ECASH:    THE NEXT FRONTIER.
A Coming Alternative to Cash and Credit Cards.

E-cash is actually a number of different technologies. It can be broadly devided into two main types of transactions: online and offline. Simply put, e-cash is a method of digitizing money by converting cash to an equivalent electronic record. Online e-cash allows consumers to make payments on the Internet via digital funds recorded on their computer hard disks. Offline e-cash involves the use of smartcards on which are downloaded digital electronic units of cash previously paid for.

Digital cash is similar to checks and credit cards but has a number of additional advantages for both the consumer and the merchant. The first, as with many modern ecommerce technologies, is low cost of overhead. The second is the ability to make what are termed "micro-transactions". These are smaller amounts which are generally not accepted via credit cards, e.g. payments of $10.00 or less. Ecash transactions are possible for amounts as low as one cent.

Online e-cash was pioneered by DigiCash. The general scheme calls for the consumer to withdraw funds from his/her bank account by convertion into electronic funds. These are "deposited" on his computer. Payment is made online and deducted from digital funds available. The online merchant then "deposits" received funds to her own bank. Offline e-cash is being promoted mainly by Mondex, which in partnership with major banks is the leading purveyor of e-cash payment architectures worldwide.

Online e-cash payment allows a range of versatility in interactions between surfers and websites. As the Internet becomes more commercialized, websites are searching for ways to charge consumers for a wide variety of services including micro-transactions allowing surfers to pay for downloads, page views, interactive gaming. etc. Online e-cash allows the user's PC to communicate with a website and instantly make payments with digitized funds via the hard drive. There are a number of different payment schemes for initially procuring such funds from an e-cash provider. They can be paid for using any of the more conventional payment options: credit cards, checks and direct wire transfers.

E-cash therefore allows direct transactions between people. All that is required is the software to process the transaction. This eliminates banks as an intermediary. In this respect, e-cash is indeed like paper money. But the more general the use of e-cash becomes, the greater concern must be over problems of security and privacy as well as problems associated with paper money such as counterfeiting. E-cash allows a number of convenient solutions to these problems. Encryption and unique coding, for example solve many of the security and duplication problems which are possible in theory.

Privacy requires that e-cash be essentially untraceable. That is, there should be no record of who spent what unit for which transaction. New technologies are making this possible as well, enabling consumers to create anonymous units of currency which their banks can validate but which they can then render untraceable. The bank becomes essentially blind to the exact user of the currency.

It is too early to say whether e-cash will eventually replace paper money and credit cards, but the growth potential of the utility is enormous.

Did You Find This Information Useful?
Email This Page to a Friend.