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Electronic money is a new expression the meaning of which is not stable. It can refer to different realities depending on the context (legal or not, historical or actual, monetary theory...).
However, the underlying principle of electronic money involves the use of computer networks, the Internet and digital stored value systems. Examples of electronic money are bank deposits, electronic funds transfer (EFT), direct deposit, payment processors, and digital currencies such as Bitcoin.
Electronic money definitions
LawSince 2001, the European Union has implemented a directive "on the taking up, pursuit and prudential supervision of the business of electronic money institutions" last amended in 2009.
However, doubts on the real nature of the EU Electronic money have arrised since calls have been made in favour of a merger of Payment institutions from Payment Services Directive and Electonic money institutions from homonym directive. Indeed, such a merger could mean that electronic money is in reality of the same nature as bank money or scriptural money.
Monetary theory and history of monetary ideasMonetary classfications usually distinguish different types of money : commodity money, Fiat money, ... Electronic Money would be a different form of money altogether.
Electronic money systems around the worldWhile electronic money has been an interesting problem for cryptography, to date, the use of e-money 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 money system. London Transport's Oyster card system remains essentially a contactless pre-paid travelcard. Two other cities have implemented functioning electronic money systems. Very similar to Hong Kong's Octopus card, Singapore has an electronic money program for its public transportation system (commuter trains, bus, etc.), based on the same type of (FeliCa) system invented by Sony and first deployed in Tokyo and Osaka, Japan. The Netherlands has also implemented a nationwide electronic money system known as Chipknip for general purpose, as well as OV-Chipkaart for transit fare collection. In Belgium, a payment service company, Proton, owned by 60 Belgian banks issuing stored value cards, was developed in 1995.
A number of electronic money systems use contactless payment transfer in order to facilitate easy payment and give the payee more confidence in not letting go of their electronic wallet during the transaction. The idea of a future with only electronic money has been met with controversy.
Electronic money systems
Centralised systemsMany systems—such as PayPal, WebMoney, Payoneer, cashU, and Hub Culture's Ven—will sell their electronic currency directly to the end user, but other systems only sell through third party digital currency exchangers.
In Kenya, the M-Pesa system is being used to transfer money through mobile phones.
Some community currencies, like some local exchange trading systems (LETS) and the Community Exchange System, work with electronic transactions.
Decentralised systemsDecentralised electronic money systems include:the currency
- Ripple monetary system, a monetary system based on trust networks.
- Bitcoin, a peer-to-peer electronic monetary system based on cryptography.
|This section is incomplete. (September 2013)|
Hard vs. soft electronic currenciesA hard electronic currency is one that does not have services to dispute or reverse charges. In other words, it only supports non-reversible transactions. Reversing transactions, even in case of a legitimate error, unauthorized use, or failure of a vendor to supply goods is difficult, if not impossible. The advantage of this arrangement is that the operating costs of the electronic currency system are greatly reduced by not having to resolve payment disputes. Additionally, it allows the electronic currency transactions to clear instantly, making the funds available immediately to the recipient. This means that using hard electronic currency is more akin to a cash transaction. Examples are Western Union, KlickEx and Bitcoin.
A soft electronic currency is one that allows for reversal of payments, for example in case of fraud or disputes. Reversible payment methods generally have a "clearing time" of 72 hours or more. Examples are PayPal and credit card.
A hard currency can be softened by using a trusted third party or an escrow service.
- Automated Clearing House (ACH)
- Credit card
- Debit card
- Digital wallet
- E-commerce payment system
- Electronic Money Association
- Payment system
- "Directive 2009/110/EC of the European Parliament and of the Council of 16 September 2009 on the taking up, pursuit and prudential supervision of the business of electronic money institutions amending Directives 2005/60/EC and 2006/48/EC and repealing Directive 2000/46/EC, Official Journal L 267 , 10/10/2009 P. 0007 - 0017". Retrieved 30 December 2013.
- Good, Barbara Ann (2000). The changing face of money: will electronic money be adopted in the United States?. Taylor & Francis. pp. 80–81. ISBN 978-0-8153-3809-3. Retrieved 28 December 2010.
- Bradley, Stu (21 March 2012). "The Future of Digital Money". KashFlow. Retrieved 14 September 2013.