digital money

digital money

Electronic money used on the Internet. In order to turn the Internet into a giant cybermall (online shopping center), companies have developed software that provides complete and secure order fulfillment over the Internet. These software packages support various payment schemes that fall into two categories.

Credit Card Processing
The first category is the traditional credit card. Most Web browsers and Internet Service Providers (ISPs) support one of the major security protocols such as Secure Socket Layer (SSL). For example, on Netscape's browser, if the transmission between browser and server is secure, the key icon at the lower left side of the screen is connected. Otherwise, it is split in half to signal an unsecure transmission. More elaborate methods, such as CyberCash's credit card system, prevent the merchant from seeing the credit card number.

Digital Coins
The second type of digital money is like travelers checks. Called "e-money" and "e-cash," it is downloaded as "digital coins" from a participating bank into the user's computer, or an account is set up within the bank. Either the digital coins or the transactions that debit the account are transmitted to the merchant for payment. All transactions are encrypted.

Many had believed that digital money would fuel a new online information industry that would allow customers to pay in smaller increments, such as five cents a lookup or 10 cents per download; even a fraction of a cent for more trivial transactions. However, the digital coin concept has yet to take off.

The Credit Card Is the Winner
In the meantime, although trillions of dollars are routinely transferred around the world via the private banking network, money traversing the public Internet would seem like easy pickings for the hacker. However, thus far, traditional credit card transactions have won out as users have become more comfortable making purchases on the Internet. See Web payment service, First Virtual, Open Market, cybermall and smart card.