Electronic money or e-money, is an evolving term that can have different meanings but in principle involves the use of computer networks and digital stored value systems to store and transmit money. It may have official legal status or not. It may be historical, current or theoretical.
The underlying principle of electronic money involves the use of computer networks such as the Internet and digital stored value systems. Examples of electronic money are bank deposits, electronic funds transfer, direct deposit, payment processors, and digital currencies.
Electronic money can be understood as a way of storing and transmitting conventional money through electronic systems or as digital currency which varies in value and is tradeable as a currency in its own right.
Types of systems
Many systems—such as PayPal, eCash, WebMoney, Payoneer, cashU, and Hub Culture's Ven will sell their electronic currency [clarification needed] directly to the end user. Other systems only sell through third party digital currency exchangers. The M-Pesa system is used to transfer money through mobile phones in Africa, India, Afghanistan, and Eastern Europe. Some community currencies, like some local exchange trading systems (LETS) and the Community Exchange System, work with electronic transactions.
Main article: CryptocurrencyCryptocurrencies allow electronic money systems to be decentralized, systems include:
Bitcoin, a peer-to-peer electronic monetary system based on cryptography.
Litecoin, originally based on the Bitcoin protocol, intended to improve upon its alleged inefficiencies.
Ripple monetary system, a monetary system based on trust networks.
Dogecoin, a Litecoin-derived system meant by its author to reach broader demographics.
Mobile sub-systems number of electronic money systems use contactless payment transfer in order to facilitate easy payment and give the payee more confidence in not letting go of their electronic wallet during the transaction.
In 1994 Mondex and National Westminster Bank provided an 'electronic purse' or to residents of SwindonIn about 2005 Telefónica and BBVA Bank launched a payment system in Spain called Mobipay which used simple short message service facilities of feature phones intended for pay-as you go services including taxis and pre-pay phone recharges via a BBVA current bank account debit.
In 2012 O2 (Ireland) (owned by Telefónica)launched Easytrip to pay road tolls which were charged to the mobile phone account or prepay credit.
O2 (United Kingdom) invented O2 Wallet at about the same time. The wallet can be charged with regular bank accounts or cards and discharged by participating retailers using a technique known as 'money messages' The service closed in 2014
In Ghana, there is MTN Mobile Money, Airtel Money, Tigo Cash, etc
Hard vs. soft electronic currencies
A hard electronic currency is one that does not have services to dispute or reverse charges. In other words, it is akin to cash in that it only supports non-reversible transactions. Reversing transactions, even in case of a legitimate error, unauthorized use, or failure of a vendor to supply goods is difficult, if not impossible. The advantage of this arrangement is that the operating costs of the electronic currency system are greatly reduced by not having to resolve payment disputes. Additionally, it allows the electronic currency transactions to clear instantly, making the funds available immediately to the recipient. This means that using hard electronic currency is more akin to a cash transaction. Examples are Western Union, KlickEx and Bitcoin.
A soft electronic currency is one that allows for reversal of payments, for example in case of fraud or disputes. Reversible payment methods generally have a "clearing time" of 72 hours or more. Examples are PayPal and credit card. A hard currency can be softened by using a trusted third party or an escrow service.