What Are Mobile Wallets? Is It Safe to Use a Mobile Wallet?

Jun 05, 2023 / Reading Time: Approx. 5 mins

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Mobile wallets, also known as digital wallets or e-wallets, have greatly enhanced our daily lives by providing exceptional convenience. In India, a large number of individuals now rely on e-wallets to carry out online transactions and make payments. The widespread acceptance of digital payment methods by both merchants and customers can be attributed to their convenience and the assurance they offer regarding transaction security. These wallets enable us to purchase goods and services effortlessly, completing the payment process within seconds. Additionally, they provide businesses with the added convenience of eliminating the complexities associated with handling physical cash. However, many consumers still have security concerns when using mobile wallets. This article explains what mobile wallets are and whether they are safe.

Since the onset of the COVID-19 pandemic, the popularity of mobile wallets has surged dramatically. This is hardly surprising, given the convenience they offer, particularly during a time when many individuals prefer to minimise their physical transactions.

What is a mobile wallet?

A mobile wallet is a software-driven solution that enables individuals to engage in electronic transactions, including bill payments, mobile recharges, and travel/movie bookings. Additionally, e-wallets offer the convenience and security of transferring money between bank accounts, serving as a reliable alternative to traditional physical wallets. By utilising a mobile wallet, individuals can conveniently access their financial information and conduct transactions without the necessity of carrying cash or cards.

  • Mobile wallets provide users with a convenient and efficient method to make online payments.

  • They offer versatility for various transactions, including booking train or flight tickets, recharging mobile devices, settling electricity bills, and reserving gas cylinders.

  • To utilise a digital wallet, users need to initially transfer funds from a connected bank account.

  • Mobile wallets ensure security and can be employed for a wide range of transactions.

  • To conduct transactions through a mobile wallet, users require a smartphone, a mobile wallet app, and an internet connection.

How does a mobile wallet work?

There are various options available when it comes to selecting an e-wallet, such as Google Pay, Apple Pay, PhonePe, Paytm, MobiKwik, and more. For international transactions, e-wallets like PayPal can be used, and these wallets generally operate similarly. Once downloaded from the App Store or Play Store, you will need to register by providing personal details such as your name, contact number, email ID, and bank information, and then create a password.

When making an online or offline purchase from a restaurant, supermarket, grocery store, or any other retailer, you can use your mobile wallet to make the payment with your preferred modes of payment, such as mobile wallet, debit card, credit card, internet banking, and UPI.

What Are Mobile Wallets? Is It Safe to Use a Mobile Wallet?
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What are the types of mobile wallets?

1. Open Mobile Wallets: These e-wallets offer a wide range of transactional capabilities. Players like M-Pesa have collaborations with banks, enabling services such as merchant payments, money transfers, and cash withdrawals. Opening an account with open mobile wallet providers is a simple process that involves registration, loading money from a regular savings bank account into the mobile wallet, and initiating transactions. These providers allow users to withdraw money from designated bank ATMs and agents like local grocery shop owners. However, take note that such accounts are typically intended for smaller amounts or petty cash usage.

2. Semi-closed Mobile Wallets: This mobile wallet category is less flexible than open mobile wallets. Once the money is loaded into the wallet, users are obligated to spend it either at merchant outlets affiliated with the e-wallet provider or through the company's own e-commerce platform. In such cases, money cannot be withdrawn once it has been transferred, and additional services are usually not available. 'MobiKwik' and 'PayUMoney' are popular examples of semi-closed e-wallets. While 'Paytm' also offers semi-closed e-wallets, it allows users to transfer money back to their bank accounts with a certain fee. With semi-closed e-wallets, the company providing the service manages the funds but is required to deposit the money into a separate escrow account.

