E-Commerce Blog: Electronic Currency

Electronic money (also known as e-money, electronic cash, electronic currency, digital money, digital cash or digital currency) refers to money or scrip which is exchanged only electronically. Typically, this involves use of computer networks, the internet and digital stored value systems. Electronic Funds Transfer (EFT) and direct deposit are examples of electronic money. Also, it is a collective term for financial cryptography and technologies enabling it.

Advantages and disadvantages of electronic money

Advantages.

Issuer advantages:Electronic currency works in a much simpler and cheaper way,which makes it ideal for micro-payments and thus much more attractive for credit companies. The low cost of electronic currency is that it does not require the huge amount of expensive infrastructure that other systems do, in particular credit cards,because the value in a card can be transferred into a reader without need to contact a network facility to corroborate the payment, the transaction can be performed locally and the money will stay in the reader until later download.

Consumer convenience: Electronic currency could prove very convenient for consumers. Because it involves advanced charge of money from the owner’s bank account, almost anybody can be supplied with a smart card, as there is no risk to the issuer. Consumers will also find it useful to have to do without carrying cash for small transactions, such as bus fares.

Increased consumer confidence: Because a smart card only holds the amount of money that the bearer has placed on it, consumers will be more willing to use it to purchase over the Internet without fear of somebody else misusing the payment information, as happens with credit card fraud. Some of the schemes are also being issued with a built in locking code, which will allow users to lock the cash on a card, making sure that if the card gets lost or stolen another person will not be able to use the money.

Payer anonymity: The payer can remain anonymous, as is the case with paying in cash.

Disadvantages.

Although the potential advantages for electronic money are considerable, there are still several problems that should provide a healthy dose of skepticism for this payment system.

Consumer confusion: With three schemes competing to become the electronic currency standard, there is a real possibility of the whole system becoming too complicated for users. One of the main problems with too many schemes would be that the user may not be able to use the card everywhere, which is what would be expected of a system that is meant to replace physical currency.

Regulatory maze: The regulation for electronic currency is still unclear in some vital points, which must be answered before the system is made more widely available.

Security: The main concern that must exist in the minds of those interested in the implementation of electronic cash must be security. As happens with physical cash, widespread counterfeiting of electronic currency could have huge implications for the economy.

Information above are obtained and refined from: