Digital Wallet

The use of e-wallets is becoming more popular and is changing the way people carry out transactions. Just think of being able to order a cup of coffee in the morning and make payment without necessarily using cash or a card. 

Digital wallets or e-wallets allow you to make seamless transactions online. And the knowledge of how they work and how to use them cannot be overstated. It helps you enjoy a more convenient, secure and efficient way to manage your finances in this digital age.  

What is a digital wallet? 

A digital wallet is an application that stores your payment information and passwords securely for making transactions. It allows users to make electronic payments without needing physical cash or cards.  

Digital wallets can be accessed via smartphones, smartwatches or computers. This convenience enables you to make contactless payments in stores, online or within apps. You can link credit cards, debit cards, bank accounts and cryptocurrencies to a digital wallet. This seamless payment process makes transactions faster and safer. 

How does a digital wallet work? 

Digital wallets use various technologies to facilitate transactions, providing a convenient and secure way to manage financial information. They feature advanced encryption technology and two-factor authentication, which protect you against unauthorised access. Here's a quick rundown of the different technologies used: 

Near Field Communication (NFC) 

Think of NFC like a digital handshake. It allows two devices, such as your smartphone and a store's payment terminal, to exchange information when they're close to each other. The technology powers contactless payments, where you just tap your phone near the payment terminal to pay.  

Magnetic Secure Transmission (MST) 

MST works by sending a magnetic signal from your phone that looks like the magnetic strip on the back of a credit card. This signal can be read by traditional card swipe readers, even if they don't support newer NFC technology.  

QR Codes  

A QR code is a digital barcode. You can use your smartphone's camera to scan these codes, which then allows your digital wallet to send payment information to the store. This method is popular as it allows you to make quick and easy payments. 

Types of digital wallets  

They are divided into three main categories, namely: 

Closed wallets 

These are specific to a particular company and can only be used to make transactions with that company's services. They are not interoperable with other platforms, so you cannot transfer funds to other wallets or bank accounts.  

E-commerce companies issue such kinds of wallets, which are typically used for purchasing goods or services directly from them. The refunds on cancelled transactions usually go back into the wallet balance. 

Semi-closed wallets 

Semi-closed wallets offer way more flexibility than closed wallets. They allow transactions with a select group of merchants or service providers. However, you cannot withdraw cash directly from these wallets. You can use them for a variety of payments, like mobile recharges, bill payments and purchases at affiliated stores. 

Open wallets 

Open wallets provide the most flexibility as you can make a wide range of transactions. These are issued by banks or in partnership with financial institutions. They allow you to make purchases, transfer funds and even withdraw cash from bank ATMs. You can shop using QR codes and make peer-to-peer money transfers. 

Benefits of using digital wallets 

• Digital wallets allow for fast, one-tap transactions. 
• They use encryption and tokenisation to protect your financial information from fraud. 
• They provide a simple way to track and manage spending and transaction history. 
• Digital wallets minimise the need to carry cash, reducing the risk of theft or loss. 
• They can store and apply loyalty points and discounts automatically during purchases. 
• Digital wallets can store various accounts and cards, making it easier to switch between payment methods. 
• They offer a convenient payment method without accessing traditional banking services. 

Steps to use a digital wallet 

Download the digital wallet app  

Start by downloading a digital wallet app. You can find and install the Kotak811 mobile banking app from your device's app store.  

Set up your account 

Open the app and follow the instructions to create an account or sign in. And if you already have one, just enter your email address or phone number. 

Add payment methods  

Link your credit or debit card to the digital wallet by entering the card details or taking a photo of the card. You can also add your bank accounts or other payment methods. 

Verify your information 

For security purposes, you may need to verify your card or account. This might involve entering a one-time password sent to your email or phone or verifying through your bank. 

Choose a strong PIN 

Use a combination of numbers that is not easily guessable. Avoid using common patterns like 0000,1234, etc.  

Make your first payment 

When you're ready to make a payment, unlock your phone and open the digital wallet app. Hold your device near the payment terminal for contactless payment or scan a QR code provided by the merchant. Then, confirm the transaction using the PIN. 

Make the most of digital wallets 

Another great advantage of digital wallets is that you can use them in another country, too. This is great for times when you are travelling and making purchases overseas. You can make transactions without having to exchange physical currency. Therefore, they have become handy for anybody who has to travel in the world today.