Digital Wallet – Future of Payment

What is a Digital Wallet?

A digital wallet (or e-wallet) is an electronic device or software which allows you to store, manage and pay electronically using a variety of payment instruments such as credit cards, debit cards, Internet banking and digital cash. In banking terms, a digital wallet is a type of prepaid payment instrument like your debit card. You can save your payment details on your digital wallet so that you don’t have to retype the information each time you make a purchase. Digital wallets authenticate the user using digital certificates or other encryption methods. Google Wallet, Samsung Pay, Apple Pay, PayPal and Paytm are some of the popular e-wallets that are in use. Although, they are little different from each other, but they perform the same basic tasks i.e. enable you to complete a transaction using your mobile device(s), such as a smartphones and so on.


Types of Digital Wallets

Depending on the device that is used, digital wallets are divided into two categories, device-based and internet-based wallets.

Device-based digital wallets: These type of digital wallets use NFC (Near Field Communication) technology to allow users to pay for purchases by waving their NFC-capable phones or other NFC-capable devices near a contactless reader (which is also an NFC-enabled merchant terminal). There is no need of physically handing over your credit or debit card, but you need a device such as an iPhone, Apple Watch or Samsung phone. Apple Pay and Samsung Pay are examples of device-based digital wallets.

Internet-based digital wallets: This type of digital wallets offer personal user accounts where a user can sign up for an account and store credit or debit card information in it for faster checkout. When the users make a purchase from an e-commerce website, the users first need to register and create an account. After this, they need to sign in to their account and use the saved payment information to pay for their purchase(s). These type of digital wallets allow users to pay for online purchases without providing their card details to the website from which they’re shopping. Google Wallet, Pa Pal and Paytm are examples of internet-based digital wallets. Google Wallet and Pa Pal both offer apps that can be added to compatible phones, allowing them to be used as device-based digital wallets in store.



Digital Wallet Components

There are two main components of a digital wallet, software component and information component. Let’s briefly learn about these components:

Software Component: The software component provides security i.e. it protects users’ personal information and the actual transaction through encryption. Most digital wallets are stored on the client side. They are self-maintained and fully compatible with most e-commerce websites. A server-side digital wallet, also known as a thin wallet, is one that an organisation creates for and maintains on its servers. It provides enhanced security, efficiency and additional functionalities to the user.

Information Component: The information component refers to a database that is used to store user information such as payment method (credit/debit/net banking), payment details (including card numbers, expiry dates, and security or CVV numbers), phone number, email address, billing address, shipping address and other such information about the purchase. The users can choose whether they want to store payment details or not. Opting to store a card saves the users from retyping the details every time they make a purchase using that card.


How Does an E-Wallet Work?

Digital wallets are complex in nature, with many different interconnected functions. This complexity seeks partnerships between parties to come together to make e-wallets work. It will be extremely challenging for any single service provider to effectively manage and execute an e-wallet. For example, a payment moves through several parties often with varying providers for each transaction. Consider the following example to understand how the money changes hands during an online transaction.

When a customer makes a purchase from an e-commerce site by submitting  their payment information that information is sent to the payment gateway. The gateway then encrypts the payment information and then sends it to a series of proved payment processors and networks for authorisation where the payment is either accepted or declined. The decision is conveyed to the customer, and all these activities take place in few seconds. The final step happens after the payment gateway sends the transaction to the payment processors and the money is transferred from customer’s account into the merchant’s account.

List of the Advantages of Electronic Wallets

  1. It offers more convenience for many consumers.

When you’re carrying an electronic wallet, you get to limit the number of cards you carry when you travel. You no longer have the requirement to carry a lot of cash with you either. All you need to do is tap your device to the payment receptacle, or have your mobile device scanned, to pay for the items you are purchasing. That means you’re no longer carrying a pocketful of items wherever you go.

  1. It provides access to other types of cards.

Electronic wallets typically store credit cards and debit cards. They can be used for a wide variety of cards, however, if the provider is compatible with the wallet you are using. That means you can store rewards cards, loyalty cards, and even coupons within your digital wallet, allowing you to enjoy more of a paperless lifestyle.

