In today’s time, if we talk about money transactions, the first names that come to our mind are UPI, Paytm, PhonePe or PayPal. But the basic concept behind all this is digital wallet and e-wallet. Often people consider both the words to be the same, but in reality they have different meanings and uses.
In this blog, we will understand in detail what digital wallet and e-wallet are, what is the difference between them, how they work and how useful they can prove to be for us.
What is a digital wallet?
A digital wallet, as the name suggests, is the digital form of your purse or wallet. Just like your physical wallet holds your cash, cards, and important documents, a digital wallet works to store your digital currency, card information, loyalty cards, and even your identity documents. Its special feature is that it has no physical existence. It is just a software application or a cloud-based service.
Think of it this way: when you log in to your mobile banking app and see your balance there, it is actually a digital wallet linked to your bank account.
Similarly, your spot wallet or funding wallet on cryptocurrency exchanges like Binance or Coinbase, or the balance you see on PayPal – all these are different examples of digital wallets.
Its main purpose is to enable you to make online transactions, payment transfers, shopping, and other financial transactions in a secure and convenient way.
What is an e-wallet?
Now let’s talk about e-wallet. E-wallet, whose full name is ‘Electronic Wallet’, is actually a sub-set or a type of digital wallet. It can be called a kind of digital storage, where you store your money digitally. The only difference is that the term e-wallet is often used for specific applications that work on a pre-paid system.
This means that to use an e-wallet, you first have to add money to it. You can transfer funds to this wallet using your bank account, UPI [Unified payment Interface], or debit/credit card.
Once the funds are loaded, you can use it for various purposes, such as: Paying bills (electricity, water, mobile), Recharge mobile or DTH, Paying while shopping online, Transferring money to another person etc etc.
Popular apps like Paytm, PhonePe, Amazon Pay are great examples of e-wallets.
Major types of Digital wallets
Digital wallets are not just of one type. They are divided into many types based on their functionality and features. Let’s understand them one by one.
Mobile Wallets: These are smartphone applications that we use to make payments. They are very easy to use. Wallets like Apple Pay, Google Pay, Samsung Pay fall into this category. They often make contactless payments possible using NFC technology.
Web Wallets: These are wallets that are mainly accessed through a web browser. Services like PayPal, Amazon Pay are the main examples of this. You can use them from any device, just with the help of an internet connection.
Cryptocurrency Wallets: These wallets are specially designed to store and manage digital currencies such as Bitcoin, Ethereum etc. These are built on different exchanges (such as Binance, Coinbase) or blockchain. Your dollars or bitcoins are stored inside them.
Decentralized Wallets (DeFi Wallets): This is an advanced and secure form of crypto wallet. Their biggest feature is that no one institution or company has any control over them.
Only you have access to your wallet, which is in the form of some special keywords (seed phrase). MetaMask, Trust Wallet are examples of this. The world may collapse, but if you have your Seed Phrase, you can access your wallet anywhere in the world.
Bank Wallets: This is probably the most common and traditional type. When you access a mobile app or internet banking portal for your bank account, the balance you see there is your bank wallet.
You can use it for all kinds of transactions like fund transfer, bill payments, recharges, and online shopping.
Major Types of E-wallets
E-wallets are usually divided into three categories:
1. Open e-wallets: These wallets are issued by banks and their biggest feature is that not only can you transfer money from them but you can also withdraw cash from ATM. That is, it is considered the most flexible option in a way.
2. Semi-closed e-wallets: You can use them to transfer money and make online or offline payments, but cash withdrawal is not possible from them. For example, PhonePe Wallet and Freecharge Wallet fall in this category.
3. Closed e-wallets: These wallets are limited to the services of the company that has issued them. That is, you cannot use them anywhere outside. For example, Amazon Pay Wallet works only on the Amazon platform.
How does a digital wallet work?
The way a digital wallet works is very simple.
- First of all, your money is stored in digital format.
- It is linked to your bank account, cards or crypto balance.
- Whenever you make a payment, this wallet debits money from your account in the backend and transfers it to the receiver’s account.
Some digital wallets use technologies like NFC (Near Field Communication) and tokenization which keeps your data safe. Here you can know more about tokenization.
How does an e-wallet work?
First of all, you have to add money to the e-wallet. There are options for:
- Bank Transfer
- UPI
- Debit/Credit Card
Once you add money, you can use it for:
- Bill Payments
- Mobile/DTH Recharges
- Shopping or Ticket Booking
- Sending Money to another user
The record of every transaction gets saved in the e-wallet so you can easily view your spending history.
Quick Comparison: Digital Wallet vs. E-Wallet
| Points | Digital Wallet | E-Wallet |
|---|---|---|
| Basic Meaning | A wallet that has no physical existence but it stores your money or value digitally. | An electronic wallet where you add money first and then use it for payments and transactions. |
| Coverage | Includes bank wallets, mobile wallets, crypto wallets, etc. | Mainly limited to payments and fund transfers. |
| Usages | Shopping, fund transfers, storing crypto, banking services. | Bill payments, recharges, shopping, and ticket booking. |
| Source of Money | Directly linked to bank account, crypto exchange, or cards. | Requires you to add money first, then use it. |
| Types | Mobile wallet, web wallet, crypto wallet, decentralized wallet, bank wallet. | Open e-wallet, semi-closed e-wallet, closed e-wallet. |
| Control | Some are centralized (banks/exchanges), some are decentralized with no central control. | Mostly controlled by companies or banks. |
| Tracking | Not always comes with detailed history (e.g., crypto wallets only show blockchain history). | Always provides transaction history and records. |
| Examples | Google Pay, Apple Pay, Binance Wallet, Coinbase Wallet, banking apps. | Paytm Wallet, PhonePe Wallet, Amazon Pay, PayPal. |
Major benefits of using digital and e-wallets
These digital payment solutions have made our lives much easier. Let’s know some of their major benefits:
Ultimate Convenience: You do not need to carry a heavy purse or cash with you. Your phone is your wallet. You can transact from anywhere, at any time.
Saves Time & Cost: There is no need to stand in long lines at the bank or ATM. This not only saves your precious time, but also saves travel expenses.
Easy Tracking and Management: In these wallets, you get to see the history of all transactions. You can easily track where you spent the money, when and to whom you sent it. This proves to be very helpful in making a monthly budget.
Security: There is no fear of cash being stolen or lost. Most wallets use biometric security like PIN, password, fingerprint or face ID. Apart from this, technology like tokenization keeps your actual card number safe.
Offers & Cashback: Digital payments often offer cashback, discounts and attractive offers from various platforms, which are not available when paying in cash.
Conclusion
Both digital wallets and e-wallets have become a necessity. While digital wallets are a broad concept that includes bank wallets, mobile wallets, and crypto wallets but e-wallets focus specifically on payments and fund transfers.
If you need to make everyday transactions like shopping, bill payments, or mobile recharges then e-wallets are most useful for you. But if you want to make digital transactions on a larger scale, like banking or cryptocurrency then you will need a digital wallet.
After all, both of them are playing an important role in making our lives cashless and convenient.
Hopefully, through this blog post, you have understood the difference between digital wallet and e-wallet and their working method. If You have any question, feel free to ask in comments.
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