Request payment from clients and customers
Pay business bills, expenses, and invoices from vendors and freelancers
Use the money in your eBank or link it to your business bank account or debit card.
Split costs with business partners
Connect with customers, clients, and outsourced staff
Add a custom message with each payment to personalize the transaction
Get the money to your bank faster
Move that eCash from your Due wallet to your business bank account as quickly as one business day.
Startup is easy and free
In just minutes, you can get started with Due’s wallet.
Use Due Cash payment system with anyone
You can make, share, or receive payments from anyone in the U.S. who has a phone number or email account regardless if they are actually using the Due Cash payment system and digital wallet. All they need to do is create a Due account to claim or make their payment. Find others you know with a Due account simply by syncing your smartphone contacts.
Next-generation digital payment technology
All personal and financial data is encrypted and protected on Due’s secure servers. We work tirelessly to ensure that our security system meets or even exceeds the current security industry standards.
Our next-generation digital payment technology guards against any type of unauthorized transaction. If you believe that there has been unauthorized activity on your Due digital wallet, please contact us immediately at firstname.lastname@example.org. We are here to help you.
If you have lost your phone or believe it is being used in an unauthorized way, you can protect your Due digital wallet by visiting Passwords & Authorizations within your online account settings. Here, you can revoke access from your phone so it will log out of any active sessions within your Due digital wallet.
Only use your Due digital wallet and eCash payment system with people you know. We don’t permit merchants to make sales via Due or offer buyer or seller protection. Business usage of Venmo requires an application and explicit authorization. For more information, please see our User Agreement.
We work with innovative digital payment companies from all over the world.
We’re here to help companies just like yours transition into the digital economy. New technology has introduced new payment methods such as ecash, cryptocash, and ACH transactions. Moving payments online, including invoicing, can save time and money while enhancing your cash flow.
State of the E-cash Industry
- Purchase Transactions in 2014 vs. 2024 are generated by general purpose payment cards are projected to reach $515.42 billion by 2024.
- Global mobile payment volume in 2012 was $163.1 billion and is expected to grow to $721.4 billion U.S. in 2017.
- 80% of U.S. consumers surveyed use debit cards for everyday purchases over cash while 100% of those surveyed that were ages 18-24 used debit cards for everyday purchases.
- On a 2013 Federal Government survey that found the number of cash transactions was high for low-dollar amount transactions while higher dollar purchases were dominated by electronic payments and checks.
- As of January 2015, there are over 500 different types of cryptocurrencies – or altcoins – for trade in online markets.
- Only 10 cryptocurrencies have market capitalizations over $10 million.
The Ultimate Guide to the
The transfer of money certainly has come a long way over the centuries. We originally relied on a barter system where we exchanged some type of goods that we had personally produced-for goods which someone else produced-that we wanted or needed. For example, a farmer could trade some of his crop of rice to obtain a type of livestock-like a cow. The problem with this system was determining how much rice would be the fair amount in exchange a cow. That’s one of the reasons why we turned to the use of paper and coins as a currency. Unlike a crop or animal, paper and coin currency had a definite value attached to it that simplified the process of paying for goods and services.
Since then, the transfer of money has continued to evolve from gold and silver, to paper and coins to checks (also paper) to credit cards, and now forward to digital currency that is becoming more common in the 21st Century.
According to the Federal Reserve, it’s “estimated number of non-cash payments, excluding wire transfers, was 122.8 billion in 2012, with a value of $79.0 trillion.” But, why have people so quickly embraced the idea of using electronic cash?
For starters, electronic payments are actually much cheaper and more accurate than checks. Based on the 2015 Payments Cost Benchmarking Survey, “the estimated median cost of a check transaction is $3.00, compared with a range of between $0.26 and $0.50 per automatic clearing house (ACH) credit transaction and $1.50 for a purchasing card transaction.” Because of this significant price difference, two out of three finance professionals have stated that they will replace checks with electronic payments.
More importantly, as noted by Nina Gass, “Electronic cash was one of the first solutions to show consumers and businesses that it was safe, private, and very convenient to do transactions over the Internet.”
As technology has continued to evolve, electronic payments are seemingly becoming a way of the future that most of us use daily every time we use services like Due, PayPal, Square, or Apple Pay. In other words, eCash isn’t going to be going away any time soon. eCash will become more mainstream as more and more people get online, have access to mobile devices, and as the updated versions display continuous improvements to this electronic payment process.