  1. It offers more security.

If you have a wad of cash in your pocket that gets lost, you have zero options available to you to recover your funds. Losing your credit cards means you must contact each lender to cancel each card, then have a new one issues. With an electronic wallet, the information is stored through a third-party provider. It’s locked behind your password or biometrics. Even if you lose your device, you’ll still have access to your e-wallet once you get a new device.

  1. It can be used at most retailers and online stores.

Electronic wallets have become widely accepted within the past few years. Most locations that accept cards as a payment option will allow you to pay with your electronic wallet. Although there are still some locations that are using older processing technologies, which does limit some product or service access, the number of retailers who provide payment access in this manner continues to increase each year.

  1. It requires users to authorize every transaction.

Electronic wallets function like a debit card when initiating a transaction. They require you to input your PIN to authorize payment. For devices with biometrics, a payment would require your fingerprint to authorize it. That gives you another layer of security against unauthorized purchases or the financial risks associated with identity theft.

  1. It may offer access to new rewards.

Many electronic wallets offer incentives to encourage consumers to use them instead of traditional payment methods. You may find discounts apply to certain purchases, such as fuel, food, or travel. Some businesses may work with your e-wallet provide to offer specific discounts as well. That means you have the potential to save money without changing your spending habits. You’re just changing how you pay for those items.

  1. It could help you with your budget.

Many electronic wallets can help you track your spending habits. Some may generate reports that show you specific categories of spending. You can also assign fixed budgets to specific cost categories to ensure that you’re not spending more than you should on certain items. If you have a big-ticket item to purchase, however, you can disable this feature to make sure there’s enough money available to make the payment.

List of the Disadvantages of Electronic Wallets

  1. It is not fully available worldwide.

The number of retailers which accept payments from an electronic wallet depends on the actual wallet you choose. In December 2016, just 36% of retailers accepted Apple Pay. 34% of retailers accepted PayPal as a form of payment. Just 25% of retailers accepted MasterPass. About 2 million retailers in North America currently provide access to some form of mobile payment through an electronic wallet.

  1. It still requires you to carry something.

Although an electronic wallet offers more convenience for many consumers, it doesn’t fully eliminate the requirement of carrying something with you. If you don’t have your mobile device on your person, then you have no way to complete a transaction. Because these wallets don’t store your identification and other needed items, you’re still forced to carry a traditional wallet or purse with you as well.

  1. It requires your device to have a charge.

There’s also the disadvantage that an electronic wallet requires you to have a charged device to have it operate. If you’re carrying a traditional wallet, you won’t need to worry about how much battery life is left on your phone.

  1. It doesn’t eliminate your security risks.

The security of your smartphone or mobile device is dependent on the settings you use. If you don’t have your device protected with some type of password, then someone could steal your device and potentially access the funds in your bank account or credit cards. There are definite security advantages to consider which make an e-wallet a beneficial technology, though it requires responsible management of it to maximize them.

  1. It may charge you more to process payments.

Many of the electronic wallets which offer a rewards program will charge you a fee to transfer those rewards. You may be required to process payments in a specific way to access these benefits as well. When using the PayPal debit program, for example, consumers receive 1% cash back when their transaction is a standard signature credit transaction. Using a PIN through a digital wallet eliminates this benefit because you’re changing how the point-of-sale treats the transaction. If you spend $900 per month, you’d be losing over $100 each year for the convenience of this payment method.

  1. It could encourage reckless spending.

When money is electronically-based instead of a physical item, some people struggle with their spending habits. The money doesn’t feel real, so proper budgeting doesn’t take place. If you are already struggling to maintain a budget with a traditional wallet, then an electronic wallet might make that issue even worse.



Launched in 2010, PayTM is the largest digital wallet app in India. PayTM is one of the most used e-wallets in India with over 160 million people using PayTM across the nation. They’ve managed to raise around Rs. 2.2 Billion through funding by investors.


