Explain the working of e-Cash and list the properties of e-Cash | e-Commerce Notes

Explain the working of e-Cash and list the properties of e-Cash | e-Commerce Notes

Answer:
Electronic cash is a computer generated internet based concept, which allows funds to be transferred and items to be purchased by credit card, cheque or by money order.

Working of e-cash:

E-Cash works similar to electronic fund transfers done between banks.

PayPal is a good example of e-cash. To start using E-Cash an account will need to be setup with certain issuers.

There are four major components in an electronic cash system:

· Issuers – banks or non-bank institutions
· Customers – users who spends e-cash
· Merchants or traders – vendors who receives the e-cash payments
· Regulators –state authorities and tax agencies

• Account Setup:
  • Customers will need to obtain E-Cash accounts through certain issuers.
  • Merchants who would like to accept E-Cash will also need to arrange accounts from various E-Cash issuers.
• Purchase:
  • Customers purchase certain goods or services, and give the merchants tokens which represent equivalent E-Cash.
  • Purchase information is usually encrypted when transmitting in the networks.
• Authentication:
  • Merchants will need to contact E-Cash issuers about the purchase and the amount of E-Cash involved.
  • E-Cash issuers will then authenticate the transaction and approve the amount E-Cash involved.

The working of Electronic cash is based on digital signatures. This method involves two keys -one is the encryption key, which is used for locking and the other one is the decryption key, which is used for unlocking. Encoded messages can be decoded by using a particular decoding key else it is not possible to decode the message. Encoding key and decoding key is generated by the bank. 

 

The encoding key is always kept private (to secure it from hackers). Usually, the bank gives a public key (decoding key) to the customers to decode the message, which is encoded by the bank. Use of digital signatures ensures security to customers.

Properties of e-cash:

· Monetary values:
o E-cash must be backed by either Cash or Bank authorised credit or Bank certified cashier’s check.
o E-cash created in one bank should be accepted by other banks.

· Interoperable:
o The banks offering these facilities should have operations worldwide, as customers may need to use this facility from different locations, with different currencies.
o Banks with an international clearing house must be able to handle the exchange issues.

· Storable and retrievable:
o It should help customers to exchange e-cash even while they are traveling or when they are at home or in office.
o Usually, the cash is stored in devices which are easily transported like smart cards. Mondex card is an example for a device that can store e-cash.