) and authentication from your bank server. If the payment fails, you have to go through the entire process once again.
While it’s revolutionary, you cannot argue against the fact that it’s painstaking.
This is where online wallets come in.
PayPal was one of the first of such kind.
Online wallets store all your bank account details (including credit and debit card info) in one place and allow easy access to them with just a single login. Kind of like how your Google account works to give you access to various Google services (mail, docs, apps, etc.).
Plus, you can pre-fill your online wallet with a set amount of cash. The next time you buy something, you don’t even have to wait for authentication from your bank server. The pre-filled amount from your wallet gets deducted instead.
Nowadays, most of the popular ecommerce sites have their own online wallets integrated with their stores.
Amazon has Amazon Payments. Flipkart has Flipkart Money. Snapdeal acquired Freecharge and has integrated it with their platform.
There are also players like Paytm, which started as an online mobile recharging solution and expanded to include ecommerce and other online services. I use it regularly to recharge my mobile.
I haven’t used FreeCharge yet, but I’ve heard it’s better.
Apart from recharging your mobile and DTH, you can also use it to pay your utility bills and schedule monthly auto payments. Pretty cool if you think about it.
Nevertheless, using an online wallet for regular day-to-day transactions is still cumbersome. If you have a credit card, you can just swipe it at the vendor’s location.
Using an online wallet requires you to open your mobile app or website to do the transaction. If only NFC was as widely adopted as it was meant to be. That would’ve made using an online wallet even faster than swiping a card.
A smartwatch solution aided by voice or biometric verification is even better.
Anyway, if online wallets can solve at least 60% of my daily payment needs, then I guess the future of such solutions is bright.
I’m not sure about the legality of storing money in these online wallets though, since they’re not really banks per se. Banks are strictly regulated by the government and account holders have a lot of protections in place to check abuse.
What happens to the money in my online wallet if Paytm or Freecharge decides to block my account? How will I be refunded? What legal avenues do I have to make sure that I’m not cheated? There are a lot of unaddressed loopholes here.
So, to answer the question I put forward, yes, there’s definitely a need for online wallets, but the technology has to catch up significantly to make them ubiquitous. And it’d be better if the government passes a law to regulate these online wallets as strictly as regular banks.