Saturday, June 28, 2008

Electronic Currency

The Evolution...

Over the years, money as we know it has been undergoing transformation. The shape and form of money has changed from precious metals to metal coins and paper money with no intrinsic value and today it presents us with a formless form in the name of digital or e-money. Electronic currency is also known as e-money, electronic cash, electronic money, digital money, digital cash or digital currency.

Electronic currency allows consumers to pay for goods and services by transmitting a number from one computer to another. These numbers function much like the serial numbers on "real money." They are unique, and represent a specific amount of actual cash. Unlike credit-card transactions, electronic-cash transactions are anonymous. E-cash works just like paper cash. Once it is withdrawn from an account it does not leave a trail of digital crumbs. E-cash by its nature is portable and therefore more convenient for mobile commerce (Internet-capable cell phones and personal digital assistants).

The Pros

1) Convenience-With the introduction of online banking, debit cards, online bill payments and internet business, Debit cards and online bill payments allow immediate transfer of funds from an individual’s personal account to a business’s account without any actual paper transfer of money. This offers a great convenience to many people and businesses alike.

2) Ease of transter-Banks now offer many services whereby a customer can transfer funds, purchase stocks, contribute to their retirement plans and offer a variety of other services without having to handle physical cash or cheques.Customers do not have to wait in lines, and this provides a lower-hassle environment.

The Cons

1) Fraud-over digital cash has been a pressing issue in recent years. Hacking into bank accounts and illegal retrieval of banking records has led to a widespread invasion of privacy and has promoted identity theft.

2) Failure of technology- There is also a pressing issue regarding the technology involved in digital cash. Power failures, loss of records and undependable software often cause a major setback in promoting the technology.

3) Possible tracking of individuals and loss of human interaction- There is a fear that the use of debit cards will lead to the creation by the banking industry of a global tracking system. Some people are working on anonymous ecash to try to address this issue. The issue of providing anonymity to users itself introduces more problems, where there is a possibility that a fully anonymous digital cash system could induce people to commit the “perfect crime” to occur, where a criminal uses someone else’s electronic cash to make a payment, but cannot be traced.

Electronic Cash Payment Systems

Examples of providers:

Pay Pal- an e-commerce business allowing payments and money transfers to be made through the Internet.
eCash- a computer generated system which allows items to be purchased by credit card, check or by money order, providing secure on-line transactions
and processing.
First-E – an
Internet-only bank.


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