Skip to content
× FreshBooks App Logo
FreshBooks
Official App
Free - Google Play
Get it
You're currently on our US site. Select your regional site here:
4 Min. Read

What Is eCash? Definition & Benefits

What Is eCash? Definition & Benefits

More and more, people are inhabiting a digital space. Financial transactions are taking place almost entirely online. With online transactions come discussions about digital cash, as well as online security. No matter who you are, having an understanding of eCash is important. As more small businesses pop up entirely online, more insight related to eCash is necessary.

If you run a small business and need to know more about electronic money, keep reading!

Here’s What We’ll Cover:

Defining eCash

How Does eCash Work?

What Are the Benefits of Using eCash?

Key Takeaways

Defining eCash

In its simplest form, eCash can be defined as electronic cash. It's a way of paying for goods and services that isn’t in physical cash. There are two forms of eCash, an online form and an offline form.

Online eCash

The term eCash was originally used by a company called DigiCash, founded by David Chaum. DigiCash went bankrupt in 1998. The idea of eCash, however, lived on. It was the idea that started online transactions, as well as cryptocurrency. It worked for all types of transactions.

With online eCash, information regarding currency is downloaded to a hard drive. It stays there until it is transferred to another person or business online. This is the basis of cryptocurrency, in a very simple way.

Offline eCash

The idea behind offline eCash has its roots in credit cards and debit cards. Offline eCash would function similarly to a debit card. Funds from a hard drive would be linked to a digitally encoded card. This card would replace paper money (like a debit card). However, the main difference here is that physical money no longer exists to begin with. With a debit card, physical money is still present, in a way.

How Does eCash Work?

In the eCash model, users would download their electronic money from their bank. It would then be stored on their hard drive until it's ready to use. Then, when preparing to make an online purchase, they’d use their “digital wallet” to transfer funds to the merchant. The merchant, however, would need the same “digital wallet” software in order to receive these funds.

The software that manages the “digital wallets” would be run by the eCash bank. This way the money being transferred would be able to be verified. This is similar to the payment concepts that are behind debit and credit card transactions.

After the transferred amount has been verified, the merchant would be able to pay transaction fees to have it uploaded to a traditional bank. Ideally, transactions between customers and merchants would not have any transaction fees. The only fees that would be incurred would be between the traditional banks and their customers.

What Are the Benefits of Using eCash?

In today’s world, there are a few benefits that eCash brings with it.

Globalization

The world is more connected than ever. As such, we have the ability to purchase services and goods from around the globe. This isn’t always the easiest thing to do online. Currently, you have to seek out a way to make online transactions in countries different from your own. Not all payment methods are accepted. The use of eCash could solve that.

Electronic cash could be developed in a way that’s universal. That way, no exchange rates would be necessary. Software could be developed that’s usable by everyone. Using eCash could make international purchases simple.

Sensible Transaction Fees

When you make a purchase online using a credit card, it’s likely that the merchant is absorbing fees. To process credit cards and debit cards, most businesses have to pay monthly fees for the service. If eCash were to be made more widely available, these processing fees could be avoided altogether. This would allow cheaper items to be sold online. It would also mean that more money is being saved by consumers and businesses alike.

Smart Card Utilization

Smart cards are a hot topic when discussing eCash. These forms of payment would house all of the currency on them, like a wallet holds physical cash. Then, when payments are made, the data can be updated or transferred. When you go home, you then upload the electronic cash back to your hard drive until it's ready to be used again. Smart cards would eliminate the need to carry different currencies when traveling internationally. Different forms of electronic currency could be loaded to them.

Key Takeaways

With the development of cryptocurrencies, eCash likely isn’t far behind. While it’s been tried out in the past, the concept is still being worked on. We’re at a time now, though, where it could be accomplished.


We have more articles just like this on our resource hub. Be sure to check them out!


RELATED ARTICLES