Electronic money (E-money) is the currency stored electronically with electronic systems and digital DBMS(database management systems) which makes it easier for people to transact as opposed to physical money. In this type of money system, the value is backed by fiat currency and this is the only distinguishing factor between electronic money and cryptocurrency.
Some facts about Electronic money
The value of Electronic money is backed by fiat currency, which makes it different from cryptocurrency.
Some companies that allow for the use of Electronic money platforms are Square or PayPal.
The emergence of electronic money reduced the use of physical currency.
How can E-Money be Used?
The guidelines detailed in the E-money makes it clear that e-money must be redeemed. This makes it be used the same way cash is used. E-money can also be used for payment as long as it is accepted.
Let us try as much as possible to distinguish the two forms of E-money.
Software-based e-money products and
Hardware-based e-money products.
Software-based e-money is easily the easiest to use these days. In this form of Electronic money transfer, money is stored and transferred via digital devices like the software that runs on electronic devices. With this, we can transact with our electronic devices and make payments using PayPal, Square, Paytm, credit card and so on, usually while connected with an online server. Software-based E-money can make transactions flexible and reversible
Hardware-based e-money products don't even need an online connection, instead, the value of the money rests on a visible device called a prepaid app on a mobile phone. Add ups and withdrawals is usually monitored via a reader. Payments are usually regulated. This may also include transactions made through a bank. This type of payment is highly irreversible and more procedural.
Electronic Money and Other Digital Currencies
Electronic money representing cash that can be stored digitally is also colloquially known as a digital currency but the two terms are not the same. These e-currencies have what differentiates them from E-money. The term e-currency relates also to cryptocurrencies, ICOs or virtual currencies.
Like cryptocurrencies and E-money, there are companies, organisations and people that accept them as payment and they also fluctuating increase and decrease in market flow. But in contrast, electronic money systems always have an intermediary in the form of a financial organization or government monitoring it. E-money complies with all the bank regulating orders or face the consequences. Cryptocurrency on the order hand is a new venture that is not vastly monitored. Cryptocurrency is not also backed by fiat money.
Stablecoins on the other hand uses many or more assets which can serve as a fiat currency for determining its value.
Virtual currency is more stable in value and worth. This kind of currency is majorly used by private organizations. Their money values can only be spent within the space of the game
What are the Benefits of E-Money?
E-money has greatly diminished the use of cash and will almost wipe it off in future. Because of its fast-growing nature in dominating the world's exchange system, its benefits cannot be overemphasized.
It is always difficult to be misplaced. It also provides a detailed account of transactions made in time past for record purposes. The structural design of E-money makes it difficult for fraudulent activities and unaccountability. People believe belief on this system of payment rather than carrying physical money around.
With this system of payment, anyone can make payments to anybody in any part of the world with the click of a button. At the comfort of the home, payments can be made instead of running to transaction points for every money transfer.
3. Historical Records
E-money keeps an account of all the transactions made for easy references. This system makes it impossible for money to be taken without proper knowledge.
Disadvantages of Electronic Money
Some of the many disadvantages of E-money includes
1. It is usually expensive
To use E-money, some certain facilities must have to be available e.g computer systems or PC, an internet connection with data, or usually a smartphone
With just the minimum details of the user, there will inevitably be a hack. This will result in a leak of sensitive information and will eventually lead to a money thief.
So many people have fallen victims to this. A person pretends to be a certain firm or bank or establishment and customers are persistent to give away their sensitive bank information/details.