Here is an informative guide to eCash. In this guide you will learn exactly what eCash is, it’s history, the components that make this system work, the great advantages, disadvantages, and current global regulations. This guide will conclude with what we can expect the future to hold for eCash.
What is eCash?
A simple definition of eCash, also known as electronic cash, cybercash, digicash, and e-money, is a digital money product that provides a way to pay for products and services without resorting to the use of paper or coin currency. Transactions can be made over the internet, email, or personal computer to another workstation-securely and anonymously.
Over the years, two common models have emerged for eCash 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 which are also used for financial transactions.
Traditionally, electronic payment systems contain one of the following basic characteristics:
- Payment by instruction. This is a credit card transaction where the payer orders their bank or financial institution to take funds from their bank account and transfer it into a payee’s account.
- Prepaid electronic cash. Essentially this is the electronic form of cash where a card or account is debited immediately and can be reloaded with electronic cash.
- On-line. This is a payment protocol between the payer and payee that also involves a third party, such as a bank or credit card.
- Off-line. This payment protocol does not involved a third party.
- Secret key. Payment protocols must be verified. With cryptography the transaction is authenticated. A secret key is where the payer and payee have shared a key that is only between them.
- Public key authentication. Unlike secret keys, this form of authentication is available to the public, such as EMV. EMV stands for Europay, MasterCard, and Visa. The company that now manages these companies is called EMVCo, with even control split between about six different companies.
- Counters. This is where a specific amount of eCash is stored on a card in the form of counters.
- Coins. Just like ordinary money, or coins, this form of eCash has a fixed denomination for each coin.
- Software-only. This is a low-cost system that can be placed on any computer in order to exchange funds electronically.
- Tamper-resistant hardware. If security is a concern, then using special hardware that stores and uses a secret key should be used.
History of eCash
Believe it or not, the idea of electronic money didn’t originate in the 20th Century. Shockingly it can be traced back to 1880 when American scientist Edward Bellamy purposed that payments be made in his book, “Looking Backwards,” with prepaid cards in settlements. While this system didn’t become a reality, it wasn’t until 1914 that there was an actual attempt to start using credit cards as a form of currency. Again, this didn’t have much of an impact until the introduction of the Diners Card in 1950. Shortly after, Visa and MasterCard began issuing credit cards.
The advancement of technology has helped electronic payments grow significantly. For example, in 1968 the exchanging of electronic data became commonplace for anyone looking to transfer money. In 1974, Robert Moreno patented technology for smart cards, which was followed by the first ATMs in the United States.
Before the decade was over, electronic terminals called, “EFTPOS” (meaning, for non-cash bank payments) were being used in the United States. Five short years later in 1984, email was being used by enterprises everywhere in the financial sector to communicate with customers.
You can’t discuss the history of eCash without acknowledging the release of the first PC by IBM in 1981. The PC made it possible to develop microelectronics, which would quickly allow for microprocessors to be installed in a credit card. However, it wasn’t until 1993 that eCash as we know it first took shape.
Dr. David Chaum, a U.S. citizen, and a brilliant mathematician, became the head of cryptography at the the Dutch national research center CWI. Dr. Chaum was responsible for the invention of secure digital cash, along with the idea of blind signatures for untraceable payments. This resulted in the founding of the first electronic payment system in the world, DigiCash. Unfortunately, DigiCash went bankrupt in 1998 and sold its assets to eCash Technologies. However, DigiCash had already left an impact everywhere in the eCash world. At one American bank the customers had already embraced the eCash idea, with 90% of its depositors using the system.
At the “Real World Crypto” conference held at Stanford University January 6, 2016, Chaum was back with information on a new plan for encryption, called PrivaTegrity which he is working on with a whole team of experts from other universities. This group of academic partners hopes to allow a system that will fully allow secret and anonymous communication, including eCash capabilities, to be totally secure and be fast enough to work as a smartphone app. It is unknown if the project is fully coded and tested. Particularly compelling was Dr. Chaum’s claim that we may be able to have a, “civil society electronically without the possibility of covert mass surveillance.”
Dr. Chaum’s DigiCash wasn’t the only company exploring the electronic cash industry in the early 90s. Mondex, a smart card electronic cash system that implemented the Stored-value card, was conceived by Tim Jones and Graham Higgins of the National Westminster Bank (RBS Group) in 1991. Over the next five years, the company worked on creating an alternative to cash by inventing the Mondex electronic purse. In 1996, MasterCard purchased Mondex International with the plan of using the MXI technology as part of its strategic chip platform.
