Advances in technology enable a number of innovations that change the way Canadians pay for goods and services. Some products, for example the debit card, offer a way to access funds in a bank deposit account and can be thought of as electronic payments, or e-payments. Other innovations offer a way to directly store monetary value in an electronic device or in a communications network. We call those electronic money, or e-money for short.
What is E-Money?
E-money is a digital alternative to cash.
It is monetary value that is stored and transferred electronically through a variety of means – a mobile phone, tablet, contactless card (or smart card), computer hard drive or servers.
E-money is usually issued by an institution upon receipt of funds and is given a value in a national currency, such as the Canadian dollar.
Examples of e-money include prepaid payment cards that use payment networks such as Visa or MasterCard, or account balances kept at online service providers such as PayPal. Both can be used for a range of purchases in different establishments.
Another type of e-money is decentralized, without an issuer and not denominated in national currencies. The most well-known example is the Bitcoin, a digital currency that is used for transactions directly between users through a computer network.
Why do People Use E-Money?
People like e-money because it acts like cash: it can be as fast, convenient and confidential. E-money meets the needs of consumers buying over the Internet who want to keep their personal and financial information private.
In person, people may prefer e-money over having to carry and count bills and coins. Merchants using e-money may save the cost of providing change and processing cash.
Technological progress also helps stimulate innovations. For example, the widespread adoption of the Internet and mobile devices allows for the creation of e-money products that do not require consumers and merchants to purchase card readers, terminals or other payment infrastructure.
Source: Bank of Canada