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Types of electronic money .. Its uses .. Its risks and legal regulation

What is electronic money?

Electronic money is defined as a digital monetary medium of exchange that is represented on an electronic device, and the device in question can be software (such as a banking system, or a payment service provider such as PayPal), a piece of hardware such as a smartphone, or a magnetic device such as a prepaid card, in either case, We call these devices that store electronic wallets of electronic money (e-wallets).

Electronic money has become an essential component of the international payment and financial industry, especially in countries with dynamic financial technology markets such as China or Singapore.

Electronic money is convenient, secure, and impressive with the speed of transactions. But most importantly, it is intuitive to handle.

Types of electronic money 

  • Electronic money payment networks

It is electronic money that can be transferred through debit cards, credit cards, computer systems, and smartphones, and gives customers the ability to conduct banking transactions and purchase goods and services online.

  • Hard electronic currency

Non-reversible transactions are handled through hard electronic currencies, such as those withdrawn through a bank, the best part about this type of electronic money is its cost-efficiency for limited operations and paperwork.

  • soft electronic currency

Reverse transactions are handled through soft e-currencies, and include products such as UPIs and credit cards, the benefit of reversible transactions includes that users can roll back the transaction or cancel the transaction within a specified period of 72 hours.

  • Defined and unidentified electronic money

Defined electronic money is a form of electronic money that allows a user who withdraws money to be tracked as credit/debit card transactions. Banks can easily track your payments, anonymous money is the use of physical cash that can be withdrawn from the bank and used anywhere.

  • Online and offline electronic transactions

For online electronic transactions, one does not require a valid internet connection because it conducts transactions from the bank to third parties, but offline electronic transactions do not require an internet connection because they do not involve any bank and electronic money is stored on a card, chip or other media and any someone use it.

Uses and benefits of electronic money 

In our digital age, electronic money has greatly reduced the role of money in some countries, and it may completely replace it at some point in the future. The reason behind this transformation lies in the many advantages and uses that electronic money has for companies, financial institutions, and customers alike, and among these Advantages: 

  • Security 

Many experts classify electronic money as safer than cash, and you can't lose it or give more due to an arithmetic error on the counter, and criminals can't steal it that easy either.

Encryption technology, customer authentication technologies (such as multi-factor authentication) and regulatory standards ensure that electronic money also remains secure on the web. and anti-money laundering compliance.  

  • Comforts

Online payment has become the field of electronic money and for good reason, the choice of prepayment via bank transfer as a payment method for online shopping ends with trips to bank branches or to the Internet banking platform of your bank often.

When you choose a debit card or a credit/debit card as your online payment method you have to enter your credit card credentials or your bank account details whenever you pay online.

e-money service providers offer e-wallets in which you can store your payment method data, to pay on an online platform you just have to choose your e-wallet as an option to pay and buy with just one click, it is literally like opening your wallet and delivering the cash, except digitally.   

  • Quick Transactions

The third advantage that speaks in favor of electronic money is the speed of its transactions, and electronic financial transactions take place at points of sale or in an online store instantly, and online transfers between payers’ and payers’ accounts are much faster than bank transfers, as they take minutes and not several days.

Legal regulation of electronic money 

Electronic money is subject to financial authorities and supported by paper money. In this way, most electronic money issuance is in business, unlike banks that may issue electronic money under their full banking licenses, and the electronic money license varies from one country to another.

The dangers of electronic money 

  • Electronic money is not like fiat currency, and it consists of electronic data transactions that take place over the Internet. The value of virtual currencies is not guaranteed by an established party, moreover, they are not necessarily backed by physical assets.
  • There is a risk that trades will become invalid after the fact that the systems necessary to establish and confirm a trade are not in place.
  • Trading may be restricted due to natural disasters, changes in governments, strikes, sudden changes in the virtual currency markets, the closing of the virtual currency markets, or force majeure, and this process involves the risk of clients experiencing unexpected damage or loss.
  • The price of virtual currencies is constantly fluctuating, the balance of electronic money trading can rise or fall suddenly, please note that unexpected or specific events including but not limited to changes in the balance of supply and demand, fluctuations in the prices of commodities, fiat currencies or other markets, Natural disasters, wars or changes in laws, regulations, laws and governments and changes to virtual currencies may cause severe price fluctuations that can cause orders to fail to be fulfilled or dealt with as intended.
  • There is a risk that transactions will be affected due to system failures caused by events such as changes in the external environment.

The difference between electronic money and other digital currencies

Electronic money is represented by digital values ​​stored and transferred over the Internet. However, these two terms cannot be used synonymously. The designation of e-currency also applies to cryptocurrencies, specific tokens such as ICOs, or virtual currencies such as video game monetization currencies. All these are unique differences between digital currency It has qualities and applications that distinguish it from electronic money.

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