Around the same time, the first online purchase was completed in 1994 in the United States, along with the debut of the the first domestic chip card, known as the “Golden Crown” system, in Russia. With the arrival of a new century, the twelve largest manufacturers of smart cards, software, and credit cards announced that they would be creating the first universal electronic wallet. In 1998, one of the world’s largest online payment systems-PayPal-is launched.
Here are two other pioneers of the eCash movement from the 1990s:
- First Virtual was founded in 1994 and is remembered for being one of the first companies that offered eCash transfers over the Internet.
- In the same year, CyberCash was introduced. The company created a system that allowed users to build a “Wallet” where they could handle currencies, checks, credit cards, and CyberCoin.
The 2000’s saw impressive gains in the use and acceptance of eCash as a result of advances in technology. Some of the most notable occurrences have been:
- Bitcoin, a digital asset and a payment system, was invented in 2009.
- Google’s mobile payment system, Google Wallet, is released in 2011.
- Following in the steps of Google, Apple, Android and Samsung release mobile payment and digital wallets services in 2014 and 2015.
- The United States makes the switch to EMV cards – which stands for Europay, MasterCard and Visa – in 2016.
How Does eCash Work?
How exactly does eCash work? To have a better understanding, let’s first familiarize ourselves with how money traditionally flows using eCash.
- Withdrawal. Users have the ability to convert money from their eCash accounts into eCash coins. However, access can only be granted to the eCash account if the user can sign the withdrawal request. The signature is checked against the public key that has been registered with the ecash account since the coins are accessed using a password-encryption.
- Payment. In order to pay a specified amount, a set of coins that equal the desired amount must be selected. If you were using the the on-line ecash system, the set of coins would be encrypted for the bank through the bank’s unique public key. The shop then deposits the payment at their bank, who then credits the merchant’s eCash account, as long as all coins are valid. The accepted coins are added to the database of spent coins to prevent them from being spent again.
- Payment deposit. Again, using the on-line ecash system, this protocol would be completed by the shop or merchant. The most important component of the payment protocol is that the payment deposit will be made specifically to the payee.
- Coin redemption. Coins can be directly returned to the mint without using them in a payment if they’ve expired, need to be refreshed, or need improved distributions.
- Recovery. If coins that have been lost they can be recovered through a protocol carried out between the user and the mint.
Now that we’re aware of how the money flows, it’s time to realize that the money flow can only be accomplished through the cooperation of the following four components:
- Issuers. These can either be financial institutions, or non-bank institutions.
- Customers. These are the individual who spend eCash.
- Merchants or traders. These are the vendors who receive eCash.
- Regulators. Authorities or state tax agencies.
Once all of the parties are involved, the basic idea of a eCash transaction involves at least one of the components; the issuer, customer, and merchant who will accept the eCash in exchange for the products or services rendered. There are then three general stages for the transaction to be completed.
The Consumer has to open an account with a bank that provides eCash accounts. The merchant who is willing to participate in eCash transactions must have access to these accounts with a number of banks in order to support the transaction of the consumer who may use any of these various bank accounts. However, the banks will manage both the consumers’ and merchants’ accounts.
Once the consumer decides to purchase a good or service, he or she will transfer the eCash amount from their bank account to either their electronic purse (on-line system) or eCash token (off-line system). The eCash payment will then be transferred to the merchant so that they are compensated for the goods or services provided. The eCash payment will be either a softcopy (via software) or token based. For most transactions through the Internet, the process will be encrypted.
After receiving the electronic payment from the consumer, the merchant will receive a confirmation from the bank. The bank will then authenticate the electronic transaction. During this same step, the bank will debit the consumer’s account for the amount that was agreed upon. Finally, the merchant delivers the products or services and will inform the bank to deposit the payment into their bank account.
Although these stages may sound complicated if you’re new to eCash, digital cash actually acts very similarly to physical cash. The obvious difference is that electronic is digital. Here’s an example of how an eCash system would work:
A bank creates a unique digital bank note that includes a message which issues a serial number (with a primary or public key) and value of the note. This is sent to Person A. Whenever Person A withdraws this note, it will use Chaum’s Cryptographic technique. This will alter the serial number. As a result, the bank will not recognize the note when it is withdrawn. The note will be returned to the bank with a new serial number.
