Electronic money is a recent invention which means that a currency with real value can be exchanged for traditional cash; instead it is completely virtual or digital. It is a new invention in the history of money and trade. Electronic money exists only in digital format and is primarily based on the Internet or smart cards that have a record of their stored value. Transactions that are done electronically are known as electronic money. Similar names for electronic money are electronic cash, e-money, digital money, digital currency, or digital cash.
The computer age made money possible. It began in the 1960s when IBM and American Airlines created a system called SABER (Semi-Automatic Business Research Environment), which enabled American Airlines offices equipped with terminals connected to telephone lines and helped agencies check flight times, seat availability and then make reservations electronically that can be paid using the credit system.
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Banks in America and Europe began using mainframe computers by the 1970s, which helped them track transactions. It was a system that proved successful internationally when currency exchange was needed.
The acceptance of electronic money by consumers was first noticed in France in 1982 with the introduction of the Minitel service. The United States and the United Kingdom have developed a basic teletext service that has helped televisions display text directly on a television screen such as news, program guides, game show results, or weather updates. Teletext was a very useful and simple one-way service.
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French service Minitel used a stupid terminal with a built-in modem, the service worked over standard telephone lines, and the terminals were equipped with full AZERTY keyboards. Subscribers typed messages or searched queries. More than 9 million households received these Minitel terminals for free in order to encourage business entrepreneurs. Payment can be made by credit card or charged to a telephone bill. This marked the first use of electronic money in the consumer market.
In 1979, a slightly similar service was launched in the UK called Prestel. Supported equipment was expensive and required customers to call and arrange payment by phone. The service known as Homelink began in 1983 with the support of the Bank of Scotland and the Nottingham Building Society. Account holders could subscribe to a special Prestel service that enabled online banking. This was the first recorded use of electronic money.
In 1991, the Internet was introduced to the consumer market and the Arpanet network was disbanded. It wasn’t long before America Online took advantage of the new Internet and began offering retail services directly to its credit card subscribers.
In 1994, there was a strong belief that the Internet would help businesses. Pizza Hut adopted the same model that Peapod used to enable online pizza ordering with a choice of payment such as credit card online or cash on delivery.
The late 1990s proved to be a crucial moment for electronic money. Amazon.com was launched in 1995, and PayPal was founded in 1998. This has made it convenient and easy to pay money online without any risk of credit card theft. PayPal’s innovation was to offer customers a virtual account that can be topped up with a credit card or bank transfer. Then the email addresses were used to receive and send money. PayPal’s services marked the unique beginning of electronic money, which differed from traditional telephone and online credit card transactions.
Furthermore, the PayPal model has been copied by other providers with new ideas for securing clients ’funds using the gold standard, silver, platinum or palladium. However, sending and receiving payments via email was flexible.
A virtual currency supported by precious metals can be exchanged for any supported currency. eLibertyReserve, e-gold and Webmoney have become the largest suppliers of electronic money with gold.
Private currencies have also grown driven by demand for some form or market within networked games such as World of Warcraft and Second Life. Since then, private currencies have evolved on many forums and webmaster services as a means of advertising among members.
The most successful electronic money is provided by cards of stored values that are denominated in local currency. The U.S. military designed a stored value card called Eagle Cash that provided an advance on a soldier’s earnings. Hong Kong has also designed a stored value card for the quick purchase of subway tickets that many merchants in the city accept as a de facto cash card.