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Electronic Money

Introduction:

With every passing day, the Internet becomes increasingly commercialized. But the models of transaction work today, are not conductive to the growth of the Internet. Neither is the rampant piracy of information. Nor is the lack of secure efficient methods to transfer money electronically. The solution needs a system of secure and private, the electronic money transactions. The electronic money transactions have been available since the inception of e-mail. Good implementations of electronic money are completely software based, provide security over hostile networks, unforgettable, have short transaction time, and usable be any group. It can also act like cash, so also called the digital cash or blind money. Since electronic money is digital, it can be copied without any defects. So there must be safeguards to ensure that people don't transfer the same money to multiple people or double spending. Like cash, digital money, needs no authorization from a third party. It yields instant payment like paper cash. E-money systems provides for the automatic withdrawal of funds from the customer’s bank account or automatically charges the customer's credit card to pay for the services. So with the use of e-money system, one take control customer's accounts receivable problems instead of customers taking control of the suppliers. Digital signature technology is the foundation for electronic money or e-money and plays a chief role.

Types:

There are two distinct types of electronic money. They are:

  1. Identified electronic money and
  2. Anonymous electronic money
Identified electronic money contains information revealing the identity of the person who originally with drew the money from the bank. Anonymous electronic money works like real paper cash. Once anonymous electronic money is withdrawn from an account it can be spent or given away without leaving a transaction trial. In each type of e-money, there are two varieties: In on-line it is needed to interact with a bank (via modem or network) to conduct a transaction with a third party. It is very secure, but takes its own time to process. In on-line e-money systems, merchants have to contact the bank's computer with every sale and the bank computer maintains a database of all the spent pieces of e-money.
In off-line it can be conducted a transaction without having to directly involve a bank, thus takes no time to process. Off-line anonymous e-money, the true digital cash, is the most complex form of e-money because of the double-spending problem. Off-line e-money systems detect double spending in different ways such as with the use of smart card (a device similar to a credit card that contains a microchip and stores customer information) and cryptographic protocols. Smart card, also known as electronic purse, is a plastic card that has embedded a microprocessor. With each purchase the card's value is reduced. These cards are relodable.

Conclusion:

Whether or not electronic payment systems are secure, customers must feel secure before they use them. When electronic money technology matures, new opportunities will rise. People will be able to buy and sell information, small companies and entrepreneurs will be able to compete against large companies, and the copy protection schemes will mature. E-money will be the vehicle upon which the financial revolution takes place. The advent of secure e-money can also alleviate problems of software piracy.

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