Why Should You Use PayTM?: 

Payments made through PayTMs digital wallets in India are accepted almost everywhere across the nation. As a customer PayTM offers you various services through its digital wallets system. You can also use their e-wallet to make payments to numerous online merchants. One of the best things about this digital wallet is that it allows you to do much more than carry out your e-commerce transactions. Similarly, through their digital wallets in India, you can transfer money, travel, shop, and carry out many more transactions through PayTM.


With payments via PayTM being accepted almost everywhere, it’s hard not to simply switch to it completely. PayTM has recently partnered with selective educational institutes across India to make it easier for the users to make cashless payments of fees as well.


 Google Pay:

Google Pay has quickly made a name for itself as one of the best digital wallets in India. Even though Google Pay has been a late entrant in the market of digital wallets in India, it has quickly managed to make an impact on the users’ thanks to their hassle-free services.


Currently, Google Pay has more than 25 million a month active users of the digital wallet in India.


Why Should You Use Google Pay?: 

Send and receive money instantly in your bank account using Google Pay UPI.  You can easily send money to your friends, recharge your phone, pay bills and much more through Google Pay. Google Pay is directly connected to your bank account and your registered phone number. This helps you save time that you would rather spend on reloading wallets and doing additional KYC which is generally required for other digital wallets in India.


You can easily use Google Pay and send or receive money directly from your bank account.


Amazon Pay:


The Global Giant i.e Amazon has developed its own digital wallet known as Amazon Pay. The digital wallet was launched in 2007 globally. However, Amazon Pay was launched in India a decade later i.e in 2017. More than 33 million people use Amazon Pays Digital wallet to make payments for various transactions.


Why Should You Use Amazon Pay?

Previously Amazon Pay was only used to make payments when you purchase something from Amazon. Now Amazon lets you make payments through Amazon Pay while transacting with selected merchants. Amazon Pay also offers various benefits like discounts and cashback.


Amazon Pay allows you to access data from the site of the merchant in a seamless manner. Therefore, helping you streamline your purchase process. Similarly, you can transact without entering information like credit card or debit card details, address, etc. While doing this you can be sure of security since Amazon has restrictions when it comes to data security, your data is safe and secured without losing integrity.


Some of the major attractions of using Amazon Pay’s digital wallets is their brilliant general usability, mobile support along with a rich feature set.



PhonePe is an all-in-one UPI-based digital payment app. It is one of the most popular digital wallets in India. PhonePe has been able to cross the 100 million download mark within just 4 years since it’s existence. The app is powered by Yes Bank and launched by Flipkart two giants in their respective industries. The app crossed the 100 million user mark in 2018 and is growing day by day.


Why Should You Use PhonePe?:

You can do everything through this app, from UPI payments to paying through the PhonePe e-wallet, from QR code payment to paying through your debit & credit cards. PhonePe is not just like any other digital wallets in India, it has many features in the app that make your lives easier. Get great deals and cashback on bill payments, food outlets, shopping, and much more through PhonePe. PhonePe assures data security against cyber-criminals. Along with this PhonePe is a multi-lingual app. The app is available in English, Hindi, Marathi, Tamil, Bengali, and more. Therefore making it easier for users to use the app seamlessly across the nation.



Freecharge, one of the most famous names right now when it comes to digital payment in India, has been known to target the youth in all their promotions. Kunal Shah and Sandeep Tandon founded Freecharge in 2010, to make it easier for people to transact through their digital wallets in India.


Why Should You Use Freecharge?:

With an equivalent amount of coupons given for every recharge you make, it’s a great option to save while paying your bills online. Along with that their “Chat-n-Pay” service helps users chat and pay their friends and merchants instantly. Freecharge offers exclusive deals and coupons to the customers who use Freecharges’ digital wallet.


The Freecharge digital wallet in India can be used to make both online as well as offline payments. Similarly, you can also use Freecharge to make payments at merchants like Hypercity, McDonald’s, Cinepolis, Shoppers Stop, HomeStop, Crosswords, and more.



