As more consumers and businesses migrate to online shopping and digital transactions that even include multiple currencies, payment methods have had to evolve to facilitate these new preferences. One of the financial solutions that have emerged is known as ecash. This article explores the various types of products that are referred to as eCash and describes the pros and cons of using each type.
What is eCash?
In providing a simple definition of eCash, also known as electronic cash, it is a digital money product that provides a way to pay for products and services without resorting to paper or coin currency. Two models emerged for e-cash transactions:
- The online form of eCash, which was introduced by the now defunct DigiCash, worked for all types of Internet transactions.
- The offline form of e-cash involved a digitally encoded card that replaced paper money. Mondex developed and tested this model with different banks, but the company has now transitioned into the development and management of smart cards also used for financial transactions.
A Historical Context for eCash Development
eCash is an evolutionary product that has its roots in other payment concepts. Others have noted that checks were essentially the same idea because they have involved stating that an amount will be taken from one account and then placed in another.
During this process, no currency is actually transferred. Instead, banks take care of changing the amounts in both accounts to reflect the transaction. eCash removes the bank from the payment equation but essentially does the exact same thing as a check.
How eCash Works
An eCash user will download the electronic money from their bank account and store this on their hard drive. When they are ready to use the electronic cash to pay an Internet merchant or shareware provider, the same software is then used to take the amount from their eCash “wallet” and add it to the merchant’s “wallet.”
The e-cash goes through an e-cash bank so that the transaction can be verified. The merchant or shareware provider can then choose to pay their expenses with this eCashor upload it to a traditional bank account for use later. Transactions do not incur a fee except for a small amount charged by the e-cash company. This makes it ideal for smaller online transactions than any other payment method.
The Benefits of Using eCash
eCash solves some issues that developed from trying to conduct transactions across the Internet. As more discussions have emerged about paying for content on the Internet, being charged to visit a website, or agreeing to pay a download fee, there was no viable solution in place to cover such small transaction amounts. Using a credit card for a ten or twenty-five cent transaction was just not fiscally smart for businesses given the processing fees attached to these transactions.
Another issue that emerged was that shareware providers rarely got paid for what they offered because there was no viable way to do so unless they wanted to receive an offline monetary payment. eCash became a solution that was not only address this new type of transaction, but it was also cheap, secure, and private.
eCash also responds to the globalization of the economy. Now that companies and freelancers are doing business with others all over the world, eCash has provided a way to receive or send any type of currency desired.
Last, eCash also has linked offline and online payments together through the introduction of smart card technology. Money can be loaded onto these cards and then moved to other smart cards or electronic “wallets.” While previously smart card technology was just used for phone calls, the world is now using smart card technology for all types of transactions.
Changing Financial Transactions Forever
It’s clear the world of financial transactions has changed forever since the advent of eCash. Checks and paper money could be eventually replaced with completely digital payments. This will also alter how banks and other financial intermediaries are involved, delegating them to a much smaller role as just a storehouse for money, a processor and verifier, and a lender. The personal relationship with a bank will also fall by the wayside as more people turn to their computers, tablets, and smartphones for all their transaction needs.