Person A will then pay Person B electronically by sending the bank note to him or her. Person B will check the note’s validity by decrypting it through the bank’s public key to check its signature, a.k.a. the new serial numbers validity. Person B ships the note off to the bank, which checks the serial number to confirm that this specific bank note has never been spent before. The serial number, which is different from the note number that was withdrawn by Person A, will prevent the bank from linking the two transactions.
The final phase includes the enabling bank checking the new serialized key account for the amount of the transaction. If validated, the amount will be transferred via a depository notice. Person B, who is using the same encrypting technique, will return the depository notice with the new serialize account. Again, the enabling bank will be aware of who the merchant is. The bank will only know that that money is available and can be used as a payment.
In other words, think of this eCash transaction as a debit card transaction except that there is no other information beside the amount of the transaction, making the process secure.
What is Cryptocurrency and How is it Obtained?
You simply can’t have a discussion involving eCash and not mention cryptocurrency. Ever since Bitcoin launched in 2009, the cryptocurrency has captured the minds of lawmakers, financial institutions, and the general public as a whole. But, what exactly is cryptocurrency and how can it be obtained.
In it’s simplest form, cryptocurrency is a digital or virtual currency that uses cryptography for security purposes to prevent counterfeit. Cryptography, for those who are unaware, means the science of coding and decoding messages so that they remain secure. During the coding process, a key is used which is known to only the sender and the recipient.
What makes cryptocurrency unique is that it is not issued by any type of authority figure, such as a central bank. Because of this, cryptocurrency is in theory, immune to interference from bodies of government. Another feature that cryptocurrency is known for is that users can remain anonymous. The issue with anonymity is that it can be used for illegal activity like money laundering and tax evasion.
In most cases, cryptocurrency works simply when two parties transfer funds between each other. Since this involves cryptography, either a public or private keys like a RSA signature must be used to complete the transaction. Each transaction is recorded on a public ledger, also called either a distributed ledger or a blockchain, that is visible to anyone in the network. Personal information is not shared, though.
Besides security and anonymity, cryptocurrency is appealing to users because there are only minimal processing fees, as opposed to the expensive fees that most banks and financial institutions charge for transfers.
The major concern involving cryptocurrency is that because it’s a virtual or digital currency, an individual’s balance can be erased if there is a security breach or computer crash. In most instances, however, this information can be easily backed-up on the cloud. Finally, the price of cryptocurrencies is that the value can fluctuate sporadically.
A Quick Word Regarding Bitcoin
While the idea behind cryptocurrency existed years before, cryptocurrency came to the forefront in 2009 when Bitcoin was released. Bitcoin was created by a computer programmer going by the pseudonym Satoshi Nakamoto. Bitcoin is an open-source, peer-to-peer digital currency that is completely decentralized. Today, Bitcoin is accepted by more than 6,000 companies that include Overstock and Virgin Galactic.
As explained by the Congressional Research Service, “Like the U.S. dollar, the Bitcoin has no intrinsic value in that it is not redeemable for some amount of another commodity, such as an ounce of gold. Unlike a dollar, a Bitcoin has no physical form, is not legal tender, and is not backed by any government or any other legal entity, and its supply is not determined by a central bank.” (In part of this Congressional Research Service report it states that the dollar is a legal currency, yet doesn’t specifically say the Bitcoin isn’t legal, it just eludes that it isn’t traceable, and therefore a concern to governments.)
Through cryptographic techniques “special users on the bitcoin network, known as miners, to gather together blocks of new transactions and compete to verify that the transactions are valid—that the buyer has the amount of Bitcoin being spent and has transferred that amount to the seller’s account. For providing this service, miners that successfully verify a block of transactions are rewarded by the network’s controlling computer algorithm with 25 newly created Bitcoins.”
How to Obtain Cryptocurrency
Whether it’s Bitcoin or one of the hundreds of alternatives on the crypto-current market, (called Altcoins, meaning an alternate cryptocurrencies – which basically means an alternate to Bitcoin) you must first download the free and open-source software. After that, there are two basic ways to obtain cryptocurrencies, according to Forbes; “mine them using a powerful computer and buy them through a crypto exchange.”
Mining Bitcoins and Altcoins, as described in PCWorld, “involves writing a short script to run in the command prompt. It’s only a few steps, which you must follow exactly to ensure success.” However, this can put a lot of stress on your computer because it must “solve complex problems that keep the respective cryptocurrency’s peer-to-peer infrastructure secure.” In exchange for their work, miners are given pieces of Bitcoins.