This digital wallet is backed by The Reserve Bank of India (RBI) and launched by The National Payments Corporation of India. BHIM is probably one of the best digital wallets in India based on UPI. The BHIM digital was launched in India by Prime Minister Narendra Modi for all the android users. BHIM has played an important role in the quest to make India a cashless economy.


Why Should You Use BHIM?:

This digital wallet in India supports all the banks across the nation. Along with that BHIM lets you send and receive money using Virtual Payment Address (VPA) wherein you can transact without disclosing your bank details. Consequently, it also allows merchants to transact with customers by using fingerprint scanner which is obtained through the Aadhaar database.


BHIM enables QR code scan-and-pay option. Likewise, you can generate your own unique UPI PIN and QR code through the app. Also, you don’t need to worry about security issues as your login expires after 90 seconds of inactivity to minimize inappropriate and fraudulent use of your data.  Additionally, BHIM also provides you a transaction history to make sure that you keep a check on your transactions through the app.


ICICI Pockets:

ICICI is one of the leading Indian multinational banks. Currently, it is the largest private sector bank in India. ICICI Pockets is a digital-payment based app for mobile phones. The digital wallet in India service was started to make your lives easier by enabling you to make digital payments in an easy way. The app uses a virtual VISA card to enable users to transact on any website or mobile across the nation.


Why Should You Use ICICI Pockets?:

The ICICI Pockets e-wallet is not just limited to users of ICICI bank, you can fund your digital wallet through any bank account. The app’s digital wallet lets you transfer money, split expenses, book entertainment tickets, and do much more with one of the best digital wallets in India. And since this e-wallet uses virtual VISA, you can transact on any app or website in india.


The digital wallet app allows users to send money to any phone number, Facebook user, bank account number, and email ID. To make this process fun and social, ICICI Pockets uses your Facebook credentials to log in.While you might find a Pocket card useless, considering you’re opting for an e-wallet app to avoid using a card, they do have a pretty neat digital wallet app.



JioMoney, launched recently in 2016 by Jio is a digital payment app. The app is inspired by the concept of digital wallets in India. Similarly, the JioMoney app lets you get all the benefits of cash. Above all without any of its limitations.


Why Should You Use JioMoney?:

With JioMoney, one can receive great discounts and offers. Users can also bookmark their frequently visited retailers so shopping can be made quicker than usual. The best thing about Jio Money is that it can be used by people who do not have Jio as their telecom service provider. And if you own a Jio LYF mobile phone, you get exclusive access to the app that is preloaded with discounts and offers from selected merchants.


The JioMoney digital wallet in India also enables you to make secure digital payments from anywhere. Along with that, the app is very easy for everyone to use and quite simple to navigate.




Mobikwik is a Gurgaon based e-wallet payment system in India that helps its users store their money. Their payment system of digital wallet in India was founded in 2009 by Bipin Singh and Upasana Taku. Mobikwiks large network connects more than 25 million users with approximately 50k merchants through their payment system of digital wallets in India.


Why Should You Use Mobikwik?:

Their e-wallet payment system enables you to recharge, pay bills, book travel tickets, and make third-party purchases through MobiKwiks digital wallet. Similarly, the digital wallet app allows you to buy digital gold, insurance, get a personal loan on MobiKwik, and you can also invest in mutual funds through one of the best digital wallets in India.


You can carry out transactions by adding money to your digital wallet through your debit card, credit card, net banking. Their service is not just limited until there, you can also opt for doorstep cash collection and use it to pay bills and shop through their digital wallets in India.




Risks Associated with Digital Wallets

In recent times, digital wallets have grown to become one of the popular choices for online payments among consumers. The growing popularity have also attracted the attention of hackers and cybercriminals who are now developing a number of ways to work on mobile platforms. These threats have a serious impact on mobile payment security and can lead to privacy breach and financial loss. Mobile payment security is critical for all users and service providers. The payment information must be protected when it is at rest, in transit and in use.

