In this electronic era, many money matters are conducted online. Paying the bills, shopping, banking, stock trading and Forex are just a few examples of the money related activities that you can now manage online. You can even receive your paychecks through bank deposits in personal bank accounts.

But how do you transfer funds to individuals or to merchants? How do they get paid? All these electronic transactions involve what is called electronic money. It is not an imaginary entity that buys imaginary items online.

Electronic money is actually real money represented electronically to make it easy for you to pay and transfer funds anywhere, anytime and without having to actually go to the location of the transaction.

Electronic money or e-money is also referred to as electronic cash, digital currency or digital money. All of these terms mean the same thing. It is money that is electronically handled and is a representation of real tangible money. It is done with the use of a computer, the internet and now even through cellular phones.

Types of Electronic Money and Its Uses

Many types of electronic money are available, and there identified and online systems or anonymous and offline systems.

• Identified and Online System

With the identified and online system of electronic money, the bank is involved in the transaction with the help of a computer and the internet and in many cases, a third party company. With this form of payment system, you get to interact with a third party entity, but you pay real money through a bank. Your identity in this form of transaction is known.

Many merchants on the web use this kind of payment system. Examples of this type of electronic money are PayPal and WebMoney. One of the earliest companies to use online transfer of money was Western Union.

• Anonymous and Offline System

This type of electronic money is almost the same as real cash. It is withdrawn from an account and can be used to purchase an item or pay for a service. Offline money does not include the bank in the transaction. The identity of the individual transferring funds remains anonymous. An example of offline transaction of electronic money is the use of credit or debit card. Transaction data are updated offline through a microchip embedded in the card.

Advantages of Electronic Money

The convenience provided by electronic money proves to be its most important asset. Being able to pay your bills, transfer funds, send money and buy online without having to leave your home or office is what entices many individual to use electronic money. Trips to the bank are lessened, and you do not have to stand in long lines to pay the bills or deposit money. Additionally, most transactions online are faster.

Disadvantages of Electronic Money

Electronic money is highly dependent on the capabilities of the computer, internet or any electronic device used for the exchange. Power failure, unreliable internet or a slow connection can hinder the transaction. Personal interactions with people providing the service are lessened therefore any queries, errors or any problems will have to be sent online instead of being able to ask and get answer instantly and personally.

We live in a digital world. A lot of the things we do today can be done electronically. Even with its few limitations and disadvantages, electronic money still proves to be very helpful in making our everyday lives much easier. Most of us in more than one occasion have used electronic money to pay for purchases or services rendered. We just differ in which kind of electronic money serves our purpose better.