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A Beginner’s Guide to Virtual Wallet PPI in India

Virtual Wallet

Digital transactions are becoming the most convenient mode of payment for goods and services. Such transactions had gained pace, with an increase in the user base that can be observed after the COVID-19 lockdown, when people started using the virtual method of payments and found it more convenient than the cash-based payment which requires a person to physically hold the money to make payments. This unique feature has initiated the shift to online-based payments from the traditional payment method.

What is Virtual Wallet?

Virtual Wallet is an electronic wallet software that helps make online payments and facility of storing the sum of amount virtually. Virtual wallets can store all payment-related information, including debit cards, credit cards, rewards cards, membership cards, and offer coupons, permitting you to pay electronically/digitally.The term virtual wallets and mobile wallets are often used interchangeably.

The virtual wallet eliminates the potential threat of critical information like your credit/debit card numbers, your pin/password, or the CVV number on your credit/debit cards. The Virtual wallet uses a process called Tokenization. It is a method for replacing sensitive information with less critical information called Tokens. Unlike encrypted data, tokenized information can’t be deciphered.

Types of Virtual Wallets

The following are the type of Virtual Wallets according to their functions:

Open wallets

Open wallets are issued directly by a bank or a third party that can be used for any transaction. Open wallets allow customers/consumers to use the funds in the e-wallet for making payments for transactions or can withdraw the deposited fund in cash. An open mobile wallet allows users to make online payments; through an open wallet, users can still withdraw the funds in cash, including ATM withdrawals.

Closed Wallets

Closed wallets are issued by the companies linked for making payments/transferring funds to specific merchants. The customer using closed wallets cannot make payments to other merchants (non-listed) or third-party services. Under this type of e-wallet, the funds are only transferred between the User and Virtual Wallet-Issuer such as Amazon Pay is a type of Closed Wallet.

Semi-Closed Wallets

Semi-closed mobile wallets permit users to utilise the funds in the wallet to make payments for transactions with multiple listed merchants/sellers. Under this system of e-wallets, there must be an existing contract between the merchant and the e-wallet company for accepting online payment through a Virtual Wallet. Further, a user can also transfer the funds into a bank account. However, semi-closed wallets don’t have the facility to allow users to withdraw cash.

Features of Virtual Wallet

  • Ease of Seamless Transaction
  • Payment Ecosystem
  • Financial Inclusion
  • Cloud-based Software Technology
  • GPS Tracking & Navigation
  • Multi-Device Integration
  • Privacy & Security
  • Innovative Payment Methods

Differences between Digital Wallet and Virtual Wallet/E-Wallet

  • Both Digital wallets and Virtual wallets are special categories under the payment processing system. However, these wallets can be used on any device (laptops, smartphones, etc.) for making payments, whereas the mobile wallet is accessible through a software-based mobile application.
  • A digital wallet functions by communicating with pre-installed terminals using different kinds of information transfer technology. However, most mobile wallets use NFC [1] (Near Field Communication) technology to achieve the desired purpose.
  • Digital wallets can make e-commerce payments online, transfer money between peers, and make contactless payments. Virtual Wallets are digital wallets used for making contactless/online payments in place of a stored credit/debit card. Apple Pay and Google Pay are examples of E-Wallets, accessed through mobile applications downloaded to your smartphones.

 Benefits of using a Virtual Wallet

There are multi-fold benefits of using E-wallets. The critical information stored for online payments is protected at a central location (database). The card details are never stored; a tokenisation process takes place, and a unique virtual number is assigned. This technology helps protect money even when your smartphone is stolen or lost. Users have a primary duty to check the mobile wallet application’s legitimacy and authenticity.

Safe access

The most fundamental concern of any wallet user is the safety and security of critical personal information. Before making a payment, the application requires a user to enter a password/fingerprint to unlock the initialization of the payment procedure. Incase of theft or loss of a device, it will be impossible for any user to use device to make a payment without providing the required security credentials, it makes e-wallets even more secure than carrying a physical wallet with credit cards and cash, which can be vulnerable.

Accessibility and Convenience

Virtual Wallets are faster to access and more convenient, creating a hassle-free experience for users to make payments. They are preferred by users who want more convenience and security in transferring funds for in-store purchases instead of carrying physical wallets and cash to merchant stores.


Virtual wallets are gaining widespread popularity due to higher demand for contactless experiencesthat offer customers a convenient, and secure channel for online payments, ticket booking, gift cards, etc. The sole reason for the popularity of e-wallets is that it offers a secure and reliable payment solution model that ensures expeditious transactions. E-wallets let you send funds from your smartphone at the click of a button, making your transfer quick and easy.

Read our Article:How You can Also Make Your Wallet Like Paytm?

Raghvendra Sonker

Raghvendra Sonker has completed his Graduation from Gujarat National Law University. He has a keen interest in legal drafting, writing articles, and research papers. His core interest areas are Banking and Financial Issues.

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