Electronic money is also known as e-money, electronic cash, electronic currency, digital money, digital cash or digital currency. It refers to money or scrip which is exchanged only electronically. It involves use of computer network, the internet and digital stored value systems.
1. Direct deposit and Electronic Funds Transfer (EFT)
This technique is basically used for debits and credits or for exchanging values, be online or offline. Countries like Singapore and Hong Kong are widely using this technique of electronic cash system.
2. Digital gold currency
This technique is a private currency may use gold to provide extra security. E-currency system generally comprise gold, non-gold (mainly currency) or both non-gold and gold. For example, some organizations such as the US military use private currencies.
These techniques are similar as digital gold currency. In this case, the end users can purchase electronic currency directly.
Benefits
1. High efficiency of Money Exchange
Market swings could be magnified if consumers and businesses could send their money around the globe with the touch of a button on a PC.
2. More Privacy Protection
Consumers shopping on the Internet will find some forms of electronic money which sports greater privacy than using ordinary credit cards.
3. Save time
Waiting in lines at the bank counters have become an obsolete means of transaction nowadays. Lessening of paper work and immediate transfer of money and funds are the other advantages of electronic money.
4. Access to Global Markets
For the merchants, E-Cash allows access to a global market not restricted and controlled by local currencies. The integration of ordering and payment collection systems also offers enormous operational efficiency.
Limitations
1. Counterfeits
Counterfeiters could create their own personal mints of E-cash that would be indistinguishable from real money.
2. Lack Customer Protection
E-cash may be less secure than bank money, given that money stored on an electronic wallet could be lost forever should the card is damaged.
3. Lack of Regulations
Governments need to monitor money flow and trace criminal activities. These problems need to be addressed and resolved in order to gain consumers and government "trust." If computer hackers or other criminals were to break into E-cash systems, they could instantaneously filch the electronic wealth of others.
Related links:
http://en.wikipedia.org/wiki/Electronic_money
http://www.iit.edu/~peacjen/cs485/ecash2.htm
http://www.sellingonnet.net/online-means-payment/various-types-electronic-money/
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