Electronic Currency

Today, cash is known in various forms as a means of exchange and of storing value. Mussels, gold and silver as well as standardized products such as cigarettes are only a few examples. Although the coins and banknotes that are now abundant in their basic form have existed for thousands of years, the first bank note of the Swiss Federal State, surprisingly did not appear until 1907. In 1918, the Federal Reserve Banks first began to move currency, i.e., manipulated book-entries to clear payment balances among themselves, via a telegraph.

However, the widespread use of electronic currency did not begin until the automated clearinghouse was set up by the US Federal Reserve in 1972 to provide the US Treasury and commercial banks with an electronic alternative to check processing. Similar systems also emerged in Europe around the same time. Thus, electronic currency has been widely used throughout the world on an institutional level for more than two decades.

Today, nearly all of the deposit currencies in the world's banking systems are handled electronically through a series of interbank computer networks. Although banks have been able to move currency electronically for decades, only recently has the average consumer had the capability to use electronic transfers in any meaningful way. The increasing power and decreasing cost of computers, coupled with advancements in communication technology have made global interaction available at vastly reduced costs. Together, these factors make the digital transfer of funds a reality for millions of individuals around the world. As a result, we are now witnessing the development of a digital economy.

Now, less than a hundred years after the first bank note was issued, technological progress has undoubtedly created a new direction in the means of payment. The Internet and E-commerce have become an increasingly commercial area, where daily payments are rendered for goods, information and services. As a result, electronic payments are becoming the central part to online business between customer and seller. Traditional applications of rendering payment include credit cards, private label credit/debit cards and charge cards.

However, these traditional forms of rendering payment online have posed problems to both the consumer and the seller. Not all merchants are equipped to accept credit card transactions. Some merchants even prefer not to accept credit card transactions because credit card companies charge merchants a two to six percent service fee for each transaction. Since smaller sales are a significant part of business transacted online, many online merchants do not accept credit card transactions due to their small profit gains.

Additionally, consumers have become concerned with "hackers" intercepting and obtaining their credit card number stored on the Internet, as well as the possibility of becoming a victim of fraud on the Internet since the customer and the merchant never physically meet. Furthermore, as the data collection industry continues to grow, credit card companies are invading consumer's privacy by collecting their spending habits and reselling the data to third parties. Consumers are gradually realizing that providing their numbers to online merchants is no more hazardous than reciting it to a clerk over a telephone line.

As a result of recent proliferation of computers, modems and telecommunications links, modern methods of rendering payment, i.e., electronic currency, as known as digital cash, virtual cash, electronic cash, digicash, electronic money, digital money, Internet currency, cybercash or cyberbucks, are receiving a great deal of attention from both consumers and merchants.

Electronic currency is essentially a system that allows a person to pay for goods or services by transmitting a number from one computer to another. These transactions are carried out electronically, transferring funds from one party to another, by either a debit or credit.These funds are instantly cleared and secured by using strong encryption, thus eliminating the payment risk to the consumer. It is only a matter of time before electronic currency will replace the present monetary systems. Thus, electronic currency is the digital representation of money, or more accurately, the digital representation of currency.