Saturday, July 4, 2009

Electronic Currency

Electronic currency also known as electronic money, electronic cash, digital currency, digital money, or digital cash. It refers to money which is exchanged only electronically. Typically, this involves use of computer networks, the Internet and digital stored value systems. This is a system of debits and credits, used to exchange value, within another system, or itself as a stand alone system, online and offline. Electronic Funds Transfer (EFT) and direct deposit are examples of electronic currency.

The online form of electronic cash allows for the completion of all types of Internet transactions. While offline form is a digitally encoded card that could be used for many of the same transactions. The primary function of electronic currency is to facilitate transactions on the Internet and its reality is slightly more complicated and makes transactions both secure and private. Electronic currency truly globalizes the economy as users can download money into their cyber-wallet in any currency desired. A merchant can accept any currency and convert it to local currency when the cyber cash is uploaded to the bank account.

An extraordinary success that took place in Hong Kong (Octopus Card), which started as a transit payment system and has grown into widely used electronic cash system. Deposits work of this Octopus Card is 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.

Singapore also has an electronic currency implementation for its public transportation system (commuter trains, bus, etc), which is very similar to Hong Kong’s Octopus Card and based on the same type of card.

Digital coins are like travelers checks. It is also called “e-money” and “e-cash”, it is downloaded as “digital coins” from a participating bank into user’s computer, or an account is set up within the bank. Either the digital coins or the transactions that debit the account are transmitted to the merchant for payment. All the transactions are encrypted.

As conclusion, electronic currency combines the benefits of other transaction mediums and allows individuals to conduct transactions among each other.

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