digital cash

A generic term used to describe the electronic cash or digital currency used in cyberspace.

There are several companies working to develop solutions for online payment processes. For example, one such technology allows items to be purchased by credit card, debit card, or check, providing secure online transactions and processing. Another company is working to provide software solutions that extend physical-world payment methods into the virtual world, enabling businesses to offer a variety of secure, private, and easy-to-use electronic payment options.

These solutions include person-to-person (P2P), business-to-consumer (B2C), business-to-business (B2B), debit, prepaid, and mobile payments. The software solutions also enable merchant-specific payment options, including electronic gift certificates and customer loyalty points. There is also the notion of sending a check to a bank that in turn sends you software for access to an online account. From there, you draw funds to your hard drive for use when purchasing goods and services on the Internet. By using public key cryptography, this scheme combines computerized convenience with security and privacy-improving on paper cash (which some pundits believe will eventually become obsolete).

Historical perspective: Perhaps the best known digital cash website is PayPal. Launched in 1998, PayPal has become the global standard for online payments. PayPal enables any business or consumer with an e-mail address to securely, conveniently, and cost-effectively send and receive payments online. It is a network built upon the existing financial infrastructure of bank accounts and credit cards to create a global, real-time payment solution. In other words, they provide a Web-based service that enables users to send and receive payments electronically.

PayPal works like this: As a customer or consumer, you open an account on PayPal.com and register your credit card; the next time you want to pay someone for a piece of jewelry you bought on an online auction, for example, or to reimburse a friend for dinner last night, you can charge your card by transferring funds from your PayPal account into that person's PayPal account. As a seller or online merchant, you open an account on PayPal.com and either use their shopping cart or your own to accept all major credit cards, debit cards, bank transfers, and PayPal payments securely. Basically customers shop on your website and pay on PayPal.