Schulze, WG E-money and electronic fund transfers.
A
shortlist of some of the unresolved issues 2004 SA Merc LJ
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This article is available on the Schulze articles l provided under
Learning Unit 3.
Then answer the following questions:
Clark was robbed while walking on the beachfront recently. His wallet
was stolen,and he is very worried about carrying cash in the future. He
approaches you for information on the concept of e‐money which he
briefly heard about from his friend who said that e‐money can be a
suitable and convenient alternative to carrying cash.
Advise Clark in detail on the following aspects of e‐money:
1. Definition and meaning of e‐money
2. How e‐money works and the advantages and disadvantages of it
3. Important unresolved issues in respect of e‐money.
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AnswerCreated with AI
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Definition and meaning of e-money
E-money, also known as electronic money or digital currency, refers to a digital
form of payment that is stored and exchanged electronically. It is a digital
representation of value that can be used for making transactions, similar to
physical cash. E-money is typically stored in electronic wallets or accounts and
can be accessed through various electronic devices, such as smartphones or
computers.
How e-money works and the
advantages and disadvantages of it
E-money works by utilizing electronic systems and technologies to facilitate
transactions. Here is a brief overview of how it works:
1. Issuance: E-money is issued by authorized financial institutions or
electronic money issuers. Users can obtain e-money by depositing funds
into their electronic wallets or accounts.
2. Storage: E-money is stored in electronic wallets or accounts, which can be
accessed through electronic devices. These wallets can be either
hardware-based (e.g., smart cards) or software-based (e.g., mobile apps).
3. Transactions: E-money can be used for various types of transactions,
such as online purchases, bill payments, or peer-to-peer transfers. Users
can transfer e-money to other individuals or businesses electronically.
Advantages of e-money include:
● Convenience: E-money allows for quick and easy transactions, as it
eliminates the need for physical cash or checks. Users can make
payments anytime and anywhere, as long as they have access to their
electronic wallets.
● Security: E-money transactions are often encrypted and protected by
advanced security measures, reducing the risk of theft or fraud compared
to carrying cash.
● Traceability: E-money transactions can be easily tracked and recorded,
providing a transparent and auditable trail of financial activities.
Disadvantages of e-money include:
● Dependency on technology: E-money relies on electronic systems and
devices, which can be vulnerable to technical issues or cyber attacks.
System failures or network outages can temporarily disrupt e-money
services.
● Limited acceptance: Not all merchants or businesses accept e-money as a
form of payment. Users may encounter limitations in using e-money for
certain transactions or in specific locations.
● Privacy concerns: E-money transactions can leave a digital footprint,
raising concerns about privacy and data security. Users' financial
information and transaction history may be stored and potentially
accessed by third parties.
Important unresolved issues in
respect of e-money
Despite its growing popularity, there are still some unresolved issues surrounding
e-money. These include:
1. Regulatory framework: The regulatory landscape for e-money varies
across jurisdictions, and there is a lack of global harmonization. Different
countries have different rules and regulations regarding the issuance, use,
and oversight of e-money, which can create challenges for cross-border
transactions and interoperability.
2. Consumer protection: As e-money becomes more prevalent, ensuring
adequate consumer protection measures is crucial. Issues such as
dispute resolution, liability for unauthorized transactions, and safeguarding
user funds need to be addressed to build trust and confidence in e-money
systems.
3. Interoperability: Interoperability refers to the ability of different e-money
systems to work together seamlessly. Achieving interoperability between
various e-money platforms and providers is essential for promoting
widespread adoption and facilitating cross-platform transactions.
4. Financial inclusion: While e-money has the potential to enhance financial
inclusion by providing access to financial services for the unbanked or
underbanked populations, there are still challenges in reaching these
individuals. Issues such as affordability, accessibility, and digital literacy
need to be addressed to ensure that e-money benefits all segments of
society.
It is important to note that the unresolved issues may vary depending on the
specific context and jurisdiction in which e-money is being used
