Electronic Money in Today’s Society
The history of money seems almost comical when a student of today’s generation is introduced. At one time cattle and crops were once used as a means of payment. Later on physical forms, such as gold and silver materials, were exchanged. Now there is even talk of coins and bank notes becoming obsolete as we progress to the world of electronic money. Electronic money includes electronic debit and credit systems, different forms of smart cards and digital money . These forms of electronic money are starting a movement towards a “cashless” society where all payments can be handled electronically. The electronic funds transfer system (EFTS) shall be ...view middle of the document...
One base arrangement in the Canadian payment system is the clearing of cheques and the settlement of money transfers between financial institutions. The advancement of technology has had a significant change in payment instruments, from a paper-based system to an electronic payment system. In the past, bills had to be paid by cheques, where you had to make sure you sent your bill early enough so it did not bypass the due date, and there was also the cost of stamps. Now banks provide websites where you can pay your bills in a matter of minutes. Banks have been encouraged to invest in an EFTS as it eliminates the necessity for cheques to be cleared, which is a timely and costly process. However, Gerald Stuber stated,
“Electronic purses may take somewhat longer to come into general use, given that substantial changes will be required both in the payments habits of consumers and in the payments infrastructure of financial institutions and retailers.”
Society has a tendency to resist change and to fear the unknown. EFTS’s may help reduce transaction costs yet there are still the issues of privacy and security. An electronic trail is left breaching privacy and there is also the issue of identity theft and computer fraud. These issues would need to be addressed in order to grow more easily accepted. As Cohen states, “As electronic commerce (e-commerce) expands, it seems only a matter of time before various innovative forms of money, based on digital data and issued by private market actors, begin to substitute in one way or another for state-sanctioned banknotes and checking accounts as customary means of payment”
Cashless Society - Costs and Benefits
Before getting into the advantages and disadvantages of a cashless society, the description of what a cashless society entails is needed. There are three forms of electronic money: electronic debit and credit systems, different types of smart cards and e-cash or digital money. Debit and credit systems are used daily and represent new, more convenient ways of payment, but it is not a new payment system . Smart cards contain a computer chip that allows it to be loaded with digital cash from the owner’s bank account whenever needed and bank approval is not needed for each transaction . E-cash or virtual money is used on the Internet to purchase goods or service. The money could be downloaded from an account, supplied as a loan or as payment, or bought with a credit card over the Internet.
A general summary of the pros and cons of a world with electronic money was given by the article “The Future of Money” written in Business Week. Some advantages included the convenience and flexibility for consumers and businesses to perform transactions. Also, banks would find e-cash cheaper to handle compared to cheques and paper records associated with paper money. There may come a time when one will not need to carry around paper bills and coins, instead have all of their cash on them...