Mobile Payment Wallets- Working and business model explained
Demonetisation of 500 and 1000₹ notes by Government of India has created a panic initially, but in the end this was a welcome move to increase cashless transactions.
Soon, there was a change noticed- People were not using ATM card swipes to purchase items, they were using mobile wallet apps to do shopping.
How does these payments work? I mean the method of payments?We will go through the method of working of these payment only banks which can be controlled from our mobile devices.
Most mobile wallets are apps which uses your mobile number or Google ID to sign up & verify payments.Most of them right now is using UPI feature(Unified Payment Interface) which makes use of Virtual Payment Address & does not need access to bank a/c details.This is more secure than technologies existing before.
UPI was introduced by National Payments Corporation of India, a subsidiary of Reserve Bank to ensure effortless digital payments.The main advantage is that you can transfer money not only from bank to bank and account to account, but also from bank to a person’s mobile wallet.
Mobile wallets provide attractive benefits to users like cashbacks,coupon codes & massive discounts on festival seasons.This is actually having a psychological effect on the user-he/she feels satisfied on purchasing an item.
Mobile Payment Wallets earn revenue by tie-ups with online retailers for giving offers to their users, showing advert frames within apps etc.
We’d like to quote Mr. Prashanth Jain’s answer on Quora in this context (Its about Paytm Wallet) :
“Where does Paytm earn revenue from-
- Paytm is a marketplace and a payment instrument (wallet). So the revenue comes from the merchants. In both these businesses, it charges commission on the goods/ services sold and/ or the payments processed. For both of these, there are fixes plus variable commission structures.
- On top of the transaction related commissions, Paytm also earns from value added services provided to its merchants.
Where Paytm does not earn revenue – It’s a popular misconception that Paytm earns interest on the consumers’ balance stored in Paytm wallets. However, this is completely false as RBI does not allow any PPI (pre-paid payment instrument) service provider to do so.”
Paytm,Mobikwik,Freecharge,Oxygen Wallet were the first few of them to jump on to the bandwagon & others soon followed.
If you’re still using cash as mode of payment-My dear friend, its time to rethink & be smart!