Are you ready to live in a world where the sense of security proffered by handling greenbacks, francs and yen is replaced by blind faith in the accurate transfer of intangible electrons to and from your account? Actually, if you have a credit, debit or ATM card, you’re headed in that direction. Combine any of those cards with direct deposit of funds into your bank account, and electronic commerce is already a big part of your life.
Electronic commerce, a catch-all phrase for the various cashless ways we make transactions, is becoming more prevalent. Businesses have been using methods such as electronic data interchange (EDI) and electronic funds transfer (EFT) to eliminate the costly two-way transfer of physical contracts and payments for many years. And in many cases the actual transfer of cash from one hand to another is more symbolic than meaningful, since the cash usually ends up in a bank account somewhere down the line.
Handling cash costs money for both businesses and financial institutions, and many are eager to get rid of the expense. “Three to six percent of every transaction is absorbed by the costs associated with handling cash,” affirms Edgar Brown, senior vice president of the customer direct access division for First Union Bank in Charlotte, North Carolina.
Consumers will soon have a myriad of electronic payment systems available to them. Smart cards, electronic checks, CyberCash, Visa Cash and a host of other products are either already available or will be introduced shortly. Thomas P. Vartanian, a Washington, D.C.-based attorney who specializes in electronic commerce issues, groups the competing formats for electronic commerce into four categories:
Credit cards: Traditional Visa or MasterCard, ATM and debit/check cards.
Electronic checks: Automated clearing-houses such as Checkfree that remit payments on a scheduled basis. Services will send or receive payments with the authorization of the business or consumer.
Notational electronic money (Cyber-Cash): These payment systems don’t actually transfer money to the consumer, but set up an account with a financial institution and merchants to transfer value from bank to merchant.
Token-based electronic money (Mondex, Visa Cash, Digicash): In this case, the monetary value is actually token- or software-based and is moved onto a PC or smart card. This is the equivalent of carrying actual dollars in your pocket.
Financial institutions are also employing other cost-saving measures. Electronic banking is another way to eliminate many of the fees associated with handling currency. For consumers these new payment systems will mean greater convenience and the ability to better track expenditures.
But before choosing any of these forms of electronic commerce, get a clear understanding of what the product is, and what it does. Be sure to get disclosures from the company issuing your electronic cash, including who is responsible for the value of the product in case of loss or theft. Find out your rights as a consumer with respect to privacy and the information that is being collected about how and where you are using this form of payment.
Bob and Helene Durham of Valley Cottage, New York, have