2. Introduction
Electronic money is referred to as the form of currency that
is electronically stored in technical devices such as that of the
banking computer systems. Unlike the decentralised
cryptocurrency, electronic money is backed by a fiat
currency. Meaning they are regulated by a central authority.
“Electronic money is money which exists in banking computer systems
and is available for transactions through electronic systems.Its value
is backed by fiat currency and it can be exchanged into physical form
however its uses are often more convenient electronically.
E-money products can be hardware-based or software-based,
depending on the technology used to store the monetary value.”
3. What is Electronic Money
Electronic money a.k.a e-money can be transferred by smart
cards (credit or debit cards), smartphones and computer
systems among others. In order to facilitate transactions from
bank accounts, financial firms and banks sign deals with e-
money networking processors to give customers access to
smart cards with which electronic transactions will be
possible.Also, with most e-commerce platforms allowing e-
money transactions, consumers can now shop for almost the
goods and services available online.
4. Broadly, electronic money is an electronic store of monetary value
on a technical device.The definition of electronic money is
becoming more scientific and specific with developments
associated with it.The European Central Bank defines e-money in
the following words.“E-money can be defined as amount of
money value represented by a claim issued on a prepaid basis,
stored in an electronic medium (card or computer) and accepted
as a means of payment by undertakings other than the issuer”
(ECB).
In which form e-money can be kept?
E-money can be stored in hardware a chip card or software usually
stored in a server.An access card like credit card or debit card that
simply enables us to reach our deposit or to avail a credit doesn’t
qualify as e-money.
5. Types of electronic money
E-money is usually issued by an institution upon receipt of funds and is
given a value in a national currency like Rupee. Basically, money is of
three types with the first two being the most important.The first
category is stored value cards that contain prepaid money. Smart cards,
prepaid cards and cards used in bus like Mybus card, are examples of
this prepaid payment cards. Second is the software based electronic
money where money is kept online in servers. Here, account balances
are kept at online service providers such as Paytm.
Another type of e-money is virtual currencies without an issuer and that
not denominated in national currencies. But there are several conditions
that makes virtual currencies to be counted as electronic money.The
ECB itself gives three areas of electronic money.
Empirically, the stored value cards like smart cards are used for standard
retail payment transactions. On the other hand, the software based
online payments supported by software based mobile wallets and digital
wallets.
6. Electronic money in India
In India, the field of electronic money is regulated by the RBI
mainly under Payment and Settlement SystemAct (PPS Act) 2007.
The Act gives details about the issue pf electronic money under
the name Prepaid Payment Instruments. Separate Prepaid
Payments Instruments guidelines are also issued by the RBI on this
behalf.As per the PPSAct, banks and non-bank entities can issue
pre-paid payment instruments in the country after obtaining
necessary approval / authorisation from RBI.
In 2002, aWorking Group underYV Reddy has submitted report
on Electronic Money by making an extensive study about the
potentials of electronic money in India. Electronic money in the
form of Prepaid Payment Instruments are expected to push
cashless transactions in the country.
