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What is Electronic Cash?

Felicia Dye
Felicia Dye

Electronic cash is one of the instruments that can be used to conduct paperless transactions. Paperless transaction is a term used to describe financial exchanges that do not involve the physical exchange of currency. Instead, monetary value is electronically credited and debited. Often called e-cash or digital money, this financial instrument is commonly used to conduct distant transactions, such as those between parties on the Internet and those between parties in different countries.

Electronic cash can be a financial instrument created and used within a private system, much like frequent flier miles. However, in most cases, e-cash is equivalent to paper currency and can therefore be exchanged among individuals or spent for any types of goods or services that a person wishes to acquire. This financial instrument has played a large role in the increasing popularity of telecommuting, which is an arrangement that allows people to work together in distant places.

Debit cards are often used to access electronic cash.
Debit cards are often used to access electronic cash.

Digital currency can allow a freelancer in India to be paid for work that the he did for a contractor in Canada. This is possible due to a monetary exchange system whose principle is similar to that of money wiring. When a person uses a wiring service, he usually presents money or has money withdrawn from an account.

The value of that money is then credited to someone else in another place. The paper currency the sender presents or which is taken from his account is not physically sent and given to the receiver. Electronic cash is exchanged in a similar way. One major difference, however, is that transactions can often be conducted without a live middle man.

Debit card machines enable customers to make purchases using their debit cards.
Debit card machines enable customers to make purchases using their debit cards.

People involved in electronic cash transfers may never acquire any paper currency. They may receive their funds electronically and they may use them electronically. This does not mean, however, that it is impossible to get paper currency from electronic cash.

In many instances, electronic money can be converted into paper currency quite easily. This is possible because e-cash is commonly held in an account that can be accessed in several ways. For example, many have debit cards that can be used at an automated teller machine (ATM). Sometimes, a person can request that all or a portion of the money held electronically be made available by check.

There are a number of advantages of electronic cash. One of them is that it eliminates the apprehension that many people feel about carrying and exchanging paper currency. Another advantage of electronic cash is that it is usually easily converted to another currency, making traveling and international business substantially easier.

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Discussion Comments


@browncoat - Our payment systems and tendency to store everything digitally does make some people nervous but I actually think in some ways electronic cash systems are getting closer to a true representation of what money is supposed to be. It's supposed to be a way of storing labor and time and exchanging it for the products of other people's labor and time.

When the value of the objects used to measure currency (such as gold pieces) becomes more of a focus than what they are supposed to represent, you have a problem.


@KoiwiGal - In some ways electronic cash is very good for us, but in other ways it could end up being dangerous. Money tends to be filthy in a very literal sense, since it gets handled so much and it can spread disease.

But there's a reason that historically governments were supposed to keep a certain amount of gold or silver on hand to back up the amount of currency they were backing. These days our money doesn't exist at all in the physical sense and could be potentially completely erased at the touch of a button.

When money is that incorporeal, then it raises serious questions about debt and the economy in general.

I actually wonder if that's one of the reasons people have become so materialistic. At least with items they have a way to see and hold their wealth in their hands.


It's funny how quickly people have made the transition to using only electronic cash. I hardly ever get out real money or even have coins in my wallet these days because it's just so much easier to use a card.

The only time I feel the loss of it is when I come across buskers or charities looking for donations and I don't have anything handy to give them. But I imagine it won't be long before people can carry a little card for things like that, which just needs to be pressed to a sensor and donates a small amount.

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    • Debit cards are often used to access electronic cash.
      By: Andres Rodriguez
      Debit cards are often used to access electronic cash.
    • Debit card machines enable customers to make purchases using their debit cards.
      By: NatUlrich
      Debit card machines enable customers to make purchases using their debit cards.