If you prefer to purchase Bitcoins or Altcoins, you can only do so through select and limited markets. This includes currencies on major exchanges like VaultofSatoshi, Kraken, Coinex, and BTC-e.
What makes cryptocurrencies like Bitcoin interesting is that they can be used as an investment tool and a transactional platform.
Properties of eCash
For electronic payments to be as effective and efficient as paper and coin currency, electronic payments should include the following properties:
One of the main concerns surrounding eCash is how secure it is. When the determined amount is being transferred between consumers, merchants, and banks the prevention of any unauthorized individuals like hackers intercepting, or even changing, the content of the messages, such as the dollar amount, should be addressed. This is commonly addressed through encryption and special serial numbers that give the bank the power to verify the authenticity of the transaction.
Besides online security, physical security should be taken into account. For example, if a hard drive crashes or a smart card is stolen, the eCash could also be lost. Thanks to advances in technology, eCash can be stored on secure cloud databases so that it can be easily recovered.
Privacy, in regards to eCash, is the anonymity of the consumers who have made the payment. As with coins and paper notes, the payee should not be able to be linked or be traced during transactions. Privacy is important because consumers’ privacy should be protected from being monitored by financial surveillance. Anonymity, however, does present a number of concerns like counterfeiting, money laundering, and blackmailing in extreme circumstances. Keep in mind that the more anonymity that is offered the less security there will be.
One of the benefits of electronic cash is that it’s portable and can be taken with you no matter where you are in the world. In fact, the portability of eCash could replace traditional wallets since it can be stored on your smartphone on in the cloud.
Another advantage of eCash is that it can be transferred from the payee to the payer without being referred to a bank. The ability to transfer between parties should be easy and convenient, just as with traditional paper and coins. Parties should also be able to exchange funds electronically to each other no matter where they are in the world.
When discussing divisibility, eCash denominations should be able to be divided into small amounts. This makes smaller transactions possible between parties. Arguably on the main challenges for divisible systems having the ability to divide the value into smaller amounts that will eventually be equal to the original value.
Previously, divisibility systems were solved by Eng, and Okamoto’s scheme, Okamoto’s scheme and Okamoto and Ohta’s scheme. More recently, International Association for Cryptologic Research shared a system by Patrick Märtens that is based on bounded accumulators and “a new technique to prove that several revealed values are inside an accumulator.”
As a whole, eCash payments do not just have to contain the features listed above. To truly replace traditional money transfers, electronic payments have to be more convenient, easier-to-use, and ubiquitous – meaning that eCash networks must work with each other.
It’s common practice for eCash systems like PayPal, eCash, WebMoney, and Payoneer to sell their electronic currency directly to the end user. However, it’s not uncommon for other systems to sell their currency through third party digital currency exchangers. For example, the M-Pesa system is transfers money via mobile devices in third world countries like Africa, India, Afghanistan, and Eastern Europe. In some situations, community currencies, such as local exchange trading systems (LETS) and the Community Exchange System, work with electronic transactions.
In the above examples, these systems are known as centralized systems where the user’s real identity is still known. This has raised privacy concerns over centralized systems, however, it has also been argued that being able to identity users is a benefit if they need to be contacted or identified.
You can’t talk about decentralized systems without discussing how cryptocurrencies play a part in these systems. Cryptocurrencies, as noted previously, are not regulated by any governing body that can verify the peer-to-peer transaction, which occurs anonymously. Because these systems are decentralized, the value of the currency can fluctuate quickly and often.
Besides Bitcoin, are here some other examples of cryptocurrencies that use decentralized systems:
- Monero launched in 2014 and “is built on principles of privacy, decentralization, and scalability.”
- Litecoin was founded in 2011, Litecoin is “a peer-to-peer Internet currency that enables instant, near-zero cost payments to anyone in the world.”
- Dogecoin is an open-source peer-to-peer currency that allows you to easily send money online.
- Peercoin claims that it’s more energy efficient and the world’s first proof-of-stake coin that was created in 2012.
- Primecoin is an innovative cryptocurrency that uses as “unique form of proof-of-work based on prime numbers.”
- Ripple doesn’t rely on the Bitcoin code and focuses on improving cross-border payment offerings.
- Nxt also uses it’s own code that was developed from scratch.
