Electronic Cash

Electronic cash can be treated. as the latest concept in on line payment systems. The fact, that, credit card issuing companies or banks make money, by charging merchants a processing fee ranging from 1.5 percent to 3 percent of the transaction value, makes ecommerce merchants on. a constant lookout for alternatives. Also, stores that accept card payments require a minimum amount of purchase so as to cover the transaction costs, thus making credit card a non profitable mechanism for small purchases on line. These factors have led to the development of a new type of payment mechanism Electronic cash, also referred to as digital money or cyber cash. It is paperless money and various ways have been either proposed or implemented to generate this. Electronic cash scores over credit cards because of its usability in small transactions. With very low fixed costs, electronic cash provides the promise of allowing the users to spend on low amount purchases.

If defined, you can say that electronic cash is nothing but icons or electronic tokens stored in your computer hard drive, which you can transmit using modem and a special software. Home banking software could be modified to allow you to convert cash in your bank account into electronic tokens that can be stored in your computer and then used for cyber shopping. You can also upload money from your smart card onto your computer, or maybe down load cyber cash from your computer to your smart card. We will discuss all these in detail as we proceed.

But first we need to examine the concept of Micro payments. 'Micro payments' the term is used to mean many different things. How big a micro payment is usually depends on how big an average or common payment is for the person or company using the term. Thus, for a corporate transaction, a micro payment may be anything under Rs. 500, whereas for a credit card system it may be anything under Rs. 100. In general We use this term to describe small valued transactions. When speaking specifically about B2C ecommerce, they generally are payments that are not feasible to be carried out through cards or cheques. These are often small exchanges of information like stock information or updates, downloading songs of your favorite artistes, news on subjects of your interests, etc. Or there are products of low value like greeting cards, gift articles and other such inexpensive stuff. In most cases,micro payments are intended for use with online delivery as well. Since cards and cheques require some processing fees for the payments to materialize, it is often not feasible to pay for such transactions through them. E cash primarily satisfies this need of paying for small transactions.

As said earlier that there can be many ways to implement e cash, but there would be certain properties that would remain common to all types of e cash. These common features or properties, for the, need of understanding, can be explained under four headings:. monetary value, interoperability, retrievability, and security.

It is necessary for e cash to have monetary value, which in simple words would mean that it has to be backed by either cash, bank authorized credit, or a bank certified cashiers cheque. Whenever an e cash transaction occurs, it would be necessary that re conciliation or resolution of funds be immediate and hassle free. Any e cash, in no circumstances can be returned in such a case for insufficient funds or other related problems.

Interoperability, as in real world payment systems needs to be achieved. By interoperability, we mean that e cash must be exchangeable as payment for other e cash, paper cash, goods or services, lines of credit, deposits in banking accounts, bank notes or obligations, electronic benefits transfers and similar instruments. Most e cash proposals till date use single banks, whereas we would need multiple banks working jointly through international clearinghouses, ensuring smooth exchangeability. With the growth of electronic commerce over, the Internet, international trade increases. Obviously you cannot, in this *case, expect customers from all over to use the same bank.

Then another issue is that e cash must be storable and retrievable. Remote storage or retrieval like that from a, phone or any other communication device, would allow users to exchange e cash from home or office or even while traveling, The cash should be storable on a remote computers memory, in smart cards or other easily transportable standard or special purpose devices. Because it might be easy to create counterfeit cash that is stored in a computer, it might be preferable to store cash on a dedicated device that cannot be altered. This device should have a suitable interface to facilitate personal authentication using passwords or other means and a display so that a user can view the cards contents.

Two widely accepted methods of e cash storage exist today :on line storage and off line storage. On line cash storage would mean that the customer does not personally have possession of electronic cash. Instead, a trusted third party an online bank is involved in all transfers of electronic cash and holds the consumers cash accounts. Online systems work by requiring merchants to contact the consumer's bank to receive payments for consumer purchases. This helps prevent fraud by determining if the consumer's cash is valid. This resembles with the process of checking with a consumer's bank to ensure that a credit card is still valid and that the consumer's name matches the name of the credit card. ' Whereas off line cash storage is the virtual equivalent of money you keep in your wallet. The customer holds it, and no trusted third party is involved in the transaction. Protection against fraud is still a concern, so either software or hardware must be built to prevent double or fraudulent spending. Smart cards are the hardware for storing e cash and are encrypted and tamper proof, thus providing a software solution as well.

E cash should not be easy to copy and tamper with while it is being stored or exchanged. This would include preventing or detecting duplication and double spending. Counterfeiting poses a particular problem, since a counterfeiter may, in the Internet environment be anywhere in the world and consequently be difficult to catch without appropriate international agreements. Detection is essential in order to audit whether prevention is working.

Other properties include divisibility and convenience. Divisibility relates to the size of payment units. Both the number of different electronic cash units and their values can be defined independently of real currency. For example, parties to electronic transactions in a particular region might decide that the smallest electronic cash unit they want to deal with is Rs. 10. The next denomination might be Rs. 12, and so on. The denominations are up to the definers and are not limited to the typical breakdowns of a real cash system. Convenience is one of the most important characteristics of cash. But a trade off between security and convenience has to be maintained. If e-cash requires special hardware, software, or finely honed expertise, then it will not be convenient for people to use. But at the same time, too much of an open system would make it vulnerable to security lapses. But in any case, convenience has to be well thought off, while establishing a system for e-cash.

Domain Name Search