 Some of the risks associated with mobile payments and digital wallets are:

Mobile Malware: Mobile malware refers to malware (short for malicious software) that is designed explicitly to damage or disrupt mobile devices such as tablets or smartphones. It is one of the main threats to a mobile payment system today. A mobile malware can record calls, instant messages, send call logs and other critical and sensitive data to a cybercriminal. Malware can attack in many forms. For example, you could accidentally download a malicious app that dials premium rate numbers from your phone; while, other malicious apps can potentially alter your phone’s function and make it unusable. ZitMo (Zeus-in-the-mobile), a mobile version of Zeus malware is designed to steal your one time passwords (OTPs) sent by bank that are used to authenticate mobile transaction.

SSL/TLS Vulnerabilities: Secure Sockets Layer (SSL) and Transport Layer Security (TLS) are two widely used protocols in computer security. The main purpose of these protocols is to provide privacy, integrity, identification, forward secrecy and application. Many mobile payment systems use SSL/TLS to protect user data on the Internet. SSL/TLS allows an over the air connection between two systems to be encrypted, making the data unreadable to attackers such as usernames, passwords, credit card numbers and anything else that is being sent back and forth during the connection. However, SSL/TLS and its implementation may also have vulnerabilities which could be exploited by attackers. The Heartbleed Bug is a serious vulnerability that allowed attackers to steal information protected by the SSL/TLS encryption.

Hacking: Mobile payment technology uses wireless communication technology that facilitates transmission and reception of transactions among devices without being connected physically.This is known as over-the-air (OTA) communication.This also enhances the chances of hackers attempting to compromise mobile devices without having the phone physically.

 Data Leakage: Data leakage is one of the main concerns for digital wallets as there are multiple parties involved in the transaction process. When a user makes a purchase using a digital wallet at a mobile as POS, all the parties (digital wallet service provider, mobile payment as POS service provider, merchant, acquiring bank and issuing bank) are required to collect the transaction data.

Phone Theft/Loss: There are many types of risks associated with debit/credit cards whether they are stored on a smartphone or not. The biggest of these risks is a lost phone, which can give someone access to all the sensitive information that is increasingly being stored on mobile devices. Some digital wallet, provider security measure that disable the wallet if five erroneous PIN attempts are made.

Safeguarding Your Digital Wallet

Mobile payment is changing the way consumerspay.With more and more businesses offering their services online, the need for a safer way to pay online is the crying need of the hour. As online transactions increase, businesses in the payments industry are consistently adopting advanced technologies to protect their consumers interest. At the same time, even the most secure (payment) systems can be compromised, especially if the consumer uses a weak password or if a device ends up in wrong hands. Therefore, we all have a role to play in keeping our digital wallets safe. In the same way, we protect our physical wallet today, it is imperative to protect our digital wallet too.

Keeping your sensitive information safe can be easy and inexpensive. There are a few simple things that consumers can do to ensure the safety of their money, as they increasingly use the convenient method of payment—digital wallets. The guidelines that should be followed to safeguard your digital wallet are:

Enable Device Password: Set your devices to require a password before they can be used. Today, most devices including smartphones come with a system lock feature that allows you to lock the device when not in use. Some devices can automatically lock themselves if not used for a while. Always Connect to a Secure Network: Use only the networks you trust, especially when you do online transactions. A rule of thumb is to avoid open Wi-Fi hotspots as they are usually insecure and could be a trap laid by hackers who want to steal your

Always Connect to a Secure Network: Use only the networks you trust, especially when you do online transactions. A rule of thumb is to avoid open Wi-Fi hotspots as they are usually insecure and could be a trap laid by hackers who want to steal your payment information.

Keep Login Credentials Secure: Never share sensitive financial data and login credentials (usernames, passwords, PINS and answers to your security questions; with anyone, especially the ones you don’t trust. Don’t write down information used to access your digital wallet. Don’t use the same password you use for email or social networking sites. Instead use a unique password for your wallet.