Contactless Payment Systems
These are credit cards, debit cards, smart cards, or mobile devices that rely on radio-frequency identification (RFID) or near field communication (NFC) to make secure transactions that do not require signature or PIN verification. The most common example are contactless payment systems are mobile subsystems and digital wallets. Examples include:
- The ‘electronic purse’ that was introduced by Mondex and National Westminster Bank in 1994.
- The payment system called Mobipay that was implemented Telefónica and BBVA Bank in Spain in 2005.
- Venmo originally launched as a mobile payment system through SMS in 2010. It became a social app where friends could pay for small purchases like a cup of coffee.
- Google Wallet, which launched on September 19, 2011, allows users to store all of their credit card and debit card online.
- Easytrip was initiated in 2012 in Ireland as a way to pay road tolls. The tolls were charged to the user’s mobile phone account or prepaid credit.
- The O2 Wallet was introduced in 2012 and could be loaded with regular bank accounts or cards. The service shut down in 2014.
- In October 2014 Apple Pay was released and is similar to Google Wallet, except it’s exclusive to iPhone users.
- Samsung Pay debuted in 2015 to rival Apple Pay. It has similar features but is available for Samsung devices.
- GNU Taler is an anonymous and open source electronic payment system that will be available to the public in 2016.
The Benefits of eCash
The greatest benefit with eCash is that allows individuals to make make financial transactions online in real-time. Because financial information is stored electronically, consumers no longer have to carry cash, only mobile devices or smart cards to complete a transaction. eCash also gives merchants more opportunities to partake in commerce.
Those are a just a few of the benefits of eCash. Here’s a closer look at the advantages that users and merchants can enjoy.
Instead of waiting for a bank to approve a transaction, such as for a check to clear, users can send and exchange funds instantly without ever having to step inside of a bank. In fact, you can use electronic payment systems anywhere in the world, as long as you can get online. Furthermore, eCash prevents consumers from having to pay pay withdrawal fees that are commonly by banks whenever you visit the ATM or the interest rates that incur with credit cards. In fact, people can exchange money directly to each other without the involvement of a third party.
Merchants also have a lot to gain by embracing eCash systems. For starters, these systems can become a marketing tool for their eCommerce business. When a merchant uses a payment system, whether it’s PayPal, Apple Pay, or Primecoin, the consumer can feel secure in making a purchase of the site since the online marketplace uses a trusted payment system. Some payment systems also provide merchants with coupons to help entice consumers. Another perk, is that the fees charged by eCash payment systems are usually lower than what credit card companies charge.
eCash also gives merchants from anywhere in the world to partake in the global marketplace. For example, an online merchant in India can sell their products to anyone in the world and accept payments with just one-click of a button. Family members in Uganda can exchange funds between each other, even if none of them have a traditional bank account.
Finally, both merchants and customers can enjoy the security, and if needed the anonymity, that eCash provides. Since each transaction still needs to be verified, the chances of fraud are greatly reduced.
This was touched upon earlier, but one of the greatest advantages of eCash is that it’s going to increase the opportunities for international exchange. No matter where you live in the world, you can sell your product to international consumers and receive a payment in real-time. For example, you could be a record shop in Germany that sells a $20 vinyl to a customer in Australia or a clothing manufacturer in America who sells products to customers in Brazil for $15 a shirt. Not only are the fees cheaper, it makes it easier to sell items to a global marketplace by using a fast, secure, and convenient eCash system.
Disadvantages of eCash
While electronic payment systems have been improving their security features, this is one area that remains a concern for users and merchants. Despite needing to verify transactions, fraud is still a common occurrence, thanks to hackers. For example, a hacker can find their way into the bank accounts of unsuspecting victims which could lead to instances of identity theft or having your funds stripped away. Hackers could also attempt to counterfeit the money by recreating the eCash form.
Additionally, there is a concern that eCash can become easily available to criminal and terrorist groups if they use a decentralized system. This makes it harder for governments to track these types of organizations since it’s more difficult to find a paper trial. eCash also makes it more challenging to monitor and collect both income and taxes, so it’s possible for people to easily transfer funds and hide assets in offshore accounts.
One of the troubling limitations of eCash is that while it has the chance to be used by low income individuals or those in undeveloped countries, it will be an uphill battle for these groups to use an eCash system since a computer, mobile device, and internet connection are required for eCash transactions. Until this problem is addressed, which is an area that organizations like the Bill and Melinda Gates Foundation are working on, not everyone can enjoy the benefits of eCash.
