a brief introduction to e/mobile wallets and how they work€¦ · e/mobile wallets and how they...

A Brief Introduction toe/mobile Wallets

and how they work

Faisal Khan (Payments Consultant) http://about.me/faisal.khan (c) Copyright 2013-2014. Faisal Khan & Company. All Rights Reserved.

http://about.me/faisal.khan

An electronic or mobile wallet is a layer on top of the traditional bank account layer

This would be PayPal

Bank Wallet Company User



In a traditional bank’s core banking software, branches are defined and within each branch

Core BankingSoftware



Each Branch Level then has individual bank account holders who bank at the particular branch


Branch “B”

Branch “A”Bob

Jane

Beth



A Wallet Company is assigned a Branch Status and it has its own eco system of users in it


Branch “B”

PayPalBob

Jane

Beth

Branch “A”



Every transaction that Jane does within the PayPal “Branch” is internal to PayPal and any transaction

she does external to her PayPal Branch is classified as an external transaction


PayPal

Jane



Any money that Jane transfers to her “PayPal” account is essentially held by the Bank that PayPal is working with and the custodian for the

money is the Bank (since PayPal is not a Bank). PayPal has all financial benefits of the money held in its sub-branch account with the bank they

work with (interest earning, etc.)


PayPal

Jane

Jane’s Money

PayPal has an IOU for Jane’s

Money Who has my money?



So the earlier slide we saw of the Wallet Company would look something like this…

Bank Wallet Company PayPalUser



So the bank can issue to PayPal, Debit Cards (since the money is with the Bank). These Debit cards are branded for PayPal and given to the users. PayPal can even

issue a credit card, since both PayPal & the Bank have enough credit score information about the user to take the risk. The risk would be underwritten by PayPal.

Bank Wallet Company PayPalUser



Any transfer between two PayPal accounts is internal and has no fees associated with. PayPal just makes an intra-bank funds transfer in its

banking software.


Branch “B”

PayPalBob

Jane

Beth

Transfer between two accounts



When you attach your Bank Account to your PayPal account, you are essentially giving PayPal permission to do ACH transaction from your external bank account and keep that reference on file.

Any money you add to your PayPal account from your bank is deposited and held by PayPal’s Bank. Any money you withdraw from your PayPal account to your Bank Account is essentially an ACH

deposit into your bank by PayPal’s bank.

User’s ExternalBank Account

PayPalBob

ACH

PayPal’s Bank



The front-end interface to the clients can be electronic or mobile or a combination of both. This is just a method of convenience. The Wallet Company’s wallet software is

what keeps your accounts, whilst the Bank keeps your money.

Bank Wallet Company

PayPalUser



a brief introduction to e/mobile wallets and how they work€¦ · e/mobile wallets and how they...

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