Academic journal article Review of Business

Global Electronic Money and Related Issues

Academic journal article Review of Business

Global Electronic Money and Related Issues

Article excerpt


Advancements in communication and information technology have produced unprecedented opportunities in the global economy, where countries and regions are digitally connected. This digital technology has fostered innovations in a variety of products and services including electronic money and payment systems. The purpose of this article is to provide a comprehensive discussion of key concepts and issues related to global electronic money and payment systems. We review the basic requirements of electronic money. We also discuss the characteristics of electronic money transactions. A classification of electronic payment systems is presented. Finally, issues impacting international trade and transactions with electronic money are identified.



With the rapid globalization of the business environment, trade and investments are rising in greater quantity, creating national wealth and consumer affluence, especially in developing countries. A convergence of consumers' tastes and preferences across the globe is increasing demand for foreign products and services, and technological advancements are making the world more and more borderless [23]. Internet technology and its various manifestations have become the visible examples of the way in which people around the world interact and get connected instantly. Digital convergence of telecommunications, computers, media, and consumer electronics is rapidly conjoining many new products and services. Electronic money is a product of such digital convergence, and is an electronic replacement for cash. It is storable, transferable, and perhaps unforgeable. It is meant to be used in place of tokens and banknotes for the purpose of making payments electronically.

The purpose of the following discussion is to provide a comprehensive understanding of the developments of electronic money and payment systems. A classification of electronic payment systems is also provided. The first section focuses on the concepts related to electronic money. The second section deals with the characteristics of a system that makes electronic payments possible. Section three presents a brief overview of electronic money payment products. Finally, section four identifies issues associated with electronic money.

What is Electronic Money and how does it work?

Traditionally, people and businesses have used tokens or objects as money [3]. Tokens represent a standard monetary value. In the United States, tokens such as quarters and dollars are used to buy goods and services. Other countries also use token forms of money. Different economies such as Western Europe and the U.S. use a surrogate form of money that does not rely on specific tokens. This surrogate form of money is sometimes called notational money. A check, either in an electronic form or in a paper form, is an example of notational money. Although not universal, a form of electronic notational money is already in wide use. Banks in the U.S., and in most countries in the world, handle high-value payments electronically. Many of the smaller transactions are also handled electronically in a number of countries. Such electronic transactions have been the norm for high-value payment for more than 30 years. All international settlements are also performed electronically.

In the borderless economy, the marketplace is becoming increasingly virtual and society is becoming paperless or cashless [24,25,26]. The term electronic money (or electronic cash or digital cash) is used in a variety of ways and in a variety of contexts. Some observers of this phenomenon consider electronic money as a substitute for cash, some associate it with systems used to perform retail transactions, and others think of it as a prepaid electronic device that can record a monetary value for use by consumers. Electronic money (e-money) is defined as a "monetary value as represented by a claim on the issuer which is stored on an electronic device and accepted as a means of payment by persons other than the issuer" [6]. …

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