Finally, there are concerns about what happens when you can’t access your funds, such as during a power failure. Or, what happens when your records or coins are lost because of a security breach. These are rare occurrences and have been considered as more and more information is stored on the cloud.
In 1996, Patrick G. Goshtigian discussed the regulations of eCash in a paper published at the Anderson Graduate School of Management at UCLA. In regards to security, Goshtigian stated;
“The legal challenges of E-cash entail concerns over taxes and currency issuers. In addition, consumer liability from bank cards will also have to be addressed (currently $50 for credit cards). E-cash removes the intermediary from currency transactions, but this also removes much of the regulation of the currency in the current system.
Tax questions immediately arise as to how to prevent tax evasion at the income or consumption level. If cash-like transactions become easier and less costly, monitoring this potential underground economy may be extremely difficult, if not impossible, for the IRS.
The more daunting legal problem is controlling a potential explosion of private currencies. Large institutions that are handling many transactions may issue electronic money in their own currency. The currency would not be backed by the full faith of the United States, but by the full faith of the institution. This is not a problem with paper currency, but until the legal system catches up with the digital world, it may present a problem with cybercash.”
For over twenty years we are still facing numerous legal questions surrounding eCash since it not only can cross borders, but also because it’s difficult to track. These issues, especially the governmental oversight of currencies, will continue to be an issue with eCash use.
To have a better understanding of the laws and regulations regarding eCash, here are how several different countries are handling cryptocurrencies like Bitcoin:
The United States
Bitcoin is legal in the United States and was classified as a as a convertible decentralized virtual currency by the U.S. Treasury in 2013. In 2015, the Commodity Futures Trading Commission, CFTC, started to classify Bitcoins as a commodity. Currently, New York state is the only state to have granted a license to a Bitcoin exchange in 2015. The company, itBit, now has a bank-like status in the U.S.
According to the Library of Congress, “Canada does not have a specific law or regulation that regulates bitcoins.” However, Bitcoin is not considered legal tender in Canada and has been briefly mentioned during anti-money laundering and anti-terrorist financing regulations for virtual currencies.
Germany considers Bitcoins like foreign currency. While not recognized as legal tender, Bitcoins “are units of value that have the function of private means of payment within private trading exchanges, or they are substitute currencies that are used as a means of payment in multilateral trading transactions on the basis of legal agreements of private law. ”
The United Kingdom
While Bitcoins are not regulated in the UK, it’s been reported that “Her Majesty’s Revenue and Customs has classed bitcoins as “single purpose vouchers,” rendering any sales of them liable to a value-added tax of 10–20%.”
As of this writing, Japan has no laws regarding the use of Bitcoins. Haruhiko Kuroda, the governor of the Bank of Japan (BOJ), has said that the BOJ was “researching issues of bitcoins, but I have nothing to say regarding bitcoins at the moment.”
China is one of the few countries in the world where Bitcoins are essentially illegal. In fact, the country announced the, “Notice on Precautions Against the Risks of Bitcoins,” in 2013 stating that it prohibits banking and payment institutions from dealing in Bitcoins.
While these doesn’t appear to be any legal framework that regulates, restricts, or bans the use of Bitcoins in India, the country’s banking institutions have warned customers about the potential hazards that Bitcoin can present. This was most evident with the 2013 release of the Reserve Bank of India’s public notice.
Bitcoin is currently in dispute in Russia. In 2014, Legislation was introduced by the Ministry of Finance that would view Bitcoin transactions as a misdemeanor and would imposes fines for dealing with cyber currencies and monetary surrogates.
As noted by the Library of Congress, “On October 9, 2013, Brazil enacted Law No. 12,865, which created the possibility for the normalization of mobile payment systems and the creation of electronic currencies, including the Bitcoin. The Law provides, among other things, for the payment arrangements and payment institutions that comprise the Brazilian Payment System.”
Overall, most central banks across the world are cautioning individuals from using virtual currencies like Bitcoin. In most cases though, most authorities are allowing citizens to use virtual currencies, even though they’re not accepted as legal tender.
The Future of eCash
Jerry Kuch, Yacov Yacobi and Paul England, cryptography researchers at Microsoft , proclaimed that eCash will be the future of money. According to these researchers “we’ll carry little cards with computer chips called e-wallets and exchange encrypted bits of information for things we need.” They also predicted that we’ll be able to:
- Make one-click micro-payments online.
