Semi-closed and closed wallets- The difference

A wallet is a payment service that allows people to send and receive money via a mobile device or a desktop computer at no cost to the sender or receiver. An E-Wallet, on the other hand, allows you to store numerous credit card and bank account details in a secure environment, eliminating the need to enter account information when making a payment. Once you’ve registered and created an E-Wallet profile, you’ll be able to make payments faster and with less typing. A prepaid digital wallet is a type of electronic gadget that allows users to conduct electronic transactions. This can include using a computer to purchase things online or using a smartphone to purchase at a store. PayTM, PayU Money, Mobikwik, Citi Master Pass, ICICI Pockets, and others are among India’s top 10 mobile wallet firms.

What are the types of digital wallets or e-wallets in India?

Open wallets: They are issued by banks or institutions affiliated with banks. Customers using these wallets can use them for transactions that are permitted with a semi-closed wallet, such as bank withdrawals and TMS & Transfer of Funds. Master Card, Visa Card, and other open wallets are examples.

Closed Wallet: A company that sells products and/or services can create a closed wallet for its customers. Customers with a closed wallet can only utilize the funds held in the wallet to execute transactions with the wallet’s issuer. Returns, cancellations, and refunds are all gathered in the wallets. Amazon Pay, for example, is a closed wallet.

Semi-closed wallet: Customers can make transactions at designated places and businesses using a semi-closed wallet. Although the coverage area of semi-closed wallets is limited, they may be used for both physical and online purchases. However, to accept payments through mobile wallets, businesses must execute agreements or contracts with the issuers. Paytm, Freecharge, Mobikwik, and other semi-closed wallets are examples.

Following are the advantages of open wallet, semi-wallet and closed wallet

• Open Wallet: It may be used for cash withdrawals, swiping cards to purchase goods or services, and mobile and online banking.
• Closed Wallet: Cashback and refunds; purchases of goods and services.
• Semi-Closed Wallet: Used to purchase items from connected merchants and to transfer funds amongst wallet holders.

Let’s take a better view of them

Closed wallet

E-wallets have been around for a while, and their popularity has been growing at a rapid pace. In the e-commerce business, digital wallets have nearly replaced payment banks. A closed wallet is a fantastic mechanism for building client loyalty by offering reward-based cashback and also crediting money in response to rejected orders by requiring consumers to utilize the money to acquire products or services offered by the issuer. Closed wallets are wallets that are provided by a company to a customer for the sole purpose of purchasing products and services from that firm. Amazon Wallet is one example.

Semi-closed wallet

Semi-closed wallets allow users to purchase and send virtual funds to other users in the same wallet network. A semi-closed wallet also allows you to transfer a portion of your wallet balance to your bank account. In India, semi-closed wallets are quite popular. These wallets make online purchasing easier while also giving a high degree of payment security. These wallets allow for quick transactions and seamless returns. Another element that adds to the concept’s success is its broad service coverage.

Difference between closed wallet and semi-closed wallet

Closed wallets are those that enable the purchase of products and services from a single seller. They do not have a cash withdrawal or redemption option.

• A closed wallet is a wallet service given by service providers to their clients or users that is platform-specific. It’s largely utilized by internet businesses to build a loyal customer base. It allows customers to make rapid payments and receive cash rewards;
• A closed wallet has limited applications and only accepts a limited number of clients. The Amazon wallet, also known as Mynt, is a great example of this type of wallet.

Semi-closed wallets, which have a contract with the issuer to accept payment instruments but do not allow cash withdrawal or redemption by the holder, and which allow the purchase of goods and services, including financial services, at a group of clearly identified merchant locations/ establishments.

• In a semi-closed wallet, you may purchase online and transmit money to someone else on the same network. Customers may also transfer money from their wallet balance to their legal bank account using such a wallet.
• semi-closed wallets are widely utilized in India because of their unrivaled durability and adaptability. The finest examples of this wallet are semi-closed wallets like PayTm, Oxygen, Citrus, and others. The RBI’s approval is required before launching a semi-closed wallet service in India.
• Customers in India are familiar with the concept of digital wallets. These services first appeared on the Indian market around a decade ago, and they have since attracted a large number of customers. E-wallets are widely utilised in the e-commerce business and have shown to be a viable alternative to traditional payment methods.
• An open, closed, or semi-closed wallet can be used to conduct transactions both offline and online, including using online services, purchasing products online, receiving financial services, paying fees, and so on, through or to merchants who have a legitimate contract with the issuer to accept payment instruments.

The four types of prepaid payment instruments that can be issued in the nation are as follows:

• Instruments of payment in a closed system
• Instruments of payment in a semi-closed system
• Payment instruments with a semi-open system and payment instruments with an open system

Payment instruments issued by commercial establishments for usage solely at their businesses are known as closed system payment instruments. Cash withdrawal or redemption is not possible with these instruments. Free charge credit, Ola money, and so on are examples.

However, these-

Payment instruments with a closed system are those that can only be redeemed at a limited number of clearly designated merchant locations/ businesses that have signed a contract with the issuer to accept the payment instrument. The possessor is unable to withdraw or redeem cash from these gadgets. PayTM is an illustration.

Conclusion

A digital wallet, often known as an e-wallet, is a software-based system that secures clients’ or customers’ payment information and passwords for various online payment methods and websites. With near-field communications technology, customers may complete purchases quickly and simply using an e-wallet or digital wallet. Mobile payment systems, which allow customers or users to pay for items using their phones, can be used in conjunction with digital wallets. Digital coupons and information can also be stored in an e-wallet. Open, closed, and semi-closed wallets are the three types of digital wallets.

To provide such services to clients, one must first get a Reserve Bank of India Prepaid Wallet License.