How e-wallets charge fees: every step of the process
In this article we intend to help individual users and companies to understand what they should keep in mind when they use e-wallets for online shopping, trading, igaming or anything else.
We understand an e-wallet as a prepaid online account, accessed via a mobile app or a desktop, which allows a user (an individual or company) to deposit and store money (which then becomes e-money) for any future online transaction, with the option of later withdrawing it. Examples of e-wallets on the market today include Skrill, Neteller, STICPAY, EcoPayz, Payeer and others.
Flow of transactions for e-wallets
Here is an e-wallet process diagram, showing user-to-merchant transactions and vice versa. For user-to-user transactions the process looks the same. The process flowchart looks very similar across all e-wallets, but there are differences in the details. Consider the example of the STICPAY e-wallet:
Authorisation
To sign up, the user or merchant creating the e-wallet account is usually required to submit documents proving their identity. Sometimes, for instance, STICPAY, e-wallet allows unverified clients proceed a limited amount. The list of required documents depends on the platform but normally includes:
For users: proof of legal identity (driving license, passport, etc.), proof of address (government issued residential registration, etc.).
For merchants: certificate of incorporation, company proof of address and corporate structure.
Authorisation fees: during the account submission stage there is usually no fee charged by e-wallets.
Deposit
After your identity has been approved, it’s time to deposit money for further transactions. Each e-wallet has its own base currency. The base currency of an e-wallet acts as the default currency. When a user converts money, their local currency is calculated against the base currency.
Users can open e-wallet accounts in local currencies. For example, Skrill and Neteller have 38 and 36 local currencies respectively, while STICPAY offers 25 and ecoPayz offers 53. There are still e-wallets with single-currency accounts, for example, UPayCard.
Furthermore, each e-wallet offers its own range of deposit methods, normally including the following: local and international bank wire; Visa and Mastercard; crypto; other e-wallets; and prepaid cards.
Deposit fees:
- The service fees charged by e-wallets for deposit transactions depend on the deposit method chosen. For instance, Neteller and Skrill are relatively large providers and offer the same rate for all methods — 2.5% and 1% respectively. Smaller e-wallets such as STICPAY offer a variable rate: 1% for bank wire and crypto; 3.85% for Visa and Mastercard 3.85%; and 1.5% for UnionPay.
- Bank wire service fee: users choosing this payment method should be aware that local and international banks might charge their bank service fee. E-wallets do not normally cover this cost.
- Conversion fee: when making a deposit, users may be charged an e-wallet conversion fee if the currency of the account they are making a deposit from is different from the base currency of the e-wallet. Users will also be subject to the exchange rate set by the payment platform they are using to complete the deposit (e.g. Visa or Mastercard). E-wallet conversation rates are different from one e-wallet to another and depend on the agreement in place with the payment provider. For instance, Skrill and Neteller charge conversion fees that are almost two times higher than STICPAY. In such cases local bank wires can be an effective option, as they are mostly fulfilled without a conversation rate being charged.
Internal transactions
After making a deposit the user or merchant can make transactions internally in the e-wallet ecosystem, sending or receiving money from user to user, from user to merchant or vice versa.
Internal transaction fees:
- Internal send and receive fees vary between e-wallets and depend on the business model of each e-wallet. The exact fees are commercially sensitive, but users can guess approximately using calculators on e-wallet websites.
- A currency conversion fee can also be charged at this stage if the deposit currency is different from the recipient’s account currency.
Withdrawals
When a user or merchant wants to withdraw money from an e-wallet account, the fee will depend on the method of withdrawal. The mechanism is essentially the same as with deposits, but the fee amounts are different.
Withdrawal fees:
- Withdrawal fees depend on the method of withdrawal and the agreements in place between the e-wallet and the payment provider. They can vary from 0% to 8%.
- The procedure is the same as with deposits when it comes to bank wire service fees and conversion rates.
It is important to pay attention to additional fees on e-wallet platforms. For example, Skrill and Neteller charge users for their activity on the platform. Accounts are free for personal use as long as you log in or make a transaction at least every 12 months. STICPAY does not charge inactivity fees.
Summary, type of fee: deposit transaction fee, withdrawal transaction fee, internal transaction fee, conversion fee, bank wire service fee
Each e-wallet has its own business model and technical ecosystem. The fees charged depend on these structures too. For example, some e-wallets have their own technological resources to support the platform, while others rely on third parties. Furthermore, e-wallets have different contractors who fulfil local bank wires, serve different country groups, and have different agreements in place for how deposits are made and, accordingly, the kinds of fees that are charged.
