Digital Payments

Casting light on the E-Wallet Business Model

Modern technology has redirected our country’s resources towards a brighter today and tomorrow. The E-wallet, also known as a digital wallet, is a remarkable result of modern technology that has completely revolutionised the world of payment. It is an excellent innovation that meets the demands of the modern world. E-wallet business models have provided an unexpected boost to the E-commerce sector or merchants in general. It has also resulted in an increase in online transactions. People prefer digital wallets to cash since they don’t have to handle cash in their pockets each time they go out. Therefore, let us examine every element of the e-wallet business model, from its advantages to its operation.

Definition of E-Wallet Applications

The contemporary man uses technology to create his life simpler and to direct the youth toward a better and easier future. The “e-wallet application” is one of the most typical outcomes of extending the role of technology.

The payment app business model is a prime instance of a modern creation built particularly to fit into modern-day norms. This has increased the popularity of in-app payments, and as a result, the eCommerce sector is undergoing significant transformation. Digital wallet mobile applications make it easy to make the payments since you don’t have to search for change or carry currency in your pockets; everything seems to be accessible at the touch of a button on the phone. Besides this basic transaction, current e-wallet apps allow users to pay bills, recharge phones, buy tickets, invest, and do a lot more.

It is simpler for the end-user to connect with your apps if you provide clear instructions and a well-curated application. The mobile wallet revenue model is another essential aspect that shapes the reflection of the user’s application. The revenue model chosen affects whether or not someone’s application can grow into a stronger and superior alternative. Since we’ve understood how an e-wallet works, let’s look at some revenue options.

What is an E-Wallet Business Model – Revenue Models of E-Wallet Applications?

As online payment systems advance, the demographics of the user population change dramatically. One reason for the widespread use of such apps is the widespread adoption of Smartphone. E-wallets, as the name implies, are electronic versions of traditional wallets that may be used to make payments. A mobile wallet is used when an user utilises a digital wallet on his Smartphone. As India has become a cashless market, the government is obligated to actively encourage these electronic services. Currently, e-wallets have a strong market position because they are supported by government-backed digital payment apps such as the BHIM App or the Unified Payments Interface (UPI)^[1] payments app.

Functions of Digital Wallets

The following are the basic services that any e-wallet delivers:-

1. Maintains Debit and Credit Card Credentials – All digital wallets can save users’ credit and debit card information. E-Wallet mobile apps allow users to perform transactions or transfer funds to the app wallet using card details. E-wallets like Google Pay permit direct payment from the card by utilising the card’s details, but others, such as PayPal, take funds from a stored credit or debit card and pay through the system alone.
2. Safety and security – It is important that the platform on which the e-wallet mobile app development team is working is both safe and secure. Any App that is built must include safe and secure environment, and when it comes to an applications linked to financial or healthcare, confidentiality is added to the list. Digital methods of transaction are far more secured, protecting the personal information of the users. E-Wallets encrypt all credit and debit card data using a login password or biometrics. Furthermore, the data is encrypted in a variety of methods.
3. Coupons & Loyalty Cards – Many E-Wallets contain vouchers or loyalty cards in order to provide customers with an appropriate credit or discounts for using a particular card to shop at a given store. Some well-known wallets, such as Apple Pay and Samsung Pay, provide customers with loyalty cards. In addition, they provide intriguing cashbacks, incentives, and discount coupons. This engagement and discounts vouchers make it easy for consumers to continue using the same application.
4. Peer to Peer (P2P) Transactions – The e-wallet business model offers a user-friendly interface in which funds may be transferred from one user to another. Payments using e-wallets are often in modest quantities that are used for rent, utility bills, cellphone recharge, and so on. The creation of an e-wallet business model that we are examining here must be efficient and accurate. They make certain that their users have a variety of options for making payments in the proper manner.
5.  Customer-to-Business (C2B) Transactions – Every digital wallet application has a business profile as well as a personal one. If someone owns a business, their transaction limits & everything else will be higher, while if individuals possess an individual account, things will be otherwise.
6. Business-to-Business (B2B) Transactions – While considering how e-wallet businesses generate money, it is impossible to overlook the fact that business transactions and associated fees are the main sources. With the advent of technology, it has become simpler for customers to conduct large-scale transactions without fear. Because businesses can freely interact, it is much convenient for users to earn more and better.
7. Pay Bills and Recharge – Another important function of the e-wallet apps. Bills may be paid, timetables made, tickets booked, and phones recharged here. Not only that, but in most situations, the programme provides a reminder for recurring payments, making it quite easy for users to come up with unique ideas.

