Electronic cash is a general term that describes 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.
Because e-cash is issued by private entities, there is a need for common standards among all e-cash issuers so that one issuer’s e-cash can be accepted by another issuer.
This need has not been met yet. Each issuer has its own standards and electronic cash is not universally accepted, as is government-issued physical currency.
The e-cash transaction is more efficient and therefore less costly than other methods thereby meaning lower prices for consumers. Transferring electronic cash on the internet costs less than processing credit card transactions.
E-cash transfers occur on the internet, which is an existing infrastructure and user existing computers. Thus additional costs that users of e-cash must incur are nearly zero.
E-cash does not require a party to obtain an authorization, as is required with credit card transactions.
E-cash is a secure and convenient alternative to bills and coins. This payment system complements credit, debit, and charge cards and adds conventional convenience and control to everyday customer cash transactions.
E-cash usually operates on a smart card and has an embedded microprocessor chip stores cash value and the security features that make electronic transaction secure.
E-cash transactions usually require no remote authorization or personal identification number (PIN) codes at the point of sale. This is because e-cash is transferred directly from the customer’s desktop to the merchant’s site.
E-each can be reloaded onto card’s microprocessor chip as frequently as needed. Using e-cash, the customer has two options: a stand-alone card containing both e-cash or a combination card that incorporates both e-cash and debit.
E-cash can be transferred over a telephone line embedded onto the card keeps track of the e-cash transactions.
Process of creating electronic cash:-
Creating truly anonymous electronic cash requires a bank to issue electronic cash with embedded serial numbers such that the bank can digitally sign the electronic cash while removing any association of the cash with a particular customer.
The process begins when a consumer creates a random serial number that he sends to the bank issuing the electronic cash. The bank uses the consumer’s random serial number along with the bank’s digital signature and sends the random number, electronic cash and digital signature as one package to the user.
The consumer can now spend the electronic cash, which is digitally signed by the bank. When the consumer spends the e-cash and the merchant passes it along to the issuing bank, the bank validates the electronic cash because it contains the bank’s digital signature.
However, the bank cannot determine the identity of the spender. It only knows that the electronic cash is genuine.