J.S.S.Y's E-Commerce World

Introduction on Electronic Currency


Transaction, buying and selling have been brought closer to us and made much easier with online means of payment technique. Electronic currency is also known as electronic money, digital cash, e-money and more. This involves the use of computer networks, the internet and digital store value systems. There are a variety of ways in which online transaction can be carried out without much hassle. Besides purchasing and selling products, one can also carry out major business payments and other transactions using e-money. Examples of electronic currency are direct deposit and Electronic Fund Transfer (EFT).






The picture above shows how EFT transactions are carried out




Types of Electronic Currency

There are two types of electronic currency which are:

• Identified e-money contains information revealing the identity of individual who originally withdrew the e-money from the bank. A transaction path of e-money can also be created, which means the bank is able to keep track of movements of e-money through the e-market. This is important for the banks and other relevant authorities to detect any fraud or irregularities, for instance, money laundering. Examples of this kind of e-money are PayPal and WebMoney.


• Anonymous e-money is where once the e-money is withdrawn from the bank, the identity of the person who uses the money will be unknown and the bank cannot track the e-money's movement through the e-market, for example, hard cash. This feature can be misused by certain irresponsible parties who are carrying out illegal transactions.

Advantages of Electronic Currency

• Reduces company's expenses because transferring digital money through the internet is cheaper than using conventional bank systems, since there is no need for the use of extra forms or hire-teller.


• Makes transactions procedures easy as there is no need to fill up forms or make telephone inquiries to the bank. So the number of procedures to follow are lesser compared to the traditional method.


• Promotes fast transaction because there is real time coordination of information and transaction without the needs of intermediaries services. If the process reqiures services of the bank, it will take a longer time especially if the bank is going through peak hours.
  
• Secured payment because e-money banks use SET-enabled servers and SSL-enhanced browsers (others) that provides more secured online payment. This build customers' confidence in utilizing electronic currency.

Disadvantages of Electronic Currency

• Communication overheads: Security and anonymity can cause bottlenecks to the system which can happen at times during real-time verifications. This may cause the system to slow down.


• Massive databases: The bank will have to main a detailed and confidential database because it involves a lot of highly private and confidential information of its customers.


• Synchronization: The bank need to synchronize its server everytime transaction is made. It will be insanely impracticable to maintain.

Reference links:

http://www.buzzle.com/articles/advantages-and-disadvantages-of-electronic-cash.html

http://en.wikipedia.org/wiki/E-money