Digital wallets: the genesis, current usage, and future use healthcare payments in India

What are digital wallets?

A digital wallet – or e-wallet – is software that enables users to make payments electronically, using a computer or mobile device. Digital wallets are primarily accessed through mobile applications and have improved safety and convenience in transactions as one need not carry cash, debit, or credit cards to make payments. In financial terms, digital wallets are a form of Prepaid Payment Instrument (PPI), which facilitates the purchase of goods and services, including the transfer of funds, against the value available on the instrument. The value available refers to the amount paid for by the user through cash, from a bank account, credit card, or other PPIs.

PPI options for digital payments have been around in India since 2002, but the use was restricted to gift cards, forex cards, meal reimbursements, etc. However, the introduction of digital wallets has led to the country’s surge in digital payments in prepaid instruments. Oxigen wallet is the first-ever e-wallet in India, launched in July 2004. In 2006, the media firm Times Group, in association with YES Bank, introduced Wallet365.com. But, the use of digital wallets picked up pace after the launch of Mobikwik in 2009. In addition, Paytm, Google pay, PhonePe, Amazon pay, Airtel money have captured the country’s digital wallet market in recent years.

There are three types of digital wallets

• Closed wallets – issued by a company to a user to buy goods and services exclusively from that company. Examples are Amazon Pay and Ola Money.
• Semi-closed wallets – users can transact with listed merchants and stores through online and offline payments. Examples are Paytm and Airtel Money.
• Open wallets – offer all features offered by semi-closed wallets and can also be used to withdraw money from ATMs. This type of wallet is issued only by banks, which have partnered with other banks.

How are digital wallets facilitating healthcare payments in India?

The evolution of digital wallets has made health finance easy, informative, and comprehensive. The COVID-19 pandemic has prompted many companies of all the industries in the country to re-evaluate the operations performed. The versatility and technological innovation backing digital wallets has contributed to helping with the payments provide access to important information to its users. Especially in the health sector, digital wallets allow the patients to self-manage their medical expenses and offer more.

An international example is M-TIBA, a digital wallet by PharmAccess and Safaricom to facilitate inclusive healthcare in Kenya. It is a three-way platform that connects patients, healthcare providers, and healthcare payers. It enables the exchange of money and data between these three parties, allowing financing within the healthcare sector.

Every kind of healthcare product and service provider in India today has options to pay through mobile wallets. We can see this in online consultation providers such as Practo and Lybrate, Apollo 247, or online pharmacies like Netmeds, MedPlus, and PharmEasy. Online booking and payment for diagnostic tests saw a 60-70% increase in tier 1 cities since the COVID-19 outbreak. Diagnostics providers also provide the option to transact through digital wallets. Digital wallets have also been used to purchase other healthcare products and essentials, from masks to health insurance policies. Thus, digital wallets have enabled fast, convenient, and secure payments for healthcare in India.

What is the future of digital wallets?

Future trends in mobile wallets are the enhancement of loyalty rewards, security and simplicity, artificial intelligence, and cryptocurrency. Also, companies that have investments in mobile wallets have been devising ways to expand their reach in rural areas, which can significantly impact the country’s development. The government also has encouraged private and public partnerships to increase the volume of transactions through mobile wallets.

In May this year, the Reserve Bank of India has issued a guideline for all PPIs, including digital wallets, to become interoperable by April 2022. This regulation removed the limitation of using the amount in one wallet only on expenses made through the same wallet. Users can send money from one mobile wallet to various other wallet brands and withdraw cash from Point-of-Sale machines. This move will lead to increased acceptance and volumes for wallet providers. More importantly, this interoperability can expand digital adoption and payments as it will provide more value and ease of use for current and new customers.

Other digital payment modalities have also disrupted the financial payments landscape in India, with the Unified Payments Interface (UPI) being the largest one, perhaps. In Quarter 1 of 2021, around 1.13 billion transactions were made through mobile wallets, while UPI-based payments numbered around 2.3 billion. The value of the transactions was about INR 411.75 billion for mobile wallets and crossed INR 5 trillion for UPI. Stay tuned to this space to read more about UPI in India in our upcoming blog post!

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