In here we share with you a article about what is the electronic money definition & overview
Table of Contents
- What is e-Money?
- Electronic Money: A Brief Overview
- Pros and Cons of Electronic Cash
- Electronic Money Transfers
- Electronic Money is the Future
What is e-Money?
Electronic money (e-money) is broadly defined as an electronic store of monetary value on a technical device that may be widely used for making payments to entities other than the e-money issuer. The device acts as a prepaid bearer instrument which does not necessarily involve bank accounts in transactions.
Electronic Money: A Brief Overview
E-money products can be hardware-based or software-based, depending on the technology used to store the monetary value.
In the case of hardware-based products, the purchasing power resides in a personal physical device, such as a chip card, with hardware-based security features. Monetary values are typically transferred by means of device readers that do not need real-time network connectivity to a remote server.
Software-based products employ specialised software that functions on common personal devices such as personal computers or tablets. To enable the transfer of monetary values, the personal device typically needs to establish an online connection with a remote server that controls the use of the purchasing power. Schemes mixing both hardware and software-based features also exist.
ECB statistics on electronic money do not distinguish between hardware-based and software-based e-money.
Directive 2009/110/EC of the European Parliament and Council of 16 September 2009 on the taking up, pursuit and prudential supervision of the business of electronic money institutions established a new legal basis for e-money issuance in the European Union.
Article 2(1) of the Directive defines an “electronic money institution” as a legal person that has been granted authorisation to issue e-money. Furthermore, according to Article 2(2) of the Directive, “electronic money” means “electronically, including magnetically, stored monetary value as represented by a claim on the issuer which is issued on receipt of funds for the purpose of making payment transactions […], and which is accepted by a natural or legal person other than the electronic money issuer”. Credit institutions, as well as other financial and non-financial institutions, may issue e-money.
In order to align the ECB’s monetary financial institution (MFI) balance sheet statistics with the new definitions, Regulation ECB/2008/32 was amended by Regulation ECB/2011/12 and Guideline ECB/2007/9 by Guideline ECB/2011/13. Data complying with the revised reporting scheme are available as of the reporting period December 2011.
Data on e-money issued by euro area MFIs start in September 1997, while national data may start later depending on their date of availability. As a consequence, as statistical developments are affected by changes in the reporting population, statistical developments of euro area aggregates are affected by changes in the number of euro area countries for which e-money statistics are available.
Aggregated total issuance by euro area MFIs is available on a monthly basis, while national issuance by all electronic money institutions is available only annually.
The amount outstanding of e-money issued by euro area MFIs is included in the item “overnight deposits” on the MFI balance sheet.
Pros and Cons of Electronic Cash
E-Cash is an internet-based system that facilitates the transfer of funds anonymously. Similar to credit cards, E-Cash historically has been free to users, while sellers have paid a fee. it is a system of purchasing cash credits in relatively small amounts, storing the credits in your computer, and then spending them when making electronic purchases over the Internet. Digital cash can also be stored on an electronically sensitive card.
Pros of E-Cash
-The customer is a convenience because customers do not have to bring the change with them E-cash is either in an E-Cash account waiting to be drawn upon, or is conveniently loaded onto a credit card size.
-For the merchants, E-Cash allows access to a global market not restricted and controlled by local currencies. The integration of ordering and payment collection systems also offers enormous operational efficiency. E-cash can also be programmed to restrict or limit the types of purchases made, unlike paper money.
–The online electronic cash systems that are operated through the Internet, provide convenience to the user and the banker. The online system can be accessed through the Internet from anywhere in the world. Hence, the user does not have to actually go to the bank to transact any business.
– online shopping is the shopper can sit at home and purchase the goods he wants, with the help of a credit card. The ‘smart’ cards can also be restricted to specified payments. For example, the parents of a student studying in a far-off university can charge his smart card that can be used only for paying tuition fees.
Cons of E-Cash
– only consumers with PCs would have ready access to use it, while those without, many low-income consumers would not.
-it may be less secure than bank money, given that money stored on an electronic wallet could be lost forever should the card is damaged.
–Fraud is the primary concern when it comes to e-cash, including those making counterfeit digital money that is difficult to distinguish from legitimate money.
-Any type of hacking that results in the theft of e-cash could mean that the fiduciary responsibility may land on your shoulders, particularly if doing so has put you in a position of non-compliance where fees and penalties could also be added to that burden.
-More importantly is the governments need to monitor money flow and trace criminal activities. These problems need to be addressed and resolved in order to gain consumers and government trust. With the traditional system of money exchange.
-Money laundering and tax evasion could proliferate in stateless systems as criminals use the untraceable cyber dollar to hide assets offshore.
Electronic Money Transfers
An electronic funds transfer is the electronic transfer of money between people, banks and companies. This payment technology is used to pay bills, send money to friends and family and compensate workers each payday.
EFT payments are a speedier alternative to physical payment methods like cash and checks. Direct deposit, credit card transactions, ATM transactions, electronic checks and phone payments are all types of EFT payments.
Electronic Money is the Future
The horse and buggy didn’t survive the advent of the automobile. Likewise, banknotes and coins aren’t going to survive the dawn of digital money. The advantages of the newer technology far outweigh the disadvantages. The transition will be well worth it.