Advantages of E-Wallet Business Models

5 FinTech Business Models

There are more revenue-generating options for every e-wallet business model as the users discover greater options. However, the most prominent are:-

1. Micro – payments – This is simply a financial transaction involving a minimal sum of money. It is usually done online or using a digital application. The “in-app purchase” is an instance of a micro-payment. This is where the consumer pays money on virtual goods or upgrades to the next level of service in the application.
2. Pay-Per-Use (PPU) – The use of a product or service is metered in this business model. Users are only charged when they utilise the service. One instance is TV channels, wherein members pay just for the channels they wish to see. Another case in point is when industry research firms sell access to high-value material on a pay-per-use or pay-per-download basis. The pay-per-use approach allows your consumers to pay just for what they use and when they use it.
3. Memberships – Users pay a monthly fee to gain unlimited accessibility to a product or service under the membership business model. Many applications nowadays use the subscription model to keep their customers/clients coming back.
4. Freemium – This is another essential and intriguing method of interacting with the customers. The owner here provides some few services to customers free of cost and charges for the rest of the features. In this situation, if the user is satisfied with the fundamental functions, he or she will seldom seek for more, and if anything is lacking, there is always the paid option. One example of this kind of business model is how gaming applications charge a fee for some features.
5. Crowdfunding – Crowdfunding is another critical issue that you must address. This company concept relies on a straightforward method of obtaining cash from the general population. Individuals and organisations who embrace the product’s concept make donations to provide significant financial support and refined technologies.

Types of E-wallet business model based on Utility

When it comes to shopping or making payments for products and services, e-wallets or digital wallets are absolute lifesavers. The scope of e-wallet utilization, on the other hand, is determined by the type of wallet. To reap the advantages of the e-wallet business model, one must first understand its many forms and how they work. The RBI has classified e-wallets into 3 types:-

• Closed-Wallet Application

This type of E-Wallet business model is utilised by applications such as trivago, travel triangle, Flipkart, insider dot com, and others. The user can utilise the money that they have saved in the app wallet here. Closed wallets are accounts in which the money placed may only be utilised for the particular apps or other firms that also issue closed wallets.

Closed wallets are online accounts into which money is reimbursed when a service or product is cancelled or returned. In this case, the service provider receives a profit based on the interest earned on the money held. As you can immediately provide incentive points and money to the user’s account, this is one of the most engaging and successful ways to gain consumer confidence. Refunds are also included in the application, making it simpler for the service provider to earn more and have a larger market presence.

• Semi-Closed Wallet

The Semi-Closed wallets are the greatest means to transmit virtual money to another wallet network user. These wallets do not have as many restrictions as the Closed Wallets. The Users could share funds from the same e-wallet accounts here. Furthermore, these accounts ensure that specific sums may be readily moved to the accounts. These wallets are highly popular in India since they have made online buying easier while also providing a high degree of payment security. These applications are getting popular because to the simplicity of financial transfers that are linked to bank accounts. A further key element that contributes to their popularity is the fact that they are quick since they do not require a lot of information for bank transfers.

The convenience and speedy money transmission, as well as the safety, are driving the popularity of semi-closed e-wallet applications in the market. 

Semi-closed wallets could be used for a variety of online as well as offline transactions, including:

1. Buying Goods and Services
2. Transfer of Financial Services
3. Fees and premium merchants that have signed a specific agreement with the issuer to issue payments

As a result, semi-closed e-wallet apps are in high demand in the industry.

• Open E-Wallet Application

This is the most basic type of E-wallet available. This is among the most secure and safe e-wallet apps available on the market. Banks or financial organisations are mostly responsible for its development. It facilitates the semi-closed e-wallet app’s transactions, including cash withdrawals at ATMs, banks, or financial institutions, as well as the easy transfer of funds.

The e-wallet apps can make it easier for users, businesses, and banks to benefit and develop. Huge queues in front of banks and financial institutions may be easily avoided, and better options can be found with only a few clicks. Pay Zapp by HDFC Bank, M-Pesa by Vodafone, and ICICI are a few recently created open wallets in India.

Concluding Remarks

E-wallets have completely transformed the e-commerce sector. Several apps, like Google Pay, Phonepay, and Paytm, have introduced a functionality that allows users to transact directly through their bank account. As a result, the e-wallet business model will be an all-in-one service provider that will likely remain in the market for a long time. To construct a digital business, one must explore, invent, and develop a distinctive e-wallet business plan.

Read our article:E-Rupi: Contactless and Cashless Digital Payment