E-Money

E-money is defined by European Commission as “electronically, including magnetically, stored monetary value as represented by a claim on the issuer which is issued on receipt of funds for the purpose of making payment transactions” (European Commission, n.d.). As such, E-money provides the same advantages as cash: real time transaction and anonymity. Ken Griffin et al. (n.d.) note that there are a number of categories of E-money which include E-cash, digital checks, digital banks checks, smart cards and electronic coupons and tokens. There are a number of E-money issues such well known PayPal and less known such as Pecunix, Ukash and Bitcoin. Moreover, virtual world such as SecondLife has its own E-money currency (e.g. L$) which can be earned, spend and exchanged for US dollars (SecondLife, n.d.). As stated previously, the main advantages of E-money are real time transactions, low transaction fees and anonymity similar to real cash transactions. There are, however, concerns about security and fraud, as well as question on financial backup the virtual currency. For example, criminals are targeting Bitcom digital wallets or are using botnet networks to utilize the collective resources to mint virtual currency which can be exchanged for a real money (Peter Coogan, 2011).

Credit cards, on the other hands, are backed by international organizations responsible to issue and acquire credit card transactions. Often, the transaction fees (flat fee or a percent from a transaction) are charged to the merchant. From a end-user standpoint, credit cards are existing and trusted technology whereby the security standard (e.g. Payment Card Industry Data Security Standard) is verified by independent qualified security assessors (QSA). Additional benefits such as CashBack, AirMiles and membership points increase the adoption rate by the consumers. The drawback (which is considered by some consumers as an advantage) is the fact that all purchases are done in credit, and if not paid in full are subject to comparatively high interest rates changed.

It is difficult to compare the security risk between the E-money and the credit card technologies as both had high profile data thefts such as theft of 25,000 Bitcoins from 478 account (Jason Mick, 2011) and “a massive" security breach at a credit card processor has put 10 million accounts at risk” (Brandon Hill, 2012). On both fronts, there are efforts to tighten up the security as evident with Payment Card Industry Data Security Standard (PCI SSC, 2010) and MintChip Challenge by Royal Canadian Mint to create a secure alternative to E-cash backed by the Canadian Government (Emily Jackson, 2012).

With variety of methods to exchange funds (i.e. payment and transfers) electronically such as PayPal, MintChip, Bitcoin, Credit and Debit Cards, it is not surprising that Sweden moving towards cashless economy (CBCNews, 2012) where different digital payment methods are used in parallel serving different purpose (i.e. micro payments) rather than compete with each-other.

Bibliography

• Brandon Hill, 2012. “Global Payments Inc. Hit By Security Breach; 10M Visa, MasterCard Accounts at Risk” [online]. DailyTech. Available from: http://www.dailytech.com/Massive+Security+Breach+Hits+MasterCard+Visa+10M+Accounts+at+Risk/article24355.htm (accessed: April 14, 2012).
• CBCNews, 2012. “Sweden moving towards cashless economy” [online]. Available from: http://www.cbsnews.com/8301-202_162-57399610/sweden-moving-towards-cashless-economy/ (accessed: April 14, 2012).
• Emily Jackson, 2012. “Royal Canadian Mint to create digital currency” [online]. The Star. Available from: http://www.thestar.com/business/article/1159513--royal-canadian-mint-to-create-digital-currency (accessed: April 14, 2012).
• European Commission, n.d. “e-Money” [online]. Available from: http://ec.europa.eu/internal_market/payments/emoney/index_en.htm (accessed: April 14, 2012).
• Jason Mick, 2011. “Inside the Mega-Hack of Bitcoin: the Full Story” [online]. DailyTech. Available from: http://www.dailytech.com/Inside+the+MegaHack+of+Bitcoin+the+Full+Story/article21942.htm (accessed: April 14, 2012).
• Ken Griffin, Phillip Balsmeier, Bobi Doncevski, n.d. “Electronic Money as A Competitive Advantage” [online]. Available from: http://journals.cluteonline.com/index.php/RBIS/article/download/5458/5543&ei=uVKFT-2kBoXh4QSvr4izBQ&usg=AFQjCNFHe4HkbgG7hbdsQzlWnXg1LR7MNA (accessed: April 14, 2012).
• Payment Card Industry Security Standard Council, 2010. “Payment Card Industry (PCI) Data Security Standard” [online]. Available from: https://www.pcisecuritystandards.org/documents/pci_dss_v2.pdf (accessed: April 12, 2012).
• Ross J. Anderson, 2008. “A Guide to Building Dependable Distributed Systems”. 2nd Edition. Wiley Publishing.
• SecondLife, n.d. “Buy L$ ” [online]. Available from: https://secondlife.com/my/lindex/buy.php?lang=en_US (accessed: April 14, 2012).
• Peter Coogan, 2011. “Bitcoin Botnet Mining” [online]. Symantec. Available from: http://www.symantec.com/connect/blogs/bitcoin-botnet-mining (accessed: April 14, 2012).