3. Closed Mobile Wallets: Closed digital wallets are exclusively used for e-transactions with a specific company. For instance, the e-wallets of 'Myntra or 'Flipkart' can only be used for transactions within those platforms. These types of e-wallets come with strict conditions and inflexible terms. No permission from the Reserve Bank of India (RBI) is required to launch closed e-wallets. In the case of closed e-wallets, the money held in users' e-wallet accounts is considered a liability on the books of the company.

How secure is a mobile wallet?

Mobile wallet transactions benefit from multiple layers of security. Each transaction is safeguarded by the app itself, the retail outlet, and the bank or credit card issuer.

One of the highly secure payment methods used by digital wallets is tokenisation. This process involves encoding your information in a highly secure manner. Consequently, even in the event of a retailer experiencing a breach, your credit or debit card number remains protected and won't be compromised.

Mobile Wallets rely on established security measures, such as Personal Identification Number (PIN) and Two-factor Authentication, to safeguard your information. They employ encryption technology to protect your financial data and passwords, making it challenging for hackers to gain unauthorised access or decipher your data. Therefore, you can trust mobile wallets with your personal and financial information, as the implemented security measures make this payment method more secure than using cash or debit/credit cards.

Here are the key security benefits of mobile wallets:

1. Tokenisation:

Mobile wallets employ tokenisation, a technique that conceals your bank or credit card account details. Instead of transmitting your credit card information, the digital wallet assigns a random identification number, known as a token, to your purchase.

2. Encryption Technology:

Mobile wallets also utilise encryption technology for every transaction. This technology scrambles your financial information, making it significantly more difficult for hackers to access your personal data.

3. Passwords:

Furthermore, you have the option to set up a password and enable two-factor authentication within your digital wallet. Alternatively, you can use biometric features like Face ID or Touch ID on smartphones to provide an additional layer of protection for your financial information. In the unfortunate event of your phone being lost or stolen, your password and biometrics act as the initial defence against unauthorised access. This security advantage is unique to digital wallets and not present with physical cards.

Here are some other benefits of using mobile wallets over cash and plastic cards:

1. QR-enabled Technology:

Mobile wallets utilise QR (Quick Response) technology to enable seamless and efficient transactions. Users can simply scan the QR code presented by the merchant using their digital wallet app, eliminating the hassle of entering lengthy card numbers or payment details. This streamlined process enhances convenience and efficiency.

2. Convenience:

Mobile wallets simplify the process of paying for essential services such as electricity, gas, and mobile phone bills. Beyond these everyday uses, digital wallets offer the convenience of booking flights, train tickets, and various other services. Users can take advantage of features like alerts and auto-payment options to ensure timely payments. This enables efficient management and payment of a wide range of expenses, making the overall experience quick and convenient.

3. User-friendly:

E-wallets are specifically developed to prioritise user-friendliness and security. They provide a straightforward and user-friendly interface, enabling users to oversee and monitor their transactions effortlessly. Mobile wallets empower users to conveniently carry out a range of tasks, including transferring funds, depositing money into their wallet, checking their balance, and performing other related functions.

4. Customer Support:

The availability of 24x7 customer support enables customers to connect with a mobile wallet company in real time, facilitating inquiries and addressing concerns related to products or services. This streamlined communication enhances the overall customer experience and enables businesses to deliver prompt and efficient support to their customer base.


Mobile wallets provide individuals with the ability to conveniently make payments for everyday services using their smartphones. By incorporating advanced encryption and security measures, utilising a mobile wallet can actually offer a higher level of safety compared to traditional plastic cards and cash.


KETKI JADHAV is a Content Writer at PersonalFN since August 2021. She is an MBA (Finance) and has over seven years of experience in Retail Banking. Ketki specialises in covering articles around banking, insurance, personal finance, and mutual funds and has been doing it for over three years now.

Disclaimer: Investment in securities market are subject to market risks, read all the related documents carefully before investing.

Disclaimer: This article is for information purposes only and is not meant to influence your investment decisions. It should not be treated as a mutual fund recommendation or advice to make an investment decision.

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