What is a mobile wallet?
A mobile wallet, also called a digital wallet, electronic wallet, or e-wallet, is a solution that enables its users to pay and accept payments with the help of a mobile phone without using cash or a bank account. Literally, it’s your virtual wallet for paying, accepting payments, or storing money.
Types of mobile wallets
There are three types of mobile wallets:
- Open wallets are usually issued by banks and allow users to pay for goods and services, withdraw cash at ATMs or banks, and transfer funds.
- Semi-closed wallet enables users to transact with the listed merchants and locations, usually with those who have a contract with the mobile wallet issuer. Although the coverage area of such wallets is restricted, both online and offline buying can be done through the wallets.
- Closed wallet is usually issued by a company selling products or services. The funds stored on a closed digital wallet can be used to make transactions only with the issuer of the wallet. The money from cancellations, returns, or refunds is also stored in such wallets.
How do mobile wallets work?
Mobile wallets are usually represented in mobile applications that allow for sending and receiving money transfers to pay for goods and services or to get paid. So, to make use of an e-wallet, a user should just download an application.
What can a mobile wallet be used for?
Digital wallet solutions are among the most convenient payment methods of universal use. Depending on the type of a mobile wallet, it allows users to:
- pay for mobile communications, internet, or TV services;
- pay for goods and utilities;
- transfer funds from one wallet to another;
- make money transfers to other payment systems.
Benefits of mobile wallet payments
The main benefit of this digital payments solution is that transfers between wallets are instant, and many digital wallet systems allow for transactions in different currencies. So, a mobile wallet in your smartphone enables you to pay for purchases and accept payments from across the globe.
Modern mobile wallet solutions allow users to forget about the need to carry cash or plastic cards. It is enough to have your smartphone with a particular free application.
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Downsides of mobile wallets
Digital wallets are a convenient way for money movement. Still, they have certain drawbacks:
- Lost access. If you forget the password, you need a special key file to restore access to your wallet. If you lose this file, it will be challenging to regain access. You will probably have to write an application to the bank with a request.
- Commissions. Depositing and withdrawing money from electronic wallets is usually subject to commissions.
- Transfers between different wallets. To transfer or receive money from an electronic wallet in another system, users have to use an exchange that charges about 12–15% commission.
- Human error factor. If you accidentally transfer money to the wrong place, you will not be able to refund or charge it back.
How to use a mobile wallet
The first step of using any mobile wallet is installing an application on your mobile device. After that, you should enter some personal data and a PIN code and then transfer the necessary amount of funds from your bank account to the digital wallet account. Now your wallet is ready for use.
To make a payment, you need to launch the app, enter your PIN code and select the "make a payment" mode. The next step is to scan the QR code provided by the seller of goods or services and make payment.
Choosing the best mobile wallet: a quick guide
The conditions of using certain solutions are constantly changing, so when you decide to connect the service, go to the official sites and clarify the nuances. Below are the essential criteria for choosing the best mobile wallet:
- Geography. The system must work in the regions where your customers live.
- Commission. Find out the size of commissions for each transaction to calculate the total costs of connecting a mobile wallet.
- Withdrawal. What are the withdrawal methods, and to what banks it can be done.
- Specifications. What are the installation features, and is there any need to connect something additionally.
- Terms of connection to the company's website.
For private users:
- Ways to move funds. Is it possible to transfer funds from banks and other wallets.
- Commission size. For withdrawal of funds, transfers and other operations.
- Payment for goods and services. What trading platforms you can cooperate with.
- Ease of connection. What personal data is needed, and how long it takes to connect.
- Restrictions. What transactions can be performed without account confirmation.
- Support of the desired currency. For freelancers, for example, if they accept payments in foreign currencies.
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