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The Growth Story of Semi-Closed Wallets

Semi-closed wallets

With semi-closed wallets, you can do shopping and transfer virtual funds to another user in the same wallet network. A semi-closed wallet also allows you in transferring a certain amount of wallet balance to your Bank A/c. Semi-closed wallets are very popular in India. We are looking at semi closed wallets in this article.

What do we understand by the term Semi-Closed Wallets?

The E-wallets are the instruments in the financial markets facilitating end-users in the activities of purchasing goods and services, including a transfer of funds, against the value stored in such wallets. The holders of such wallets store the value in wallets by making payment through cash, credit or debit card, or online banking.

Future of Semi-Closed Wallets in India

Technology is making us feel its presence over every sphere of our lives, whether it is entertainment or politics or the financial sector. The advent of online banking and mobile banking has further simplified the banking experience in the country. Cash transactions have been limited to small details or other sundry expenses. And after the demonetization attack of Prime Minister Narendra Modi in November 2016, while most of the entities suffered quite a drawback, it was a real accelerator to the business of PayTM, M-Pesa, etc.

Now, while using the services of these entities, have you ever wondered what they actually are? These are the biggest examples of semi-closed wallets in our country. These prepaid wallets are making online shopping simpler and also providing a high level of security in payments.  These wallets offer rapid transactions as well as uninterrupted refunds. Wide service coverage is another factor that contributes to the success of this concept.

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Types of e-wallets

Basically, e-wallets are divided into three categories:

Types of e-wallets
  • Closed wallets– facilitating the purchase of goods and services with a single vendor issuing such a wallet. They do not provide a facility for cash withdrawal or redemption.
  • Semi-closed wallets– facilitating the purchase of goods and services including financial services at a group of clearly identified merchant locations/ establishments, which have a specific contract with the issuer to accept the payment instruments, but do not permit cash withdrawal or redemption by the holder.
  • Open wallets– facilitating the purchase of goods and services, including financial services like funds transfer at any card accepting merchant locations (point of sale terminals) and also permit cash withdrawal at ATMs / BCs.

In this article, we will concentrate on the usability and working mechanism of semi-closed wallets. Pay TM, Airtel Money, Mobiwik, and Pay U Money are some of the prime examples of semi-closed wallets. These wallets do not permit the user to withdraw cash, but you can use the money stored in these wallets for online shopping, recharges, and bill payments. The payment companies are required to manage the money stored in these wallets by opening an escrow account in a bank. Since it is a new product in the financial market, the companies are coming up with a wide range of benefits to the customers, e.g. instant cashback.

In addition to usability, semi-closed wallets strive to create accessibility, convenience, and credibility. Simplicity is reflected in their designs, which make them a lucrative option in the hands of consumers.

All you need to do is to store money in your wallet through any of the net banking channels. These wallets are mostly supported by a mobile app[1] where you can check balances of your wallet and make purchases. Some wallet services such as Paytm have built their own stores where you can buy goods, and some let you buy recharges for your phone or pay your DTH bill. You can also use these wallets to make payments on other websites.

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Features of Semi closed wallets

Semi-closed wallets are a very safe option to make payment in the sense that your bank account is not touched as it is in the case of credit and debit cards. Another important feature that distinguishes a semi-closed wallet is that it lets you take money out of it and put it back in your bank account, providing full control over your money.

The recently added features to the semi-closed wallets; such as auto-recharge, auto payment deduction make it a hassle-free option to manage transactions for the end-users.

Growth of e-wallets in India

The growth of the e-wallet segment in the financial sector of India can be attributed to the joint results of the rising use of smartphones and wide internet coverage throughout the nation. Due to rising competition and advancement in technologies, the telecom operators have gradually reduced their internet charges. This has resulted in the increased use of the mobile internet, further strengthening the market for e-wallets.

E-wallet companies are being benefited from millions of transactions and double the number of users. The average wallet-spending for retail was about INR 500-700 prior to the demonetization move, drastically increasing to INR 2,000- 10,000 post this event.


The government of India has looked to ensure fool proof security for conducting transactions through semi closed wallets considering the fact that Semi-closed wallets have immense potential to add value to the overall GDP striving to make the country a cashless economy.

Read our article: Legal Framework in India for Payment Gateway

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