Bandar - Bandar Al-Turaif 1 [email protected] Electronic Cash Credit cards today dominate the online payment systems but electronic cash is the way

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[email protected] 1. Electronic Cash Credit cards today dominate the online payment systems, but electronic cash is the way of the future. Electronic cash (also called e-cash or digital cash) is any value storage and exchange system created by a private (non-governmental) entity that does not use paper documents or coins and that can serve as a substitute for government-issued physical currency. Since e-cash is issued by many private companies, we need common standards for all e-cash issuers so that they are accepted by each other. Until now those common standards were not met. Every issuer has its own standards and e-cash is not universally accepted compared to government-issued physical currency. Concerns about electronic payment methods include privacy and security, independence, portability, and convenience. Privacy and security issues are probably the most important issues. E-cash has its unique security problems. E-cash must have two important characteristics in common with physical currency. It must be spent only once and it must be anonymous. E-cash is independent and portable. E-cash is independent, if it is not related to any network or storage device. It is portable, if it can be freely transferable between any two parties. Credit and debit cards are not portable. In a credit card transaction, the credit card recipient must have an account established with a bank unlike the case in e-cash. The most important characteristic of cash is convenience. If e-cash requires special hardware or software, it will not be convenient for people to use. 1.1. Advantages and Disadvantages of E-Cash Transferring e-cash on the internet costs less than processing credit card transactions because conventional money exchange systems require banks, bank branches, clerks, automated teller machines, and an electronic transaction system to manage, transfer, and dispense cash. Operating this conventional money exchange system is expensive. E-cash transfers occur on an existing infrastructure, the internet, and existing computer systems with no additional costs. With e-cash transferring money to next door or to the other side of the world costs the same, while distance and cost are proportional when we move physical cash and checks. E-cash does not require authorization of payments, unlike credit card transactions. E-cash does have disadvantages just like real cash, money laundering, it is not traceable. Also it can be forged. For e-cash has to be successful, a standard must be developed for e-cash disbursement and acceptance. 1.2. How Electronic Cash works To establish e-cash, a consumer opens an account with an e-cash issuer and presents proof of identity. The consumer can then withdraw e-cash by accessing the issuer’s web site and presenting proof of identity, such as a digital certificate. After the issuer verifies the consumer’s identity, it gives the consumer a specific amount of e-cash and deducts it from the consumer account. In addition, the issuer might charge a small processing fee. 1
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This note was uploaded on 01/15/2012 for the course COT 5405 taught by Professor Ungor during the Fall '08 term at University of Florida.

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Bandar - Bandar Al-Turaif 1 [email protected] Electronic Cash Credit cards today dominate the online payment systems but electronic cash is the way

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