 Install Apps From Sources You Trust: The world of apps also features many fake apps that are designed to collect your sensitive data. There may be suspicious apps that look exactly like the real wallets. The users need to be extra careful while installing the official wallet app in their smartphone. Carefully read user reviews that can provide some clues about the integrity of the app.

Keep Your Devices Up-To-Date: An up-to-date device is more secure. Hardware and software manufacturers release frequent updates to optimise performance and security of your device. They include counter measures for newer threats; therefore, ensure they are installed.

Use Security Software: There are many security applications, including firewalls that can detect and remove threats such as viruses and malware.

Monitor Account Activity: Monitor the account activities regularly. This will help you immediately know about any unauthorised activity in your account. if any such activity is detected, immediately report it to your financial institution.

Security Measures

To mitigate risks associated with digital wallets, users and wallet service providers must undertake security measures to prevent a data breach. Mobile payment service providers must take all the necessary steps to ensure the security of their mobile payment app, protect payment data and prevent data breaches in the backend. Many mobile payment apps use SSL’TLS to protect data when the app connects to the Internet. These mobile payment apps must validate the security certificates received from the server. If a mobile payment system receives an invalid certificate, it should stop immediately and alert the user that a potential attack is likely to happen.

Table 1 provides a comparison of the security measures that need to he followed by users and wallet providers respectively to secure confidential data.

Security Measures for Digital Wallet Users Security Measures for Digital Wallet Service Providers


Use strong pin/password/screen lock pattern to protect mobile devices


Place specific limits on funding
Upgrade mobile operating systems regularly and apply all security patches Specific the parties and methods authorised to fund the accounts


Prevent downloading malware on mobile devices Specify the nature of the legal tender used to fund the accounts


Use cautions when receiving suspected SMS messages and emails


Monitor the frequency of loads to the account


Do not connect to untrusted hotspots for Wi-Fi access Apply enhanced and ongoing due diligence on merchants, and monitoring for their compliance with regulatory



Dovetail – Banking Technology

We hear a lot about consumer payments such as online banking and digital wallets but the wider payment sector which includes payments to and from banks, corporations and financial institutions as well as consumers is much bigger. With a volume of transactions exceeding $1.3 trillion a year, banks are now looking to digitally transform their payment processes. More and more transactions are moving the online way. This means a higher number of payment transactions and more opportunity for banks and other providers to make money. With a large number of transactions being done online leading to increased competition, it becomes Imperative to examine how technology is deployed to allow seamless and real time payments. Financial technology providers play a major role in modernizing payment processing gradually, allowing banks to continue to operate at the same time.

Established in 2000, Dovetail is a leading financial technology provider and innovator. It offers highly secure payment systems and banking software solutions; based on a unified architecture that enables banks to address the ongoing compliance, revenue growth and cost efficiency pressures. Its software solution is used by major banks including Deutsche, HSBC, 1NG and JP Morgan to process millions of transactions daily. With its best-in-class payment solutions, Dovetail helps banks of all sizes simplify their infrastructure and digitally transform their payments processes effectively for both corporate and consumers—from a single payment type to a multi-country, multi-entity and centralized global payment processing system. These solutions are available on premise and deployed on cloud as well.


Dovetail Payment Solution

Dovetail specialises in payment systems. Dovetail Payment Solution is a comprehensive payment processing platform that features a set of core functions common to all banks. It mainly supports processing of high value payments with the provision of various agency services. The Dovetail Payment Solution provides modular payment processing capabilities that enable banks to digitally transform their payment systems piece by piece in one or more phases without undue risk. It also means that the new payment solution can be easily integrated with a bank’s existing system, reducing implementation effort and accelerating time to market.

Some of the key features of Dovetail Payment Solution are:

  • Supports three payment types: Immediate settlement, deferred settlement and instant payment type. • Offers a suite of CSMs for indirect or direct clearing worldwide, from US, Canada and Mexico to UK, Asia Pacific and more.
  • Can be deployed to meet operating requirements of banks, specifically, for instant payments. The Dovetail payment solution supports 24×7 operating requirements with an active upgrade capability.
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