- Have anonymous payments online.
- Use non-traditional devices like a smartphone to make payments.
Does any of this sound familiar? It should. Because those predictions have already come to fruition to make this an exciting time for electronic payments. But, where are we headed next?
Dan Schutzer, Senior Technology Consultant, BITS, believes that the future of digital cash could go in four different directions:
- Digital cash would be replaced by an alternative, such as a pre-paid or debit card, or a new start-up payment processor that meets the security and privacy needs of customers.
- Digital cash will continue to grow and may even get embraced by governments and banks. This could already be in happening. In 2012 the MintChip was introduced by the Royal Canadian Mint. The chip was attached to SD cards and contained a private key that was signed by the mint.
- Digital cash will only exist in niche markets, similar to how PayPal started because it was the perferred payment gateway for eBay users.
- Bitcoin and other blockchain alternatives will be replaced by improved financial platforms.
For the purpose of this guide, this is where we expect eCash will bring to the future of the payments industry.
Bitcoin Will Be Replaced By the Blockchain
One interesting development that has occurred is the work that IBM has contributed to the blockchain that could have serious implications. In March, 2012. Reuters reported that IBM was working on a way to create a digital cash and payment system for major currencies. While this would use the blockchain idea, the “transactions would be in an open ledger of a specific country’s currency such as the dollar or euro.”
In December, 2015, this became a reality when it announced that the Open Ledger Project had been created. This new blockchain was supported by IBM, Intel, JP Morgan, the Linux Foundation, and several big banks. As stated in Fortune, “The Open Ledger Project isn’t proposing another cryptocurrency, but rather it wants to use blockchain technology to create tools to allow businesses to build a distributed ledger for anything they can dream up–from exchanging automotive titles in seconds to paying retail suppliers when a sale is made.”
Because this new ledger is connected and distributed, the changes that have been made in the database will be easy to track, as well as be more difficult to forge. Currently, Honduras is using this technology to keep tabs on land titles and musicians are able to let fans pay them directly for their music.
There won’t be just one blockchain. There were be several versions that could bring an end to Bitcoin, primarily because these specific blockchains will be more exclusive. Unlike Bitcoin, which basically allows anyone in, the blockchain will be a part of a limited community.
Besides the Open Ledger Project, there are a number innovative companies embracing the blockchain. Bitwage uses the blockchain to make international payroll cheaper. Voatz is aiming to make elections cheaper and more transparent through smartphones and the blockchain. And, Chronicled has merged RFID tags with the Blockchain in order to validate luxury goods which will curb counterfeit items.
Mobile Payments Will Go Mainstream
This shouldn’t come as a surprise. With more than 6 billion in the world having access to a mobile device, and that figure expected to grow, electronic payments via mobile devices will become more common. This will be accomplished with near-field communication. With NFC chips already installed in most mobile devices, the transfer of electronic payments are already taking place. Users simply have to download an app and will be able to transmit banking and payment data when placed near readers. And, unlike debit cards, mobile devices are capable of displaying the payment details in real-time.
Mobile devices, however, are a only a part of the potential that NFC chips present. NFC chips can be installed in wearable devices, like a watch, wristband, or ring. Instead of using plastic or even pulling out our phones, we’ll be able to tap or swipe or use a wearable device to complete a purchase.
On top of NFC chips, the use of proximity beacons will enhance the growth of mobile payments. Companies will be able to target customers based on their location. For example, as a person approaches a store that they are already a customer of, the store will send you a coupon. The customer can then make the purchase through their mobile device and pick-up their item in swift motion.
The convenience of making electronic payments with your mobile device isn’t the only benefit. As noted in Forbes, “Ridding ourselves of cash will require new thinking on customer interaction, crime, value, and even cars.” For example, you could take the EZ Pass idea and apply that to drive-throughs at fast food restaurants where payments are collected from a device located on your vehicle.
Without cash registers and physical cash, the amount of robberies and pickpockets could be reduced. Governments could track how money is moved in real-time and use that information to solve problems like poverty. Check-out lines and transaction costs will also decrease.
Beyond the blockchain, mobile devices, and wearables, we may even experience digital currency exchanges by using biometrics. Companies like Apple and Samsung are already using fingerprints to verify transactions. But, don’t be surprised if someday soon people will have chips implanted in their hands that will contain payment information.
That’s not to say that cash will be completely eradicated. There may still always be a need for physical cash, however, digital cash will continue to evolve quickly.