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Electronic money

From Academic Kids

Electronic money (or digital money) refers to cash and associated transactions implemented using electronic means. Typically, this involves the use of computer networks (such as the Internet) and digital stored value systems. Electronic Funds Transfer (EFT) is an example of electronic money. It is also a collective term for financial cryptography and technologies enabling it.

While electronic money has been an interesting problem for cryptography (see, for example, David Chaum's work), the use of digital cash to date has been relatively low-scale. One rare success has been Hong Kong's Octopus card system, which started as a transit payment system and has grown into a widely used electronic cash system. Another success is the Canadian Interac network, which, as of the year 2000, surpassed cash as a payment method at retail in Canada. [1] (http://www.interac.org/en_n2_01_milestones.html)

Contents

Electronic money and currency

Technically, electronic money can be an independent currency, just like Euro before the legal tender of Euro was introduced in 2002. However, a service provider (except banks or governments) of electronic money lacks the abilities to back the money with commodities and to persuade people to have faith in their currency and make people use electronic money like central banks or governments do (see fiat money). More commonly the electronic money is used as a non-physical form of another currency.

In the case of Octopus Card in Hong Kong, deposits work similar to banks. After Octopus Card Limited receives money for deposit from users, the money is deposited into banks, which is similar to debit-card issuing banks redepositing money at central banks.

Advantages

Most money in todays world is electronic, and tangible cash is beginning to become less and less frequent. With the introduction of internet / online banking, debit cards, online bill payments, and internet business, paper money is becoming a thing of the past.

Banks now offer many services whereby a customer can transfer funds, purchase stocks, contribute to their retirement plans, (such as the Canadian RRSP) and offer a variety of other services without having to handle the physical cash or cheques. Customers do not have to wait in lines, and provides a hassle free environment.

Debit cards and online bill payments allow for the immediate transfer of funds from an individuals personal account to a businesses account, without any actual paper transfer of money. This offers a great convenience to many people and businesses alike.

Disadvantages

Although there are many benefits to digital cash, there are also many significant disadvantages. These include fraud, failure of technology, and the loss of human interaction.

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

There is also a pressing issue in regards to the technology involved in digital cash. Power failures, loss of records, and undependable software often cause a major setback in promoting the technology.

The largest demographic in society, the Baby Boomers, have been reluctant to embrace the many advantages of digital cash. This is due to the loss of human interaction that often occurs when digital cash is used to its fullest potential. Hence, this has deterred a large segment of society from embracing the technological advantages.

Future evolution

The main focus of digital cash is being able to expend it through many means such as secured credit cards, linked bank accounts that would be generally used over an internet-means of exchange to a secure micro-payment system such as in large corporations (PayPal).

Future evolvements of networking in terms using digital cash, a company named DigiCash is on the focus of creating an e-cash system that would allow an e-cash issuer to purchase electronic coins at some value. When they are purchased they are bought under ones name and stored on their computer or under their online identity. When spending this cash, since it is linked to the e-cash company, it secures anything that is purchased in terms that it goes through the issuer at all times, therefore only the company knows your information, and will properly direct purchases to your location.

See also

External links

ja:電子マネー

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